“Holistic: emphasising the importance of the whole and the interdependence of its parts”
– Definition from www.thefreedictionary.com
Over my years of experience in operational management and consulting practice, I have had the opportunity to work on projects relating to procurement, transport, warehousing location, inventory management, production scheduling and (internal) warehouse design. Each of these factors is a part of the supply chain or logistics or whatever buzzword is currently de riguer, and each of them is usually costing (or spending!) far too much money.
When it comes to health, it is becoming increasingly rare to treat only the symptom of the affected part without considering the wider cause – the mind/emotions and body are proven to be linked; musculoskeletal issues can cause referred pain in an apparently unrelated area and so on – hence the rise in a holistic approach to medicine. In this blog, I propose that a similarly all inclusive approach to Supply Chain improvement and procurement would generate cost saving and efficiencies hitherto unknown.
Let’s take transport procurement. Certain costs are market related so can’t be altered; but a procurement expert can negotiate the best prices from suppliers, fuel, fleet maintenance, etc. making significant savings to the bottom line.
But what about the transport operation? If you could have a fleet specialist on your team, and a route-modelling expert, then you could generate more efficient routes where the fleet is better utilised. Too many trucks run one-way trips and are less than 75% truck fill. How about Backloading? Or treat deliveries regionally rather than locally? Groupage? Multidrops? Drop and swap?
By creating greater efficiency here you could save 30-50% simply by needing fewer trucks and filling up the ones you have. This is turn creates fewer calls on disposables so we return to our savings in procurement mentioned above – the gift that keeps on giving.
But, as a transport manager myself in the past, I was shackled if the warehouse operatives fell behind on picking and loading because, say, the design of the warehouse was inefficient or there were too few loading bays. The stock was held in the wrong locations or there weren’t enough charging bays for FLTs. Or the picking strategy wasn’t efficient but it had always been done that way….
Whatever the reason, my trucks wouldn’t leave on time thus incurring penalties at the delivery point or I would have to use additional trips incurring perhaps express delivery prices… this was so frustrating because it would come out of my department budget and would make my team fail on their delivery KPIs. What could I do as a transport manager? Very little. But, using a holistic approach to the Supply Chain I could call in a warehouse design expert to cast an eye. Could we make better use of the space available? Change the strategy for picking? Alter the racking? Then the pickers/loaders would be more efficient so my trucks would depart and – traffic permitting – arrive on time.
My drivers wouldn’t get stung on drivers’ hours legislation and my overtime bill wouldn’t take a hit.
But what if the feed was from production and stock didn’t come off the line when planned?
Call in a production scheduling whizz; or an inventory management expert; or both.
Consider the stock holding; what is the ABC profile? Could you rationalise your products? Store some in a centralised location? Or in a cheaper regional location for the C-Z profiles? And whilst you are at it, stop making the F-Z profiles anyway cos frankly, who’s buying them?
Reduce the “made to order” by storing more stock in a part finished state so there are fewer delays over all… Reduce capital tied up in inventory; maybe alter your distribution network and bring in central/regional stockholding sites? Store in a location with cheaper rated land? Get the procurement team back on that one for you.
Production. Can you create swifter changeovers by altering when you make widget A in relation to widget B or D? I worked with a Cider production company (as a junior analyst at the time) and we increased their efficiency by about 15% if I recall. Not much, perhaps, but add it to the other savings already secured in my proposed holistic review? We are looking at big numbers – much bigger than any single department could achieve alone. So by playing with production scheduling we can save money on time lost, which reduces delays, and can impact on inventory in a good way, which reduces the amount of warehousing potentially but can certainly use cheaper warehousing for slower stock; transport gets away on time reducing penalties and increasing service levels so perhaps even generating additional performance bonuses. And I haven’t even started on the inbound logistics opportunities….
Have you ever read this proverb?
Let me paraphrase:
For want of a fully inter-departmental co-operative approach to the supply chain, an organisation can simply be haemorrhaging costs without really noticing.
If you would like SpringTide to give your Supply Chain a health check, please give us a call now on +44 (0) 1543 466835 or fill in this form