LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

AGILE LOGISTICS

World Wide Shipping February/March 2003
By THOMAS CRAIG
President LTD Management
www.ltdmgmt.com

Agile is the essence of supply chain management. Adaptive, move-quickly is necessary for an effective supply chain. Each order must be handled differently. Each customer has its own set of instructions and requirements to satisfy its supply chain. And manage a supply chain that can stretch 10,000 miles from many suppliers to customers. That may be the ultimate in agile and flexible. In addition, Logistics organizations are lean. The global supply chain can be extremely complex. The logistics director must be a maestro to manage an agile supply chain with its scope and breadth. And it must be lean. Lean is a fact-of-life in today's business world. Do more with fewer resources.

Being agile and lean has been made more difficult with cargo security concerns following the 9/11 attacks. For example, it has been estimated that the new U.S. Customs 24-hour Advance Manifest System rules add four days of inventory to inbound international supply chains. That is a significant impact.

Why must Logistics be agile? Time is the biggest driver and enemy of agility. It drives customer satisfaction and responsiveness. It is important to gaining competitive advantage with supply chain management. Faster. Faster. Faster. Orders change. Demand changes. Delivery requirements shorten. Inventory requirements change. Customer and company internal expectations have increased. Time demands have shortened, while the length and complexity of supply chains has increased.

So how is Logistics agile? They must do what they have been doing but do more of it. An essential requirement is to gain supply chain visibility. What is going on throughout the supply chain, within your company, at suppliers, at outside warehouses, at carriers and at 3PLs or 4PLs that may be used? What inventory is where? What inventory is needed where? What customer orders must be filled? What is happening with purchase orders? Do purchase order deliveries match up with sales and inventory replenishment requirements and dates?

Time means velocity--velocity as to order fulfillment and delivery; as to inventory turns; as to order to payment; as to placement of purchase order through to delivery to customers. Global supply chains, by their length, mean distance and time. Distance and time are anti-agile agents.

To answer these and other questions that arise, certain elements must be in place.
*Information Technology. Visibility is very important to an agile global supply chain. Visibility requires systems capability to see customer orders and inventory. It is especially critical with purchase orders and suppliers. Emails, faxes and phone calls do not give visibility to the supply chain. They are emergency measures and do not provide transparency. Logistics cannot manage using emails, especially with international suppliers.

Information technology is not the complete answer; it is not an end. It is a means to an end. Technology is one part of three parts to business process success. Practice/operation and people are two other parts. Some make the mistake of assuming that systems will solve all problems, be a silver bullet, and are disappointed when that does not happen. It does not because of other issues with practices and/or people. It is the same with implementing technology by assuming away underlying processes and people.

That caveat said; technology is necessary. Visibility into multiple suppliers with multiple purchase orders is vital to managing the inbound part of the supply chain. Revising, reprioritizing and amending open purchase orders is needed to be agile to changes in inventory and customer requirements. Emails and faxes are not the way to manage suppliers and purchase orders; technology is.

To have visibility into trading partners throughout the world, web-base systems work well for all parties. They are less expensive and have broader usage beyond the internal enterprise system. That makes them especially attractive to implement and use by many supply chain parties.

*Collaboration. Collaboration often centers on working with another company to better utilize transport or warehouse assets. This is a narrow view of collaboration that misses the bigger issues of being agile and the sheer complexity of a global supply chain with its many participants.

Collaboration really means working with trading parties to improve the exchange of information, the management of orders, both purchase orders and customer orders, and delivery of shipments. If lean is a problem, gaining the assistance of others in the supply chain makes good sense and good use of limited resources.

Collaboration can be difficult because of the "trust" issue with sharing information and the differing roles of buyer versus seller. Firms in supply chains cannot collaborate with every participant in the chain. Volume, critical need or other selection method defines firms that should be collaboration targets.

The devil is in the details, the execution of the supply chain plan. Good information technology is important to successful collaboration. Working together reduces time and uncertainty in the supply chain; and uncertainty contributes to increased inventories in the chain, as a safety buffer. Start with sharing key information--forecasts, especially revised ones, inventory levels, order information, and production schedules. Doing this helps all parties know and understand what is expected and happening and to identify and resolve potential problems.

Key collaborations should focus on supply chain execution, especially on the inbound part of the supply chain--the management of purchase orders, management of suppliers and the transport and delivery of purchase orders. This is the part of the chain that is the longest in distance and time, affects inventory, and is the bigger challenge as to overall agility and to collaboration success. Cooperation in the execution of plans enables companies to identify exceptions and quickly take remedial action.

Role for Outsourcing. The potential exists for outside firms to provide the information technology and management skills for being agile, for providing the supply chain execution. Traditional outsourcing of logistics tasks and functions with 3PLs fills gaps that exist from lean logistics. However if the 3PL has a limited view of the supply chain and limited logistics capabilities, then collaboration opportunities are missed. This creates the potential for 4PL firms with providing information technology, having logistics management skills and being neutral as to sourcing, transport and other logistics service providers that area part of the supply chain. These combined capabilities lay the foundation for agile logistics.

CONCLUSION. The pressure to be agile will continue. Time demands, inventory pressures, cost and service requirements and continuing global supply chain complexity demand it. Today's answers will be challenged tomorrow. Information technology and collaboration are vital to agility success, especially in the lean organization.