Logistics managers, meanwhile, would have a better sense of how their A new relationship between finance and scenarios related to warehouse placement and carrier choice. Too often, he says, the problem is handed off to the chief financial officer, whose options are limited without support and. Shippers who don't have the right people on staff to manage logistics Each year, Inbound Logistics' Readers' Choice Top 10 3PL file a claim for damaged or missing items," reports logistics manager M.H. Additionally, 43 percent say poor customer service is the reason shipper/3PL relationships fail. If the operation of the logistics staff mentioned above settles into the form, which This structure consists of divisional units, but also includes functional sections centralized in top management. . Relationship of purchasing and logistics takes many forms. 3), the logistics division reports directly to CEO.
In today's economic environment, doing what you've always done—even if you do it very well—is no longer acceptable. Under pressure to contain costs and produce results despite challenging circumstances, you and many other supply chain managers must transform rather than simply improve your operation.
That means adopting the philosophies, methods, and processes that will make your organization "best in class. The answer will vary for each company, but there are some practices that many leading companies are adopting now.
This article will outline 10 of the key practices that I and my colleagues have observed through our work as supply chain consultants with clients in a variety of industries and locations. Article Figures [Figure 1] Example of a supply chain management organization Enlarge this image I do not pretend to have a precise roadmap for achieving the desired level of supply chain maturity and excellence in your particular organization. The sequence of the 10 practices, moreover, does not indicate priority or suggest a higher or lower importance ranking.
Four Key Logistics Goals - Multichannel Merchant
It does, however, offer a systematic approach for measuring your effectiveness in building a best-in-class supply chain organization. Some of these practices may be simple, straightforward, and familiar. Others may be new to your company. Implement them all and you will have a strong foundation for supply chain excellence. Establish a governing supply chain council.
A governing council's purpose is to give direction and help align supply chain strategy with the company's overall strategy.
The council's membership should include the leader of the supply chain organization as well as corporate executives, business unit managers, and other influential company leaders. Ideally the council should hold regularly scheduled meetings. But even if it doesn't, its mere existence will indicate that supply chain management has the endorsement and commitment of senior leadership. We often see supply chain organizations struggling for recognition because their objectives and strategies differ from their companies' stated objectives and strategies.
A governing council can prevent that from happening by providing constant, consistent validation that the supply chain strategy directly correlates with the corporate strategy. The council can also help to remove barriers to success that exist within the organization. Every company has such barriers—usually individuals or organizations that don't see or accept the value that a wellmanaged supply chain provides.
By addressing these barriers, members of the council help to ensure that the supply chain organization is given the opportunity to perform up to its potential. When it is clear that the executive leadership is fully embracing the supply chain organization, it is likely that key business-unit stakeholders will be more willing to work with and support supply chain efforts and initiatives. Finally, the council provides an effective forum for cross-functional communication.
An active governing council creates an opportunity for business unit leaders to provide the supply chain management leadership with information regarding future strategies and projects.
Properly align and staff the supply chain organization. It can be difficult to organize the supply chain function in a way that will maximize its effectiveness and bring commensurate benefits to the company. Some companies are best served by embedding proficient supply chain management professionals in various business units.
For others, a more centralized operation is most effective. Many of the progressive companies we have worked with, however, have adopted a hybrid approach that combines a centralized strategy to gain consensus with decentralized execution to improve service.
This approach, depicted in Figure 1, is not appropriate for all companies, but it does give an idea of current thinking about supply chain management and the reporting structure.
Whatever structure you adopt, correctly staffing the supply chain organization is vital to success. Elevating staff members' supply chain management skills and knowledge is always a priority, of course. But top leadership focuses more on strategy and is less concerned about transactional ability. As supply chain leaders move up to join their companies' management teams, therefore, they must have additional characteristics. Best-in-class companies hire supply chain managers who have strong communication and relationship management skills both internally and externallythe ability to think strategically, and a focus on value creation.
Make technology work for you. Too many companies select software they hope will make them more efficient, and they structure their workflows and processes around that chosen technology. Instead, they should first review the processes that need improvement, and only then select the technology that best satisfies those process needs. That may seem self-evident, but I have seen more than a few companies buy first and figure things out later. Perhaps that is why in many companies, the supply chain organization seems to be "feeding the system" such as an enterprise resource planning system with information, and they have difficulty retrieving the type of data they need for making sound strategy and business decisions.
At best-in-class companies, by contrast, managers understand that "the system" should help them better manage their supply chains.
10 best practices you should be doing now
They find a way to use technology to produce beneficial information without having to perform various "work-arounds" to extract and view the data. They recognize the importance of an efficient purchase-to-pay process and have adopted strategies and mechanisms to get the greatest benefits from technology.
Establish alliances with key suppliers. Best-in-class companies work closely with suppliers long after a deal has been signed. In most circles today, this is called "supplier relationship management.
Two-way communication, which requires both buyer and seller to jointly manage the relationship, is more effective. The four primary objectives of an effective alliance management program with key suppliers include: Provide a mechanism to ensure that the relationship stays healthy and vibrant Create a platform for problem resolution Develop continuous improvement goals with the objective of achieving value for both parties Ensure that performance measurement objectives are achieved With a sound alliance management program in place, you will be equipped to use the talents of your supply base to create sustained value while constantly seeking improvement.
Some may be familiar while others may be new to your company. Establish a governing supply chain council Properly align and staff the supply chain organization Make technology work for you Establish alliances with key suppliers Engage in collaborative strategic sourcing Focus on total cost of ownership, not price Put contracts under the supply chain function Optimize company-owned inventory Establish appropriate levels of control and minimize risk Take green initiatives and social responsibility seriously 5.
Engage in collaborative strategic sourcing. Strategic sourcing is a cornerstone of successful supply chain management. But a collaborative strategic sourcing initiative produces even better results. Rather than consider strategic sourcing as just a matter for the purchasing department, best-in-class organizations get internal "customers" actively involved in the decision-making process.
This approach not only ensures availability of supplies but also results in lower total cost, streamlined processes, and increased responsiveness to customers' changing needs. Fortunately, there are proven best practices to help you achieve those objectives. You can improve your warehouse operations, including processes, layout, and flow, by working closely with your transportation provider. Establish a two-way relationship with your carrier to frequently share best practices, issues, and opportunities.
Conversely, disjointed transportation flow ties up space on the receiving dock. This process uses extra labor and space. To improve logistical efficiencies, consider having the vendor perform value-added services such as packaging, marking, and quality inspections. This improves the chance of errors being caught at the source; source-based services speed product flow through the warehouse. Also, avoid making transportation an afterthought; try to build it into the warehouse process and layout.
Consider inbound and outbound conveyances, queuing up shipments by carrier, and the capability to pull orders later in the day to increase customer service. Determine which carriers are able to accommodate business demands, depending on product type and turnaround time. For example, some multichannel merchants have carriers come into the center to help load trucks, while others have an inhouse U.
Postal Service office for shipping. Consider whether facilities issues could affect your operation. For instance, limited delivery-door access can force companies to rely on their carrier to move a loaded trailer and replace it with an empty one. Additional loading doors could solve this issue.
Vendor compliance is at the heart of efficient supply chain management. Simply defined, vendor compliance means that product arrives from a vendor in proper condition and is delivered in the agreed-upon manner.
10 best practices you should be doing now – Procurement – CSCMP's Supply Chain Quarterly
In addition to product quality, some vendor compliance standards include packaging and shipping requirements, advanced shipping notices, master-case and inner-case sizes, case labeling, product packaging and polybag specifications, accounting and paperwork requirements, logistics requirements and routing guides, scheduling appointments and statistical sampling requirements, to name only a few.
The proactive step of instituting a charge-back policy should be clearly stated in a vendor compliance manual, with the support from senior management. Retailers would rather have receipts arrive on time and be compliant than deal with the hassle of collecting charge-backs. Without setting these standards, a warehouse will have to absorb repackaging and re-labeling costs. Traditionally vendors, rather than merchants, have controlled inbound freight decisions.
But today more merchants are taking control of inbound freight, enabling them to influence their economies of scale and negotiating power to reduce costs. This is not an easy transition to make when you consider the number of documents, parties, languages, and currencies involved in global sourcing. But the benefits are numerous — lower costs, improved visibility of the inbound goods in transit, and the ability to schedule receipts.
Another major advantage of controlling inbound freight is the ability to combine inbound, outbound, and reverse logistics to get higher discounts. This always needs to be balanced with the issue of putting all your transportation eggs in one basket.
Carriers have areas of strength and weakness. Select vendors for their strengths. Approximately one-third of companies are using multiple carriers — a growing trend. This partnership is like a three-legged stool — without all three legs the stool cannot stand. In direct marketing, customer service must be balanced with costs. This figure includes catalog and other marketing costs, as well as the cost of nonresponses.
Most direct businesses need a customer to purchase two or three times to break even. The second cost element to consider is the high cost of being on backorder.What is Logistics Management? Definition & Importance in Supply Chain - AIMS Lecture
Figure 1 shows the breakdown of backorder costs for a small direct business. Permanently losing a customer because of poor service has the highest cost. The third type of cost element is the erosion of gross demand by customer returns and customer and company cancellations.
Figure 2 shows typical return rates by category. The higher the fashion nature of the product, the higher the return rate tends to be. Sized or tailored fashion products have higher returns. Returns also cost far more than orders to process, and in many businesses, only one-third of the returns are exchanges. For high-return categories and businesses, reverse logistics services typically allow customers to send returns into the pipeline closest to their location, either at home or via a retail outlet.
This will not only allow the merchant to schedule resources accordingly, but it will also give the merchant an estimate of return goods that will be available to fill new customer orders.
Additionally, some merchants start the refund or credit process when customer returns have been received. Another aspect of costs is cancellations. There are no historical selling data for apparel, because of the high percentage of new product.