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

It's not Shipping anymore;

President LTD Management

It's not Shipping anymore; it's Logistics. Logistics is a processs. It encompasses a broad scope ofresponsibilities, extending from the vendor through to the customer. With the five keyissues--Movementof Product, Movement of Information, Time/Service, Cost and Integration, one of the criticalissues inbusiness is time.

Time is critical. With quickening obsolence and technology advancement, new products must bebrought to market quickly. Customers do not want to carry any more inventory than they must. So theirsuppliersmust be able to respond quickly to delivery orders to them. This demand for time reduction existsthroughout each link of the supply chain.

Company management may focus on different aspects and elements of cycle time. It's verypossible theydo not understand the total process. They may look at how long it takes to enter an order, or thewarehouse time to pick and ship and order, the cycle time from order receipt to ship an order,manufacturing cycle time, time to prepare purchase orders or other measures of time. These areeachelements of the total cycle time; they are not the entire process. Without an understanding of theentirecycle and its elements, companies can optimize one element and yet suboptimize the overallsystem.

With logistics, the cycle time is significant and can be complex. In logistics, cycle time runs fromthevendor shipping to you right through to your delivering the customer's order to him. This view ofcycletime means there are both internal and external factors. These must be recognized and dealt withan orderto manage and reduce the time. And the scope and complexity becomes significant if the vendoris locatedoverseas and/or the customer order is for export. Very often company management does notunderstandthe process and what all is involved to get materials into the manufacturing facility, or finishedgoods intoa warehouse and to deliver orders--all within the time constraints to meet the customer'srequirements.

Supply chain management, continuous replenishment, vendor-managed inventory, just-in-time andsimilarprograms are customer driven. You must perform as the customer demands. That is it. Failureto meetthe customer's expectations can result in penalties, chargebacks and even the loss of his business.

These programs mean that inventory is being pulled, not pushed, from supplier to customer. Thisis asignificant change from the past, where manufacturers made product and pushed it out. Thatoften meantextra and excess inventory, in many stages of production and distribution. Not so now. To meetthe newcustomer demands, the focus should be on a DRP, distribution requirements planning, tocomplement thepull-process. DRP should then feed to MRP, materials requirements planning, and other systems.

By going from the customer delivery date and working backwards, this requires a rethinking ofhow tocalculate time and to meet it. The old manufacturing attitude of "it's made, now ship it" is notvalid. Aswe said before, it's not shipping anymore. The process must be planned to meet a delivery date. Andgiven the short notice and leadtime with some customers, meeting the requirements is easier saidthandone. It can put expediting to a new level.

Conversely, the sales attitude of "I've got the order, now ship it" is not valid and shows that thesalesperson does not know his own customer's requirements. Customers now present and even dictatehowtheir customers will handle their order. From receiving it via EDI, to the use of bar-coding on thecasesand pallet, to Advanced Ship Notices and more, customers are specifying how their customers aretoperform.

There are external and internal time issues with the logistics cycle. And external and internalconcernsthe movement of product and the movement of information. Here are some of the ways an ordermay behandled--

The external issues are obvious and get the attention, especially if something goes wrong. External issuesinvolve the carrier who brings material from the vendor to the plant, who moves it from the plantto adistribution center or who takes it to the customer. There are mode choices to be dealt with. How fastmust it move and what will you pay to have this done? Given these answers, then the carrier mustbeselected. The carrier must be reliable, even more than speed per se, reliability is important. Also,thecarrier should be able to communicate with the various parties. This can be via a computersystem, faxor they just have a good customer service group to keep vendors or receivers up-to-date.

External can also involve an outside warehouse. How well do they pick orders? How muchnotice do theyneed to pull and ship the order? How quickly do they give their customer shipment informationso youcan invoice and advise his customer of the shipment status? Or external can involve vendors whoperformspecial repacking or other services.

But perhaps the bigger time issue may be the internal handling of the product and the order. Think aboutit. A customer prepares the order. He may send it to the salesperson or to the broker. This partymay thenreview it and send it to the customer service group for order entry. Now what value was obtainedby thesalesperson or broker handling the order? There should have been some value to the customer orhissupplier? The handling delayed the order getting to the supplier. And this time delay can becritical. Thecustomer did not change his required delivery date because of this order handling. So the suppliermuststill respond to the delivery date.

Then the order must get to the order entry group. They must enter it. Perhaps AccountsReceivable mayreview the order. Time is ticking away. Yet the customer has not changed his delivery date. Then the order goes to the warehouse. How did it get there--automatically or internal company mail? Time is stillticking away.

The order must be pulled at the right time to meet the delivery date. Is the product in stock ornot? If not,how long till it will be? What if it is already too late to deliver in time? What if all the internalhandlingshave delayed the processing of the shipment so that it cannot be delivered by the delivery date andby thecarrier that the customer requested? If that happens, will the company review how it handled theorder? Or will it just blame the distribution group for not shipping the order in time?

Let's take the above procedures and situation and add some dates to it. This example is notatypical:

Look at the time which did not involve the actual order receipt, entry and shipping and delivery oftheorder. It can be significant in the total cycle time, especially given the real requirement wasdelivering theshipment by the 15th. The cycle should be viewed as a process whose goal is to deliver the orderper thecustomer's requirements. Instead, the various groups who come in contact with an order do theirownthing with the end result that the supplier failed to perform per the customer's specification. Yetcompanymanagement may not understand and look at the total process. If they do not, these servicefailures willoccur again.

Similar issues and times exist for the manufacturing planning. There are internal issues with theforecastacuracy, getting good on-hand inventory data, reviewing the production schedule, preparingnecessarypurchase orders and getting these to the vendors. Then for the vendor to handle the order, justlike above,and getting to his customer in time so that the customer can do what is required to ship his orderon time.

Cycle time grows if the the company is dealing with parts from overseas or shipping an exportorder. Management must understand and recognize the time required to book the shipment, get thecontainer infor loading in time to make the vessel closing at the dock. And if there is a surge of demand forthe shipcapacity or airline capacity and overbookings, then there is additional time to actually get a firmbooking. There is time required for documentation, export license (if required), certificate of origin,shippers exportdeclartion, invoice and other documentation, actual transit time, customs clearance andtransportation todestination. That is a lot to be done.

Time is one of the critical issues in logistics. There are external and internal factors which mustberecognized if time is to be reduced effectively. Management must understand the process and thecooperation and integration required. Their customers will not accept excuses, mistakes andfailure.