By Gwynne Richards and Susan Grinsted
Supply chain management and logistics is taking centre stage in many companies today. Until recently the areas of warehousing and distribution have not been seen as core to a company’s operations and as a result have not always attracted the cream of management talent. Experienced managers have tended to fall into roles such supply chain manager, logistics manager and warehouse manager. Outsourcing in this area has also been popular as companies look to buy in expertise and reduce costs. Below, Gwynne Richards and Susan Grinsted argue that there is an increasing need for tools to assist the new breed of supply chain and logistics managers.
In the past, warehousing and more specifically freight transportation have been seen by the media and the population at large as necessary evils with large pantechnicons thundering up and down our high streets. Today, however, supply chains are very much in the news for both positive and negative reasons.
Supply chains are now mentioned when companies are contemplating either the closure of a production facility or the opening of a new plant and its effect on local businesses within the supply chain, such as component manufacturers and transport companies. Supply chains were also scrutinised closely when the horse meat scandal broke and during natural disasters such as the ash cloud over Iceland and the Japanese tsunami. These led to many companies having to revisit their disaster recovery plans and undertake many more risk assessments.
Introducing the concept of supply chains to a larger audience has seen an increase in the number of supply chain and logistics courses being offered by Universities and new schemes such as that launched by the University of Huddersfield and The Novus Trust, a not-for-profit educational initiative in the UK, sponsored by leading companies and inspiring tomorrow’s supply chain professionals through a 4-year Supply Chain and Logistics BSc.
Many developing countries are sending their students to European Universities, specifically to study supply chain and logistics management.
The dynamics of the logistics and supply chain industry have become increasingly complicated, while the supply chain has become a primary differentiator for growth and profitability.
Globalisation has seen an expansion in the length and complexity of supply chains. The growth of e-commerce and growing environmental awareness by the consumer has introduced many new challenges for supply chain and logistics managers.
Supply chain and logistics positions in the past have failed to attract graduates and these posts have been filled from the bottom up which is no bad thing, however these managers have little in the way of supply chain and logistics tools to assist them in their day to day work.
Today’s logistics managers no longer patrol their warehouses and transport offices in brown coats clutching a clipboard and pencil. They are more likely to be in a suit or corporate uniform, use a personal digital assistant (PDA) and more often than not are seen hunched over a laptop deciphering the latest cost and productivity figures.
A recent job description for a Distribution Centre Manager required the following key skills and outlined core accountabilities which are typically sought from today’s senior supply chain managers: these included an ability to negotiate, information-technology skills, basic finance and business acumen, people-management skills and an ability to motivate and lead large numbers of employees through communication and engagement.
The job description and the core accountabilities were as follows:
• the provision of a responsive and cost-efficient logistics operation that is aligned with the current and long-term requirements of the global business strategy;
• responsibility for the leadership and direction of the logistics team;
• to ensure that the logistics operation is capable of delivering the volume requirements of the business;
• to drive continuous improvement in the cost efficiency of the operations;
• to set the long-term vision for the logistics operation in line with the strategic plan and to ensure that future volumes and customer-service requirements can be met;
• to safeguard the human and physical assets employed in the Distribution Centre and on the road;
• the management of projects and introduction of new initiatives;
• to maintain strong relationships with suppliers;
• the development and management of industrial relations within the warehouse environment.
Today’s supply chain and logistics manager needs to have expertise in human relations management, finance, project management, procurement and operations.
So how does a supply chain and logistics manager ensure that he or she can meet all these criteria with the limited experience they have gained to date?
Specific management tools have been available for a long time with a number of books being written in this field however few have concentrated on the area of supply chain and logistics.
There are many general management tools which can be adapted to be used in the field of logistics. These include process improvement tools such as DMAIC and PDCA with a number of logistics operations introducing them alongside Six Sigma. Measurement and benchmarking tools such as Balanced Scorecards and SCORSM are also heavily used.
More recently logistics operations have introduced tools originally pioneered by the automotive industry. These include Gemba Kanri or 5S, Kanban and Kaizen – for continuous improvement.
The logistics industry has, in part, embraced the Japanese workplace organisation methodology called 5S which uses five Japanese words: seiri, seiton, seiso, seiketsu, and shitsuke and loosely translated them into English as Sort, Straighten, Shine, Standardise and Sustain.
A sixth ‘S’ – Safety has recently been added to the list. The premise is to carry out these tasks in the correct order and give individuals responsibility for each task and for the improvement of their work areas.
Flow charts, Gantt charts, SWOT analyses and the increasingly popular Mind Maps are also available for today’s managers.
One of the best known and versatile management tools is Pareto’s Principle or the 80/20 rule. It is also known as ABC analysis when looking at inventory and customers. Vilfredo Pareto was an Italian economist, engineer and sociologist. It is reported that he observed that 80% of Italy’s wealth was in the hands of 20% of the population. Hence the 80/20 rule. This principle was adapted for business by Joseph Juran, an American consultant who coined the phrase “the vital few and the useful many”.
In today’s business world we see a number of parallels. Many company profiles follow a similar pattern in terms of customers, suppliers and products. It is uncanny when profiling a company to find that 80% or thereabouts of their business is with 20% of their customers or that 80% of their sales comes from 20% of their product lines or that 80% of their purchases come from 20% of their suppliers.
The 80-20 relationship isn’t always the case, however many companies do have a large number of products and customers yet only 20% of these provide the majority of the sales.
Figure 1 shows that 80% of a customer’s total order profile includes only 20% of the product codes.
Recent examples in our consultancy projects include a client where 80% of their sales came from only 16% of their product lines and another where 20% of the product lines made up 85% of their total orders. A simple Excel spreadsheet utilising the data sort facility can produce this information very quickly.
In terms of how this tool can help logisticians we can quickly see which products must have the highest availability, which can be disposed of, which customers we need to concentrate our service efforts on and from a distribution centre layout perspective we can reduce the total travel time by placing the most popular products close to the despatch area.
Other areas where today’s supply chain managers may require assistance include risk assessments both in terms of the supply chain as a whole and in terms of individual operations, such as vehicle fleets and distribution centres.
With the increasing realisation of the importance of the whole supply chain to a company’s profitability and well-being, information technology is taking centre stage with significant investments in the development of enterprise resource planning systems, supply chain execution software, transport and warehouse management systems, labour management systems and e-commerce platforms.
A challenging area is that of the environment, with both governments and companies looking to reduce their impact on the planet in terms of CO² and other emissions. It is likely that in the near future governments will look to introduce further company taxation to reduce the amount of waste and emissions produced and as a result companies will need to be able to provide data as to their emissions throughout the supply chain. Many corporate social responsibility policies will outline the company’s sustainable environmental practices and its goal of carbon neutrality. To this end, companies need to be able to measure carbon emissions from supply chain operations. Tools provided by the Carbon Trust and the Department for Environment, Food and Rural Affairs in the UK go some way to measuring supply chain emissions.
On-line tools include freight exchange systems, a form of dating agency for logisticians, portals for matching empty capacity with available freight and thus attempting to reduce the amount of empty miles run by commercial vehicles. Others include freight auction sites where companies are able to auction off their freight trade routes to the lowest bidder.
Conclusion
Supply chain and logistics departments have, to a large extent, been seen as the poor relations within companies and are certainly not the career of choice for many people. However as companies look to the future and realise that time to market and order delivery time is becoming more and more important in this age of e-commerce we are seeing a much greater interest in this sector.
The introduction of robotics, 3D printing, vision and voice picking are revolutionising the supply chain sector and with companies such as Shutl, now owned by e-Bay, delivering a product within 13 minutes 57 seconds of receiving an order on line it’s becoming more exciting and attracting new interest.
Today’s logisticians are therefore working in a fast-moving, ever-changing environment where the supply chain has become centre stage, providing competitive advantage to those who can master the management of procurement, suppliers, inventory, warehouses and distribution. Getting the right product, in the right quantity to the right place, on time, in excellent condition at an acceptable cost is paramount if companies are to compete in this new omni-channel world.
Attracting talent into this constantly evolving and fast-moving environment is paramount as is providing them with the tools to run their logistics and supply chain operations efficiently.
About the Authors
Gwynne Richards has over thirty years’ experience in logistics and supply chain. He runs his own successful logistics consultancy and produces practitioner courses in warehouse management and outsourcing. He is a visiting lecturer at Warwick University and author of Warehouse Management.
Susan Grinsted is an independent educator, trainer and consultant working with a number of educational institutions in the UK, France and Finland as well as with many multinational companies worldwide. Her work focuses on transferring knowledge and skills to enable companies and individuals improve their performance.
They are the authors of a new book, The Logistics and Supply Chain Toolkit – over 90 tools for transport, warehousing and inventory management published by Kogan Page.
References
1. Juran J (1951) Quality Control Handbook, New York, New York: McGraw-Hill
2. Richards G (2011) Warehouse Management, Kogan Page London
3. Richards G, Grinsted S, (2013) The Logistics and Supply Chain Toolkit Kogan Page London http://www.novus.uk.com/ accessed 21/01/14
4. The Logistics and Supply Chain Toolkit: http://www.koganpage.com/editions/the-logistics-and-supply-chain-toolkit/9780749468088?affiliate=7oOponbqvUCEyuLlmRAmZA
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