New Thinking in Logistics Strategic Planning
Scott T. Brinks
Changes in strategic planning for logistics in distributed operations can yield dramatic benefits such as a reduced environmental footprint and increased competitiveness. For example, consider a program resulting in shorter transport distances, reducing the number of trucks on the road without shrinking freight loads or travel distances.
What is needed: strategically improving the three main functional areas of logistics with a simple integrative strategy, because these three factors interact with one another.
- Packaging. A high percentage of trucks load up by cube, but they’re far below max weight. So much potential exists that just redesigning the worst-case packages would have appreciable effect. For example, cereal cartons have 1/3 or so empty space at the top, with flakes loosely packed in the bottom 2/3.
- Load planning. Many trucks leave the dock without a load optimized by weight and cube. And more can be done to load and off-load quicker. More side-loading trucks would simplify this. Trucks sized for a route would make a difference, too.
- Route optimization. The more optimized routes and milk runs with pick up and drop off at each stop, the better. For instance, suppose UPS and FedEx routed cooperatively. Imagine how that volume could be optimized; denser loads and more efficient delivery to the end customer.
Much can be done before looking at the strategic possibilities of an entire system redesign, but strategic possibilities increase if companies start regarding almost all operations as only nodes in a bigger system. For example, postponement is a strategy long used by manufacturers. One of the originals was the Coca-Cola bottling plant system. Computer companies like Dell and HP have long configured each order at a point close to the customer, and even they can do more with this. Simple configuration at retail or by the customer is best. If we get away from thinking economy of scale at the plant level, and think system, we can devise a much more distributed manufacturing system, and that’s the way that we’re most likely to reinvent manufacturing in high-cost countries.
Can this become a real program? Yes, IKEA is a good example. The company ships tightly-packed, knockdown kits from a high-cost country into the United States. Customers love the designs and the price, so they will incur the inconvenience of assembling IKEA products themselves. Then one can ask why they have to ship from Sweden. But when already-assembled products like filing cabinets or even dishwashers are shipped, they are boxes full of air.
Wal-Mart has long demonstrated the cost impact of logistics closer to optimum transport. Some of their suppliers dislike the disciplines needed to hit shipping times on the nose, but cost savings to Wal-Mart are in the billions, a major reason they are a low-cost leader, and Wal- Mart still has much more potential. Collaborative cooperatives could do something similar. All companies can look at cost-saving ideas.
Distributing operations is a long-term strategy. Consider smaller-scale operational points in a logistics network. Too many companies still try to optimize distribution out of one or two large plants. As they grew market, logistics was an afterthought, and it’s still an afterthought when they decide to move a plant to China. But with transportable CAD/CAM and good skills training, they could add more value much closer to the customer.
To start thinking this way: My framework of thought borrows from an old P&G model with six steps for analyzing an end-to-end process from the view of an individual order, named the “Perfect Order,” perhaps for only one unit:
- Take order
- Input order
- Inventory (stock) is available to ship
- Ship on time
- Arrive on time
- Pay on time.
The idea is to develop all systems until this is done every time with no special interventions. It just happens. Note that this is an outbound logistics view of Toyota’s ideal of one-piece flow all the way through the system — a bigger system view than just a plant. It can be expanded to inbound logistics. And something like it can be curled into a loop to map out reverse logistics to manage returns from a full life cycle process if that is needed to meet goals for energy and materials use.
All current supply chains have been built over the years on one fatally flawed assumption, one not usually calculated in supply chain costs: “cheap fuel.” But cheap fuel is gone and not returning. Now we have to factor that change in.
Manufacturing and distribution concentrated in lowcost labor areas is untenable in some areas now, and it will become untenable in many more. We must go “Back to the Future,” to our roots of distributed manufacturing and distribution, but today we can rely on technology to configure, postpone, and optimize while maintaining reliability. This can be done if we choose to do so.
Editor’s note: Partially excerpted from the Compression website www.compression.org.
Scott T. Brinks, Orange, CA has experience designing and providing global integrated logistics solutions for clients across multiple industries as well as business process engineering and business modeling, business alignment and integration, strategic planning and execution, information systems, and other business process responsibilities. He previously served as senior vice president-logistics for Agility (acquired GeoLogistics), chief logistics officer of GeoLogistics, regional director of transportation grocery/retail for Exel Logistics, Inc., and in various capacities for International Cargo Network, L.P. and other organizations.
