Logistics best practices - American Identity
Logistics Management announced American Identity as the winner of Logistics Best Practices (Gold Winner)
Here's what they accomplished:
Logistics Best Practice: Helped clients cut expedited freight usage by 50 percent and reduced shipping-related complaints by 92 percent with the help of its proprietary freight-quoting module. Used a similar module internally to improve inbound routing decisions. Overall, the new system knocked out more than $500,000 in accessorial fees.
How did they get started doing that:
The key to this success, according to Brown, is something that every logistics professional is capable of doing, and it doesn't cost one dime: "We simply listened to the customer."
There's no better place to start. However, I have no doubt that 2 years from now when the proprietary freight-quoting module gets clunky and cumbersome, that's where the next generation of customer dissatisfaction is going to come from.
Thinking Lean, Acting Lean = Being Lean...
Says Bruce Tompkins in ...Lean Thinking for the Supply Chain
A lean supply chain is one that produces just what and how much is needed, when it is needed, and where it is needed.
That's brevity for you that masks the utter transformation that an entire firm - its supply chain, manufacturing, personnel, accounting, finance, sales and management, have to go through in order to be lean. And that's the destination -
being lean.
There are two conceptual definitions in Lean thinking - Value and Waste.
What is
Value?
Value, in the context of lean, is defined as something that the customer is willing to pay for. Value-adding activities transform materials and information into something a customer wants. Non-value-adding activities consume resources and do not directly contribute to the end result desired by the customer.
So then, what is
Waste?
Waste, therefore, is defined as anything that does not add value from the customer's perspective.
If anything else, Lean is really about letting your customer define conceptually, what the firm is all about. Well, not quite that way. It is really the firm's understanding of how the customer(s) would conceptually define the firms' activities.
So while a customer might be willing to pay for feature A which require Processes X,Y and Z, a customer doesn't really wish to pay for the time that it spends waiting and being transported between Processes X, Y and Z.
How does lean thinking figure into the Supply Chain space?
If
Value is what the customer wants, then
Value is what the customer gets.
Lean principles focus on creating value by:
- Specifying value from the perspective of the end customer
- Determining a value system by:
- Identifying all of the steps required to create value
- Mapping the value stream
- Challenging every step by asking why five times
- Lining up value, creating steps so they occur in rapid sequence
- Creating flow with capable, available, and adequate processes
- Pulling materials, parts, products, and information from customers
- Continuously improving to reduce and eliminate waste
This is where getting the customer into the lean initiative makes a lot of sense. Instead of specifying it from the customer's perspective which is equivalent to the firm's understanding of the customer's perspective, it makes a whole lot of sense to get a few key customers involved in the lean process - not easy but it can't hurt.
If the customer doesn't want
Waste, then the firm has to find it and kill it.
The "Waste" reduction process begins with the question "What can we do to improve?" Some answers may include:
- Stop defective products at their source
- Flow processes together or change the physical relationship of components of the process
- Eliminate excess material handling or costly handling steps
- Eliminate or reduce pointless process steps
- Reduce the time spent waiting for parts, orders, other people, or information
My interest in Quick Response methodology (which is a kind of lean thinking put into action) exposed me to certain kinds of software based on applied queuing theory that is very helpful in just the above.
All of the above is internal to a firm's activities and its quest to being lean but a supply chain involves actors within and without the firm. So how does lean thinking rework the supply chain?
Lean suppliers (and Lean procurement)
- Lean manufacturing
- Lean warehousing
- Lean transportation
- Lean customers
Of all the above, Lean manufacturing, warehousing and transportation (depending on the extent of outsouring, 3PL involvement and 3rd party warehousing) are the only activities within direct control of the firm. Lean suppliers and procurement as well as lean customers are only within the influence of the firm but outside direct control. Lean customers don't stress the lean system from a delivery and requirements point of view while a lean supplier doesn't stress the system from an input into the firm point of view.
What's the best practice with "Best Practices"?
I've always been suspicious of "Best Practices" but that probably is because of my background in R&D and the irrelevant pride that often goes with - the NIH (Not Invented Here) syndrome. Atleast, I recognize it in myself. However, "Best Practices" is the "lazy" approach to execution in the Supply Chain space as opposed to the "hard" approach which is to knock yourself against the immutable laws of business success, fail and try again until you get it right. Sure, you save money and time using the "lazy" or well-trodden and tested path but the trade-off is in learning especially organizational learning in the supply chain space.
I've got to make a confession here too - I've got a soft corner for gaining competitive advantage through supply chain design and execution which is why I've a preference for the latter "hard" approach of doing things. Adopting the "Best Practices" approach implies that you're adopting what works and your competitive advantage w.r.t to others in the industry is marginal at best. Ofcourse, there is nothing that stops the firm from adopting cross-industry best practices or innovating up from the best practices floor that is adopted.
With regards to best practises in Supply chain execution, here are some pointers from the consultants at Tompkins Associates. Here are the 7 best practices for supply chain execution implementation:
1. Realistic objectives and expectations - Defining business requirements
2. Right Systems - Meeting business objectives
3. Right Team
4. Right Processes
5. Right Plan
6. Right Training
7. Right Timing and Support - Minimizing impact to customers
With Supply Management - Technology Rules...
Says Patricia E. Moody in the May 1, 2006 edition of Supply Chain Management Review (...)
Technology may not necessarily be the be-all and end-all. But in the supply management space, it's certainly the quickest and most direct route to cutting costs and improving profitability. The companies profiled here show how - with the right people and processes in place, technology can deliver stunning performance results.Technology may not necessarily be the be-all and end-all. But in the supply management space, its certainly the quickest and most direct route to cutting costs and improving profitability. The companies profiled here show howwith the right people and processes in place, technology can deliver stunning performance results.
Reading on in the article, she outlines the following in three companies
1. Hewlett-Packard
E-sourcing - A new buzzword for what was always the aim of upstream (or downstream if you were a supplier) supply chain collaboration with a bit of bidding/auctions thrown in. But think about this for a minute, what might the unintended consequence of this mode of supplier collaboration be? As users of this mode of procurement adopt this technology, all that it involves is poring over competitive bids of the "widget" being delivered - wouldn't a computer be able to do this as well, faster and more efficiently if there are a number of competing "widget" characteristics. A supplier relationship might be transformed from a people based process to a people-computer process.
Procurement risk management - This is one of the innovations (incidentally, also won an award ) that makes working in supply chain management exciting. As the article elaborates:
The software helps HP tackle uncertainty in demand, supply, price, and material costs. It quantifies the risk and the likelihood of certain changes and allows the company to manage risk over a longer time horizon.
This innovation incorporates the "real" problem of managing in the world - dealing with uncertainty, through a risk management approach. The next step - modeling the supply chain using control theory and modeling uncertainty through a disturbance function and seeing the behavior of the supply chain. Ofcourse, I'm dreaming.
2. Caterpillar
Predictive buying initiative - black box stuff also known as forecasting. Which parameter do you wanna change next?
3. Datacraft Solutions
Electronic kanbans - I'm hooked already. Is this going to be a fad or something about to scale across many manufacturing organizations. I've been sold on the TPS and all principles lean, wherever they can be applied and here is an innovation that does away with the kanban cards, where do I sign up. Here's what Datacraft's view is:
Since I work as a Supply Chain Professional...
There is no one reason why I wanted to set up this blog. Actually, there are several reasons. I made the jump from R&D into Supply Chain Management about 4 years ago. I'd like to think that blogging is one way to expand my thinking on Supply Chain Management.
So here it is!!
