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

LOGISTICS PROCESS FOR SUPPLY CHAIN MANAGEMENT-Some Reality

World Wide Shipping
July/August 2002
By THOMAS CRAIG
President LTD Management
www.ltdmgmt.com

A supply chain is not a series of links forged together for a common purpose. That is a nice image. However it minimizes the reality of the chain and how each link in that chain must design its own logistics process to function within the chain. As a result, there are supply chains within each supply chain. With supply chains, the emphasis is on logistics because that is the vital driver of the supply chain.

The success of the chain depends on many things. How well and how clearly the key player in the chain, the large retailer/mass merchandiser or whoever, has defined what he is doing and why he is doing it that way. For suppliers located within the chain, this is important. There is no one standard universal chain. What you are dealing with are multiple, different supply chains and logistics processes and supply chains for each customer. That means developing agile, tailored logistics solutions to meet the requirements of each customer.

Each chain is really a series of buyers and sellers of products and services. That means that each link participant has his own objectives, and sometimes conflicting and objectives, which can work against supply chain effectiveness. Companies buy and sell and participate in the supply chain for their own reasons. This is an important and sometimes overlooked fundamental of developing a working logistics process, both for the entire chain and for each link in the chain. It is also the driver behind the need for collaboration between and among various buyers and sellers. Think of the supply chain as a relay race with good speed by each runner and a great handoff and exchange of the baton between runners.

The diversity of participants in the chain can create a complex and long process. The supply chain design and plan must be clearly communicated. All parties must understand how and, especially, why the chain is supposed to function. This becomes more important as the complexity and length of the chain grows. Suppliers to suppliers to suppliers need to understand the "what and why" so they can design their own production and logistics process and cycle time. Suppliers located in other countries need to understand the supply chain given the time and distance they are from the final supply chain destination. Factor in uncertainty, a primary reason for inventory and something that increases as the supply chain complexity and distances increase, and the need for proper supply chain strategic design and tactical implementation is compounded.

Expediting and other crises are symptoms of supply chain problems. There is more involved than a "weakest link". Excessive and consistent occurrences are signs of poor supply chain design and execution. And no software can make up for supply chain design and execution flaws or shortcomings. Software is a means to an end, a tool. It is not an end in and of itself to supply chain success. The same can be said about using a 3PL. It cannot guarantee and execute effective logistics operation. Like software, a 3PL is a tool, a means.

The supply chain should be designed from the end user back through the various product and service providers. The purpose should be transparent. Each party's role in the movement of product and information should be clearly defined and delegated. Communication should be open and flow both ways. The potential for exceptions should be recognized and be built into contingencies for the plan. But note, they are exceptions. When exceptions occur too often, there is no process. There are just multiple entities each doing what they think they should do. The result is that the very purpose of supply chain management, to drive out inefficiencies, is lost. Instead the "process" has reconfirmed and created its own inefficiencies.

The process should be designed from both the strategic and tactical views. The strategic should set the grand plan and purpose and to define the players and their roles and responsibilities. Then the tactical, operational design must address the details to make the process function effectively.

No matter where you are positioned in the supply chain and no matter how well the supply chain is designed and operated, here are points you should address in your company's logistics process.

*Recognize that supply chain management has different meanings in different industries. The importance of transportation cost or inventory or information technology can impact the design and operation of the logistics process.

*Understand what each of your customer wants and why. Each customer may have his own requirements. Know them. Ask questions. Communicate internally and work together. Get forecasts for each customer, that match the regional configuration of your distribution centers. This enables you to better ensure that you have the right products positioned at the right warehouses to meet their local demands. This is important for being able to deliver full, complete orders on time.

*Reduce your internal total logistics cycle time, with purchasing, manufacturing, customer order and shipping, to have product ready and available for delivery to the customer. Seek improvements to reduce the cycle time and improve agility. Communicate the logistics process within the company, both in general and for specific, key customers, so everyone internally knows what will be done, why and how. Analyze your distribution network. Are your warehouses in the correct locations for maximum supply chain effectiveness? Each of your customers expects his orders to be delivered complete, accurate and on time. Make sure you are capable of doing that consistently so that you are a valued supplier. Do not fixate on lesser points, such as your LTL program. Instead focus on how that and other points come together as a cohesive effort.

*Develop and communicate to your suppliers what you are doing, why you are doing it and what you expect of them. Learn their processes to help you design the best one. Collaborate with them to improve their processes. Have them develop and communicate to their suppliers. Optimizing your own needs without regard to your suppliers' can really suboptimize your logistics program.

*Learn your international supplier's operations and logistics cycle time. The lead-time with international sourcing and its impact in inventory and on operations makes this very important. Always having inventory in transit, in the pipeline, smoothes some of the peaks and valleys in inventory replenishment and availability, given the distance and lead times. Learn when ocean carriers ship from the overseas port and arrive at your port of entry is a step to reducing bunching of incoming containers and product. Depending upon your distribution or plant locations, analyze using both minilandbridge and all-water options. Look at using more than one carrier to handle your shipments. Different sailing dates and arrival dates gives you alternate movements of inventory. Look at having a multimodal approach. Depending upon your products and their characteristics, consider flying some product to also keep inventory flowing to reduce gaps and bunching. Do not fixate on such things as "premium freight" with regard to airfreight. That is an antiquated definition and ignores the cycle time, customer service and inventory issues of supply chain management.

*Reduce the number of suppliers and service providers you work with. Besides the benefits of consolidated volume and leveraging, using fewer firms limits, if not reduces, the complexity of your supply chain. Unnecessary, extra players can run counter to improving the process with collaboration.

And, when you think you have it all worked out, take a deep breath, smile, and get ready to make changes. Your customers' expectations and needs are dynamic. Your logistics process must be agile to meet the new demands. If you excel at your supply chain, your company will have a competitive advantage.