Slack is the enemy of lean logistics and efficiency.
By Vicki Warker
While most manufacturers have perfected the art of lean logistics in their in-house processes, transportation of finished and unfinished goods remains riddled with inefficiencies.
Lack of visibility into the supply chain while goods are in-transit has caused managers to routinely build extra time into their shipment estimates. Instead of getting leaner, their shipments are getting longer and more costly.
The tactic, known as building in “slack,” is meant to account for variables that may impact a shipment as it moves along its journey. Any number of factors could impact a delivery, including carrier capacity, adverse weather conditions or breakdowns. Operations managers build this extra time into their delivery schedules to ensure they do not miss delivery dates.
The problem is, so do carriers and suppliers. This results in compounding overestimation that can happen from supplier to plant, plant to distribution center, and distribution center to customer site. Rather than seeking ways to provide more accurate delivery times, everyone simply builds in more slack, thereby extending inefficiency from end to end.
Indeed, slack is the enemy of lean logistics and efficiency. Not only does it add in additional delivery time, it also costs significant money because planners will build in extra inventory to account for potential shipment disruptions. This excess inventory can end up costing organizations tens of millions of dollars. That is a lot of money wasted on inefficiency.
The natural question, then, is “why?” Why do organizations insist on pursuing this tactic if it means greater inefficiencies and lost revenue?
Supply Chain Visibility Only Goes So Far
Once a shipment leaves a warehouse, tracking that shipment often becomes exceedingly difficult. Managers are forced to rely on information scanned and recorded at carrier checkpoints or supplied by freight forwarders or other third-party logistics (3PL) providers.
They have little to no sense of where their goods reside when they move between origination and destination because they have no viable means of tracking those goods along their journey. Thus, their lean logistics operations only extend as far as their warehouse walls.
To ensure the efficiency of the entire supply chain from raw materials, through manufacturing, and right up to the moment goods reach the customer, operations managers must achieve total visibility into their inventory in motion. It is not enough to rely on carrier-reported status updates, which are often inaccurate, delayed or even deceptive.
Managers need to be able to receive real-time critical data in the event of disruptions. These can include inhibitors ranging from the common (such as port congestion) to the critical (worker strikes and carrier bankruptcies). These issues can dictate whether or not goods reach their destinations on schedule. A late delivery can create a cascade effect that adversely impacts other downstream processes, increase costs and compromise customer satisfaction. Being able to respond to them immediately can make or break delivery times, increase customer satisfaction and reduce costs.
Sensors and Streaming
Achieving real-time visibility into in-transit inventory can be achieved through the placement of sensors on transport vehicles and the integration with business intelligence systems to help make sense of data. These sensors can be used to live-stream data regarding the location, condition and security status of goods.
Having this information on-hand can help keep the supply chain moving safely and surely and prevent disruptions to critical shipments. For instance, if a truck with high-grade pharmaceuticals ends up being damaged or lost due to a disruption in transit, a manager can dispatch another vehicle to take its place, thereby keeping the product refrigerated and saving millions of dollars. Live streaming can also help managers keep a close eye on high-value or sensitive goods as they are in transit, decreasing the potential for loss, theft or gray market diversion.
Being able to accurately track goods en route also provides valuable arrival time data. Managers can easily ascertain whether or not their goods will arrive on time, late or ahead of schedule. Knowing how long it actually takes shipments to arrive at their destinations, via particular routes, can help managers increase the efficiency of those shipments, since they can apply this knowledge to dock and labor schedules and better plan for future shipments. They can also modify manufacturing runs, re-route inventory as it is in-transit, accelerate or delay live or staged loading, and more.
The usefulness of the data being collected by sensors goes far beyond the open highway, however. Since the data is objective and therefore more reliable, over time, supply chain experts can collect and analyze sensor data and use it to continuously improve operations.
Having a more confident view of what is really happening with inventory as it is in motion can yield numerous important benefits. In addition to building leaner and better supply chains, organizations will be able to more easily pinpoint estimated time of arrivals and gain a greater understanding of carrier performance. Perhaps most importantly, they will be able to react in real-time if issues arise, saving them time and money while improving customer relationships.
Vicki Warker is chief marketing officer and product manager for Savi Technology. She leads Savi’s go-to-market strategy and is responsible for defining and positioning the unique value Savi’s predictive and prescriptive analytics bring to the commercial and government supply chain industry.