5 Keys to a World-Class Location Enabled Supply Chain – Part One
July 23, 2013 Leave a comment
By: Doug Mills
This is the first installment of a short series of blog posts written to help you build a world-class location enabled supply chain.
Building a world-class supply chain is not easy but there are five keys to help you get there: (1) Optimization, (2) Velocity, (3) Adaptability, (4) Synchronization, and (5) Profitability. These are key attributes that proper use of location based technology and information systems can drive bring to the fight to achieve a world-class supply chain. We’ll begin with optimization.
Optimization
Using the location information you already have in your business systems to optimize your supply chain is the first of our keys to achieving a world-class supply chain.
Some of the largest costs in your supply chain are shipping costs. Sounds obvious, fuel cost are high and few forecasters are expecting those costs to decrease appreciably in the near future. These shipping costs can be overt and easy to identify, what you are paying to the delivery service or to maintain your fleet of trucks. They can be more covert, embedded in higher unit costs from suppliers. Costs of having more goods in transit to you because they are traveling great distances are two examples.
Mastering the “where” lets you take charge. Using the power of location analytics, you can optimize your supply chain by understanding where your customer or distributors are and where the suppliers are for the materials you need. You can optimize your supply chain, just by picking the right place to build a plant or make the right decision on which is the best of your existing facilities to assemble your product in because of its location.
By understanding where your materials are, while they are in route to you lets you manage risk by helping your avert storms, backups or even civil unrest around the globe. Having clear visibility is no longer a nice to have, it is essential. For several decades now we have been driving Lean practices. Gone are the days of expensive inventories sitting in large warehouses next to our plants. We are driving electronic Kanbans and supplier held inventory to arrive within very narrow windows to achieve Takt times. Understanding the total volume of goods in your supply chain helps you manage costs with greater depth of understanding.
Optimizing where your suppliers are is critical. Enabling buyers to visualize where the suppliers are for the commodities they control is a key to driving a world class supply chain. Unit price, and advantageous Terms and conditions are important, but being able to step back and see that perhaps an extra penny or two in unit price can be far offset by hundreds of dollars saved in shipping cost due to 300-400 miles of shorter transportation or the amount of risk to on time delivery there is because we able to identify those vendors that were closest to our needs. Enabling the purchasing aspects of your supply chain with location information products at the very front end will help better control you your bottom line.
If the lanes can be shortened by becoming location aware you can:
1) Reduce overt shipping costs
2) Reduce risk to outside influences on my lanes
3) Increase velocity in you lanes
4) Reduce the total volume of materials in my enterprise at any given moment (this equals reduced cost in materials within the enterprise at any given moment)
5) Increased velocity means there is an increase in the amount of materials you can add into existing lanes without creating additional lanes should you need, to accommodate spike demands (adds robustness without additional cost)
Using the location information and some very basic location analytic tools to optimize your supply chain you can make some real gains in reducing supply chain cost, increasing velocity, and reducing supply chain risk. All of these combined benefits of actively using the location information within your enterprise will drive you forward to a world-class location enabled supply chain.
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