Category Archives: Logistics

Three Great Tips for Redesigning Your Logistics Network

A recent article in Logistics Management contained 6 Network Redesign Tips designed to help you reduce distribution costs. The following three tips are particularly relevant regardless of the type of supply chain you operate:

  • Being Green Can Bring More Green If it’s truly green, it saves you money. If a solution that purports to be green increases costs, then you can be sure it’s another example of greenwashing, because truly green solutions reduce the requirements for energy, water, and other natural resources, which ultimately decreases costs. Examples given in the article include replacing high-intensity discharge lights with energy-efficient fluorescent lighting, installing solar panels, and utilizing fans for air circulation, but there are dozens of ways you can reduce costs. See the green and sustainability archives for other items.
  • Get Creative With Transportation As per the article, start by finding ways to eliminate empty miles and increase truckload utilization, but don’t stop there. It’s not just plane, train, and truck … there’s also bus and even automobile. Busses often have empty space and are used in some countries regularly to haul small loads, and sometimes you should off-load your smaller shipments to Fedex and UPS who use smaller, energy efficient vehicles.
  • Create an Off-Shore, On-Shore, Near-Shore Blend for FlexibilityThe last thing you want to do, as a result of a supply disruption in your factory half-way around the world, is expedite multiple shipments by air that would normally go on a single ocean carrier. Not only does this send transportation costs sky-high, but it can also increase your carbon footprint. (Yes, ocean carriers, which aren’t subject to the same clean-air requirements of land-based vehicles, are dirty … but your footprint is often just a fraction of the carbon-produced as you’re sharing the load with dozens [or hundreds] of other shippers. However, if you’re filling multiple planes worth of merchandise, that carbon footprint adds up fast.) However, if you also sell into foreign markets, the last thing you should be doing is on-shoring everything. The best strategy for today’s multi-national is a blended strategy. This will minimize disruptions and costs.

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Greener Shipping Can Save Green

… but green goes beyond just packaging and carrier efficiency. In other words, while a recent article in the Environmental Leader on “how greener shipping can make you more green” had some great advice that should be a starting point in your shipping considerations, I think it missed a few key points. Furthermore, it advocated carbon offsets over greener technology, which is not the answer. You need to solve the sustainability problem, not just shift the burden to someone else who may or may not solve the problem with your cash.

To understand what green shipping truly requires, we need to start with a review of some of the key points made by the author:

Pick Packaging With Care

This goes without saying. As the author notes, the packaging must be unbleached, minimal, and should use recycled materials that meet the relevant environment standards. But before you address packaging, you need to address the product. Is it small and dense, or large and vacuous? If the latter, can it be shipped unassembled or partially assembled to save space, and thus, packaging? In other words, good packaging is more than just material selection, it’s maximizing how much you can get in a shipment (without a significant risk of damage).

Choose Efficient Shipping

This also goes without saying, but this is more than just choosing a carrier who has well planned routes, avoids wasted trips, and doesn’t send three trucks a day when one will do. It’s making sure that you’ve optimized your daily/weekly/monthly shipping schedules to maximize truckload volume, use the most carbon-efficient mode of transport possible (be it rail, ocean, truck, or air), and set up the right processes and systems to make sure their are no hold-ups or waits on your end during shipping or receiving.

Mitigate Shipping Related Emissions

This is a must, but carbon credits aren’t the answer. The answer is lower emission (bio) fuel, more efficient (hybrid) engines, and conversion to green power in your facilities (wind, solar, hydro, etc.) where the batteries for the hybrid/electric vehicles are recharged.

Read the Report

You should definitely do your homework, but don’t stop with the company’s official sustainability report which has been routed through their PR — search the traditional (online newspapers, magazines, etc.) and new media (blogs, forums, etc.) to see if there is any coverage or discussion around their sustainability and corporate responsibility and what the market has to say.

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If You’re a MultiNational, Why Would You Use a Domestic 3PL?

After reading a recent article in the new SCMR that contained a 3PL update which noted that analysts suggest global/domestic lines may be blurring, all I can do is ask why would a multinational use a domestic 3PL in 2010? A modern multinational is in-sourcing, out-sourcing, near-sourcing, far-sourcing, high-value sourcing, and low-cost-country sourcing … and moving products back and forth all over the globe. What possible logic would there be for using a domestic 3PL? If you’re outsourcing your logistics to a 3PL, then you’re outsourcing to use the full capabilities of the 3PL, not just to manage product as it comes into or leaves your country.

You could use a domestic 3PL to manage your product nationally and then a global 3PL to mange your product globally if you really wanted to, but, in doing so, you’re creating complexity, cost, and sowing the seeds of future disruption. If two 3PLs have to coordinate with every international transaction, that’s unnecessary complexity. If you’re using two 3PLs, that’s twice the 3PL fees. And if you do a lot of international shipments, that’s a lot of handoffs and a lot of chances for something to go terribly wrong.

Plus, with the greatest growth coming in China and India, chances are that your domestic market will be less and less important as time goes on. So why would you, as a multinational, use a domestic 3PL? If you have a good reason, let me know!

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What Can the Right 3PL Do For You?

A recent article in World Trade Magazine on “delivering supply chain excellence” listed seven services beyond simple logistics that your 3PL might be able to do for you. They’re worth looking into, especially if you don’t have the resources or expertise to efficiently manage certain aspects of your supply chain in house.

  • Network OptimizationIf your 3PL is efficient, it has optimized its own network. If it’s forward thinking, it will maintain an industry leading supply chain network optimization solution in-house that it can use to help its clients optimize its distribution network. If you haven’t done a network optimization, chances are your current DC locations are not optimal from a service or cost-of-service perspective.
  • Demand Supply PlanningThe 3PL can use its distribution data and optimization platform to understand how much inventory a client is carrying across their network and how much the client should be carrying at each location within their network to meet demand at the target service level.
  • Centralized BookingIf you have disparities in your booking and PO management processes, the 3PL might be able to offer you a centralized solution by becoming the central booking party of the transaction.
  • Value-Added ServicesA 3PL, well versed in best practice methodologies, might be able to discover hidden opportunities in your supply chain if you give them the chance. For instance, they might be able to reconfigure your warehouse operations to increase the efficiency of packing operations.
  • Price Management3PLs monitor market pricing very closely and know when there are capacity surpluses or opportunities for savings.
  • Designer NegotiationsSome 3PLs maintain relationships with e-Negotiation providers that can handle full rate and capacity information in the RFX and/or auction, which might be backed with decision optimization. They can license these platforms to you for use in logistics negotiations if you don’t have an in-house platform.
  • White Globe ServiceSome 3PLs offer dedicated services for manufacturers and retailers of large, bulky, hard-to-handle products which will include delivery and installation. Examples include appliances and fitness equipment.

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