Author: Christopher Turley, EMEA Marketing Manager, Flo Group
11 Jul 2015
It’s no secret that today’s businesses increasingly need to adapt. More and more, we hear the words flexible, agile and dynamic at the boardroom table. It’s also no surprise that globalisation and global competition, new purchasing channels, and more demanding customers have contributed to diminishing profit margins. The need to ensure cost effectiveness while striving for product innovation and greater customer service is not new, but the prevalence of these market conditions makes balance more critical.
Business leaders can no longer afford to look at departments in isolation; they must now take a customer-centric approach. In fact, competitive advantage is increasingly conferred by the ability to respond to customer needs, with logistics playing a central role. Logistics and supply chain management are more than the physical processes and movement of goods; they are now a central part of operational and customer strategies. In recognition of this, Gartner’s five-stage logistics maturity model puts heavy value on collaboration, visibility and data sharing. Through working with some of the most complex global supply chains, we have seen many different models employed to manage these resources and relationships. However, the business goal is principally the same – reduce costs and optimise customer service. In a sense, finding and maintaining an optimised balance is the endgame. How to achieve it with the multiplicity of resources at our disposal is an interesting question.
Business leaders should extend their view beyond flows, tools and processes to take stock of factors including internal and external relationships
Your logistics organisation should be strategic and embedded within your supply chain. Research tells us that six to 10 percent of a company’s revenue is spent on logistics and transport costs. While achieving greater focus on supply chain strategy, our clients have lowered their logistics spend by five to 12 percent.
It’s fair to say that most of our clients are aware of the challenges within their logistics operations. With varying levels of certainty, they are able to point to problem areas or pinpoint critical issues, but what they are commonly unable to identify is a starting point for real improvement. This may come down to knowledge base, or not having the right tools, or simply being unable to quantify benefits or monetise return on investment. Without a platform to start from, supply chain and logistics personnel are reduced to fire fighting, rather than driving and supporting improvements or new initiatives.
Business leaders should extend their view beyond flows, tools and processes to take stock of factors including internal and external relationships, integration between systems, and visibility of third-party logistics and service providers.
Using a seven-step approach, we have helped organisations make mathematical determinations and solve complex business decisions. The first step is to discover, i.e. define the business drivers that shape your supply chain requirements, including growth, profitability, competition, partnerships, sustainability and complexity. Following this, firms must visualise, by way of understanding network movements, pinpointing exceptions, explaining issues to colleagues, and paving the way for measurement and optimisation. Third, it is important to measure, primarily against internationally recognised metrics, to see how supply chains contribute to financial success. Once this is done, you can start to plan in operational terms, by accounting for real business events and making long-term plans that dynamically adjust for short-term challenges. Fifth, a business must optimise, as this allows it to achieve optimum cost and service balance, and the ideal warehouse and transport network. The next step is to transform, by way of defining your target operating model, the journey to get there, and delivering the resulting programme of supply chain change. The final step is to execute delivery and sustain integrated solutions, leading application partners, on-site or cloud solutions, and blended onshore and offshore support models.
Different companies are at different points in their journey to supply chain excellence. However, in our experience, there are a number of common key areas for improvement.
Transportation provides the vital link between your suppliers, production sites, ports, distribution centres and customers, so of all the logistics disciplines it is the most closely associated with the shape of the logistics network. Implementing a transport management system, along with warehouse and inventory management, will move a company to stage two in Gartner’s maturity model.
However, both before and after systems are implemented there are important opportunities to assess and optimise the network defined by those transportation links. The primary outcome of logistics network optimisation is balance between resources and delivered service to customers. In previous cases, companies have saved between five and 15 percent in total supply chain operating costs. A very welcome secondary result is visibility; by capturing the existing network, you will be able to monitor and manage the flow of goods and information. Network planning tools can now be imbedded into the supply chain landscape to shape an optimised network.
Organisational structure can also have drastic effects on a company’s ability to plan and execute new strategies. Being able to fully leverage investments in people, technology and enterprise systems requires global organisational connectivity. It is hard for a company to analyse its own performance. We can rapidly assess a client’s situation with discovery questions. Then, through reviews combined with best practice analysis, we are able to point to options in areas like in-house work or outsourcing, future systems, process change and network models. We can calculate financial returns using the best-in-class tools at our disposal.
Systems will play a central role in developing supply chain and logistics functions. Investment should be seen as a defining moment and systems selection should centre on fact-based decision making.
The transformation from domestic to international supply chains, from largely manual to automated processes, presents a real opportunity to embed a technology landscape that will support growth.
Digital technology will continue to influence operations and strategy, and it could prove a key logistics enabler. Advancements in cloud systems, analytics and mobile capabilities will drive collaboration between departments. New streams of data will provide new chances for optimisation.
The ability to track and monitor stock with RFID tracking, GPS and sensors provides near real-time intelligence. Using these and other technologies, companies gain a competitive advantage with enhanced visibility and connectivity. With the right solutions, we have helped companies make evidence-based decisions on key metrics.
Flo Group is a global logistics consultancy and key implementation partner, supporting a number of industry-leading clients. Previously known as MavenWire EMEA, Flo employs over 160 logistics subject matter experts around the world. We work with organisations to define, plan and implement business and technology change initiatives, roadmaps, solutions and projects that enable optimised logistics performance.