Category Archives: Logistics

Logistics Management’s Ten Steps to a Safer Supply Chain

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Today’s organizations must proactively enhance their supply chain resiliency against multiple threats, because if they don’t:

  • widespread disruption to customer deliveries can occur,
  • brand equity could be damaged,
  • loss of revenue could lead to investor discontent,
  • regulatory scrutiny could increase, and
  • significant legal liabilities can materialize.

That’s why I appreciated an article that Logistics Management ran last year that covered “a framework for protecting your supply chain” because, as the downturn hangs on, the risks of many types of threats increase.

The framework described in the article revolves around 10 security competencies that are required within and across each firm in the supply chain to keep it safe. Specifically, the following competencies are required:

  1. Process Strategy
    An effective security environment requires strong executive commitment and a culture that puts a premium on security.
  2. Process Management
    This requires in-depth understanding of firm and supply chain processes in order to identify vulnerabilities that may cause disruptions.
  3. Infrastructure Management
    This involves the most basic and common methods used to increase security as they serve to form a “perimeter” guarding against unauthorized entry.
  4. Communication Management
    This involves strategies to share potential threat and security information internally with employees and provide communication channels for employees to use when a potential threat exists or incident occurs.
  5. Management Technology
    Information systems provide a first-defense mechanism to understand trends in product contamination and missing shipments, as well as to identify the root causes of these occurrences.
  6. Process Technology
    This is used to track product movement and monitor processes internally and across the supply chain.
  7. Metrics
    Metrics should be developed and captured by the firm to assure adherence to security guidelines.
  8. Relationship Management
    Collaboration with external entities is necessary to ensure that security procedures are communicated and followed.
  9. Service Provider Collaboration Management
    A company cannot create a supply chain protection program alone.
  10. Public Interface Management
    Forging relationships with government agencies is a critical corporate capability to protect against many threats.

Package Diversity May Combat A Sales Slump …

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… but it may also lock you into single source relationships, which could be bad for business if your supplier is on, or is close to, shaky ground.

While it’s always nice to stand out from the crowd, I have to wonder if Coca-Cola’s recent decision to “shake up its packaging” is the right decision from a supply chain viewpoint. I’ll admit that the 16-ounce bottle might give it a key price point, but it could come at a cost. There’s a reason most soft-drinks come in standard package sizes (2 L, 20 oz bottle, and 12 oz can) … that’s the sizes that most manufacturers have standardized on. Every time you change a size, you change a production line. That requires investment. A manufacturer is not going to do that without a significant commitment on your part. This locks you in … and even if it insures a stable supplier, it also takes away any negotiating leverage you might have as a buyer if your sources are limited. This may not matter if your product sells like mad at a decent profit point … but if the sales campaign backfires, it could cost you.

I’ll admit that Coca Cola most likely has the brand, the marketing prowess, and the supply chain optimization capabilities to pull it off (as a very early adopter of strategic sourcing decision optimization and supply network optimization technologies), but I don’t think there are many companies that could pull this off in today’s economy. Anyone have a different viewpoint?

Four Tips For Keeping Your Transportation Costs in Check

Transportation costs might be temporarily low, but as soon as demands start picking up, you know they’re going to spike again. Fortunately, there’s a way to control transportation costs regardless of demand, or fuel costs, and an article last summer in Industry Week on “rethinking transportation costs” offered up some suggestions that are worth a quick review.

  • Know Your Carrier
    Know what keeps your carrier up at night and what you’ll need to do to take a more collaborative approach to solving your collective challenges.
  • Trucks, Trains, Ships, and Planes — Which is right for you?
    Consider alternate routes and alternate modes … maybe there are (much) cheaper options if you can be a little flexible on your delivery dates and transit times.
  • Let Your Network Be All It Can Be
    Reconsider your manufacturing locations, distribution strategies, off-shoring strategies, and customers. Do you have the right number, the right locations, the right strategies, and the right customers?
  • Find the Answers
    Consider all of your network data, all of your network possibilities, build some optimization models, run some simulations, and discover your true potential.

Now That You Have Your Demand Planning Strategy in Place, Use It!

In our last post, we reviewed Infor’s top ten demand planning strategies. In this post we’re going to illustrate why you need to put your demand planning strategy into action immediately using a recent case study from Global Logistics & Supply Chain Strategies as our example.

In Free The Enterprise! Bust the Silos in the Supply Chain, Robert Bowman tells us how, not too long ago, Linksys (the router division of Cisco Systems Inc.) had a record of only 20% accuracy and could only manage supply and demand for its top 200 SKUs. However, after taking appropriate actions, it was able to reduce inventory by 35%, backlog by 60%, and obsolete inventory by 40% in only twelve months. It also increased supplier fill rate from 65% to 95% while reducing expedited shipments more than tenfold from 40% down to 3%. And forecast accuracy at the SKU level increased 350% to a much more acceptable 70%.

How did Linksys do this? The Vice President of Operations tore down the silos between the demand forecasting and product management teams and created a formal S&OP organization that served as a data clearinghouse and a foundation for a company-wide demand forecast. No longer was forecasting a monthly spreadsheet exercise conducted in isolation by the demand forecasting team. In the new structure, a cross-fuctional forecasting team was formed that solicited input from finance, sales, marketing, purchasing, and supplier management before constructing a forecast. This is a much better situation than the one where no one trusted the forecast and sales would inflate its numbers to insure product availability.

In addition, the VP instituted an aggregated view of forecast, inventory, and production data for each SKU that he called “gameboards” supported by a an underlying software platform. No purchase was permitted unless it was based on factual information from the gameboard.

However, the effort ultimately succeeded because the internal walls were torn down and all organizational groups learned to work together in harmony and trust the forecast that was produced as a group. This is not always an easy effort. As the author astutely notes, “companies might find it easier to tear down functional walls separating them from external partners, such as suppliers, than those between internal departments“. In addition, “independent partners understand the need to work closely together, while individuals with a common employer tend to gravitate toward their immediate areas of responsibility“. And this tendency to stick to silos will continue unless you align incentives. If sales is incented to push product even if inventory is high and factories are incented to increase production even if the demand is not there, everyone ultimately loses. Everyone needs to be incented against the same goal and off of the same metrics, which must capture TCO reductions and ROI improvements. And the organization needs to move to a collaborative demand-driven mentality focussed on compliance with the agreed upon operational procedures.