The Insider's Guide to Business and IT Agility
By Edward C. Tracey, Virtual Delivery Source , 10/27/2002
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A small manufacturer's logistics dilemma: The CEO has asked you to cut transportation costs by 15 percent. He knows the challenges you face: multiple distribution channels, global sourcing, varied shipment sizes and frequencies, uneven service coverage by transportation providers and a maze of transaction options. Still, he thinks costs can be squeezed out of the supply chain through better long-term and day-to-day logistical execution. "The more money we sink into warehouses and transportation and such, the less capital we have for R&D and business expansion," he lectures. What's your response?
A regional retailer's logistics dilemma: Many of your customers don't buy products--they buy delivered products. A big-ticket item (in size and in price) has been back-ordered for 20 customers. Fourteen of them, in seven states, want home delivery and setup. The other six prefer to pick up their purchases at the stores they visited (four different stores in two states). Four of the customers (three home delivery, one store pickup) say they will cancel their orders if the item isn't delivered in the next four days. You're the logistics manager, and you've just received word that your supplier can now fill all the back orders from its distribution centers in Columbia, S.C., and Omaha, Nebraska. The supplier awaits your instructions. What do you do?
No one transportation provider can accommodate this logistics nightmare. Lining
up transportation providers with the right capabilities to meet diverse schedules
at a reasonable cost will steal hours of your time--time you can't spare. But
not taking the research time could cause delays, cancellations and ballooning
costs. What do you do?
Logistics: Connecting the Dots
When your product leaves the plant, warehouse or store, its cost increases until it reaches the end user. Let's say the increase attributed to order fulfillment is 25 percent. With better supply chain management, fulfillment costs can be slashed--perhaps by half or more.
Ditto for the raw materials you receive. Extending best practices up the supply chain can produce double-barreled savings from better logistics as well as better sourcing.
On the surface, managing logistics seems simple enough. The main focus is freight. You pay a transportation provider to move goods from Point A to Point B within a certain amount of time for a certain amount of money. You're just finding a way to connect the dots. But in any given logistics scenario, you'll likely find a maze of dots to consider. Some dots are more visible but less effective than others. Many dots are clustered together; some are on the fringes; others are entirely out of the picture. Some dots will soon expire. And to complete the picture, maybe you need to create some new dots.
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June 3, 2009
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