continuous improvement Archives

Guest Commentary: Transportation Strategies for Mitigating Risk as a Continuous Improvement Initiative

Guest Commentary | By Fabrizio Brasca • 09/27/2011

Supply chain disruptions occur in many forms, from simple day-to-day concerns to catastrophic natural disasters. While potential risk cannot be avoided entirely, leading companies are taking a new approach to risk management and optimization. Instead of viewing risk mitigation as a one-time or periodic activity, these companies are assessing risk as a continuous improvement initiative. By adopting a combination of sophisticated technology and best-practice processes, organizations can effectively and continuously examine risk across all aspects. The following four examples illustrate how leveraging process and technology can strategically mitigate supply and transportation chain interruptions on an ongoing basis.

Design as a Process
One of the first and most common approaches to mitigating risk is to simply plan for it. Many companies leverage network design and tactical transportation modeling solutions to plan for challenges, but the difference between practice adoption and best-in-class is one of frequency.

Best-in-class organizations not only embrace proactive network and tactical transportation design, but they also take it beyond the traditional one-time or annual problem-solving event. They maximize risk mitigation effectiveness by enabling it as an ongoing, continuous process and by designating network design as an established, staffed function within their organizations.

When correctly implemented, network design as a full-time function is cost-justifiable based on the associated risk averted, money saved, and efficiencies gained. It also provides two distinct benefits: the ability to dynamically adapt strategies as supply chains evolve and the ability to anticipate and act ahead of emerging or cyclical trends.

Procurement Beyond Price
Transportation capacity availability and service-level consistency are two other examples of risk that organizations must continuously address. Factor in a challenging economy that impacts carrier solvency risk, and these issues become magnified. Companies must consider many factors when procuring a rate between two points, including the travel direction, equipment being used, committed capacity, agreed upon service levels and additional costs. This level of variation necessitates an explicit representation of the network in order to properly analyze all risk aspects. Organizations that focus solely on overall transportation cost leave themselves vulnerable to the inevitability of risk by failing to consider other risk-contributing factors affecting their transportation chains.

Advanced transportation procurement technology helps companies combat these risks by delivering the ability to model an improved representation of the network and perform comprehensive what-if analysis. Modeling the network with sufficient granularity enables systematic analysis of the potential tradeoffs – or costs – between mitigating the risk associated with each or some combination of variables, and the price of the service. When examining strategies to effectively mitigate risk, a company must concurrently consider the cost impacts of the associated mitigation options – such as how many carriers to secure per lane – and evaluate their worth accordingly to arrive at the best option for that particular organization’s business.

The “right” option for the company is often somewhere in between the highest-cost but safest option and the least expensive but also least secure option. Conducting optimization analysis to represent the network enables the company to examine that low-level detail and identify valuable tradeoffs to arrive at the right mix that fits its business.

Collaboration With Partners
Another granular form of risk is lack of visibility within a supply or transportation chain. Inbound shipping processes represent a common example of lack of information or interaction. While a company knows what order it placed, it often does not have insight into what the supplier’s inventory is, when the goods will ship or if they will be short-shipped. Traditional electronic signals such as Advance Ship Notices (ASN) are typically sent only after the goods are in transit, thus limiting a company’s ability to proactively adjust or re-plan if something goes wrong. The impact of these risks to the company’s supply chain might manifest as not receiving required materials at its factory/distribution center or a short-shipped truck that is now only half full.

Lack of visibility also poses a threat in the operational realm. A company might not have timely insight into supplier information affecting the orders it places, such as the supplier’s capacity or how the supplier schedules appointments for the ordered loads. The ability to share these signals and gain needed visibility requires both technology and processes that enable partner collaboration and communication. With these in place, suppliers can let companies know immediately what is being shipped so the company can plan accordingly. By providing carriers with the mechanism to share capacity and other details and by enabling them to interact with the dock scheduling process, companies are able to see exactly when each carrier will arrive at the dock and ensure that carriers are not scheduling concurrent appointments that cause inefficient wait times. With the ability to receive status updates regarding when trucks are in transit as well as revised estimated times of arrival, companies can react quickly and proactively to increase performance and service.

Closed-Loop Processes
Leveraging closed-loop processes as part of a continuous improvement paradigm is another strategy in mitigating risk. While companies might track the occurrence of a disruption within the supply or transportation chain, they commonly do not have the ability to capture why the disruption happened. Technology and processes can deliver the mechanisms to tie it all together.

Being able to record the reasons behind a disruption enables this feedback to be used as inputs into subsequent processes, such as procurement or supply chain design. Companies can leverage the results of network risk mitigation what-if and other analysis as information in their transportation management and other systems. These capabilities enable a company to help ensure that it can effectively put its plans into practice and redirect when necessary based on new information and events to minimize disruptions and overall risk.

Fabrizio Brasca is vice president, global logistics at JDA Software. He is responsible for developing strategic transportation innovations across all industry verticals.

Guest Commentary: Four Critical Elements for Excellence in Supply Chain Execution

Guest Commentary | By John Williford • 05/19/2011

Our clients in industries such as automotive, aerospace, hi-tech, retail and consumer goods are emerging from one of our nation’s most trying economic times. Faced with serious pressures to cut costs and boost profits, many companies have re-examined how they source, store and deliver their products. Flexibility, innovation and the ability to operate with virtually no margin of error have become requirements when it comes to logistics outsourcing.

A company’s ability to respond to change, to be nimble and innovative, depends on its ability to execute at the highest levels. Here are some of the elements of good supply chain management that must come together to achieve exceptional execution:

Proven template: Firms that are undertaking a significant change to their logistics network are most often successful if they have a model to follow. This model becomes a pattern for a standard, replicable solution set that can be applied across different areas of the supply chain. This is not to say that all supply chains should be approached with a ‘cookie cutter’ model. Rather, a standard solution set comprised of best practices becomes foundational and can then be customized to meet each specific logistics engagement undertaken. In the absence of a proven model, it can be difficult to know what best practices or methods will breed success.

Deep Expertise: Today’s complex supply chains require applied knowledge not only in their inner workings, but also with big-picture insight of the impact that changes made in one area of the supply chain will have across the network. Great execution requires functional expertise in distribution management, transportation management, cross-docking and network design; it also requires industry expertise in the unique aspects of customer requirements, drivers of profitability, challenges and trends for a particular industry segment. Functional and industry-specific knowledge allow companies to better synchronize supply and demand to achieve the optimal flow of goods across the network.

Lean principles: Applying lean processes is key to delivering long-term value and consistent performance. In a lean culture, logistics teams are empowered to identify and eliminate waste in every process that occurs as an order is fulfilled. Lean tools, such as visual cues, problem solving jackets, and root cause analysis, result in shortened lead times, built-in quality and continuous improvement – ultimately increasing speed to market.

Continuous improvement: We’ve found that ongoing, incremental improvements – both small and large in scope – add up to a significant edge. An important tool for continuous improvement is Value Stream Mapping. Value Stream Maps are created for many aspects of the supply chain such as detailed workflow management, warehouse productivity, route optimization and, on a larger scale, total landed costs. They combine engineering talent with practical operational knowledge to find the best opportunities for change and continuous improvement.

Here’s a recent example of these principles at work in our multi-client operations: A few months ago, we assembled a team of hourly employees at our packaging facility in Athens, Georgia. The team was tasked to evaluate and reduce the time it takes to changeover one of the facility’s packaging lines in order to achieve more frequent and variable runs of our clients’ products. Using a lean tool called a Problem Solving Jacket, the team was able to identify areas to improve, make changes, test the changes, measure the time savings, make more changes, and test the next round of changes and so on. Ultimately, this team reduced the process time for the changeover from 140 minutes to 27 minutes! As this example illustrates, empowering employees to eliminate waste from processes they know and participate in every day can dramatically impact productivity.

In conclusion, by achieving the right combination of proven templates, deep expertise, lean principles, and continuous improvement, your supply chain will ultimately get products to market faster, improve efficiencies, reduce costs, open new markets and enhance customer satisfaction. That’s why when it comes to logistics, execution is everything.

John H. Williford is President, Global Supply Chain Solutions for Ryder System, Inc. As a member of Ryder’s Executive Leadership Team, he is responsible for management, operations, sales and marketing, and the financial performance of Ryder’s Supply Chain Solutions and Dedicated Contract Carriage business segments.

Take Joy in the Journey: Supply Chain Advice from Fred Berkheimer

Logistics Outsourcing | By Steve Banker • 06/02/2009

Fred Berkheimer recently retired from Unilever after a 29 year career. For the last ten years, he was the Vice President for North American Logistics with responsibility for managing both internal logistics and logistics outsourcing relationships. Along the way he worked as a process engineer, in packaging, in facilities management, and as a factory manager (at one point he managed about half of Unilever’s factories in the US). When Fred sent me an email telling me he had retired, I knew I wanted to interview him for an article.

The question I posed to Fred was this: If you were appointed the top supply chain executive at a new company, what would be the top five things you would task yourself with accomplishing? Fred mulled this question over for a few days and then we talked. Here is Fred’s top five list. The top three are listed in the order in which he would tackle them; items four and five are not necessarily sequential and might best be worked on simultaneously.

Build Functional Excellence – whether it is in planning, logistics, procurement, or other areas, and hire or develop people that have a great depth of knowledge in their area. This he considers the “blocking and tackling” of making sure things run well. Metrics and KPIs focused on a particular functional area have a role to play here. Fred made the point that in the age of outsourcing, this has become harder to do. When Unilever outsourced all of its warehousing to 3PLs, the company used one of its functional experts to manage those relationships. However, when this man retired, Unilever found it no longer had the internal expertise to effectively manage those relationships. If you are forced to go outside the organization and hire the expertise, there is always the risk that the new hire won’t be the right fit for the culture.
Install a Customer Service Mindset Across the Supply Chain – Fred is a big fan of Ritz Carlton’s service credo. Ritz Carlton has 12 service values and 3 steps to service. Every day, every employee reviews one of the fifteen service steps or values. The next day they review a different step or value. This is the foundation of building strong customer service across the entire organization. He thinks a similar credo is important in the supply chain area. It may be that you are serving the internal supply chain, in which case the downstream function becomes your customer. But at the end of the day the organization must have its eye firmly on the end customer. At Unilever, the company created customer service logistics roles. Logistics personnel, together with sales, would call on customers to determine how better logistics performance could contribute to more sales.
Commit to a Continuous Improvement Process – Fred does not care whether it is Lean, Six Sigma, or Total Quality Management. What is important is that this operational excellence process is understood across the entire supply chain, that everyone uses a common vocabulary, and that everyone participates. As you move to outsourcing arrangements, it is also critical that your supply chain partners speak the same language, use the same process, and are committed to a collaborative approach to continuous improvement.
Install a Single Team Success Philosophy – to avoid a silo mentality. If procurement buys something and they claim they have saved $10 million, but there are quality and delivery problems associated with that buy, the reality is that instead of saving $10 million they may have cost the company $5 million. If you use 3PL partners, they need define success in the same way. They will inevitably be concerned with their profitability, but metrics need to be put in place to make sure that there is a holistic approach to tracking and measuring supply chain activities. There is no magic metric that applies here. However, attention needs to be paid to balancing three categories of metrics – cash-to-cash, working capital, and customer service.
Develop Personnel with Broad, Extended Supply Chain Knowledge – It is important to have functional experts, but organizations also need people who have a broader understanding of the extended supply chain at the company. He is a big believer in growing future managers who have worked in at least two or three functional areas, ideally adjacent to each other. So, a future warehouse manager would ideally have worked in transportation and customer service. In the hypothetical example he gave about the procurement person thinking he is saving $10 million but is actually costing the company $5 million, Fred points out that this would be much less likely to occur if that person had experience in manufacturing and quality.

Finally, Fred believes that if you are not having fun, you need to find something else to do. You need to take joy in the journey!

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