Logical thinking

Logistics operators are the chameleons of the business world. Firms can adapt from standard distributors of product from A to B to dynamic consultants offering a raft of added value services to maximise your supply chain efficiency. All you need to decide is which guise you'd prefer to work with says Mike Flynn, business solutions director at logistics firm, Gist. ""Do you want someone to move goods from A to B or a partner to work together to improve the supply chain?" And as manufacturers look to drive efficiency and value there's been a shift towards the latter, Flynn reports. "We can take over from the end of the production line," Flynn explains. "We have a consultancy business that works with manufacturers on how to optimise the overall process including labelling, packing, shipping and delivery. We also do that on a global basis." Logistics firms function as oracles for bemused manufacturers, Flynn adds. "The discussion begins with manufacturers saying I have a problem and I would like you to see how you can solve it." Take the humble can of tomato soup as an entirely random example. "Before the production line we could integrate the collection of the tomatoes into the plant," says John Padbury, head of business development at TDG. "We might have a relationship with a supermarket where we could distribute your goods and we could collect the empty pallets for you." Logistics firms can offer an invaluable strategic ally, adds Padbury. "We can add an awful lot of value. Say a manufacturer has a whole host of components to their product. We can ensure availability from suppliers and sequence the parts so they arrive on the assembly line in the right order. The more of the supply chain we can look at, the more value we can add." And one key focus has been around transport costs, reports Ian King business director, manufacturing at DHL Supply Chain. Fuel costs have spiralled over the past two years forcing logistics firms to address the threat of rising haulage bills. "We ask the manufacturers whether they are making the best use out of their haulier," says King. "Are they moving product too often? Are they moving part loads when they could be using full ones?" Logistics firms can help manage costs by playing matchmaker, explains King. "Say you were based in Daventry and want to deliver product to Manchester, if you find a haulier in Daventry they'll deliver the goods and bill you for coming back with an empty lorry. But if you found someone who was delivering to Daventry from Manchester and hadn't got a load to head back with then you could get a much better price." Manufacturers are making it clear that empty lorry runs are a luxury they can ill afford, says Gareth Smith (checking job title) of Wincanton. "We've noticed that during the down turn we've had to focus on cost effective solutions. Five years ago they all wanted their own branding on delivery vehicles. We've now gearing our network around reducing empty runs." Lorry space is not the only thing manufacturers are willing to share during these difficult times, adds Smith. "Shared warehousing has become increasingly important. A lot of our manufacturers have got half-empty warehouses and are asking us to sub lease the space." Many are not precious about who they end up sharing with says Phil Shaw, director of Norbert Dentressangle's industrial business unit (confirm). "We've had Goodyear, Bridgestone and Continental tyres all delivered on the same vehicle," he says. "We don't share information which is commercially sensitive. Companies are interested in getting their product to market in the most economical way. Instead of making three deliveries we can make one." It's symbolic of the pragmatic approach many are adopting in the face of growing cost pressures. But Manufacturers must not let price be the only factor when it comes to appointing the services of logistics firms themselves. "You've got to be really careful what sort of logistics partner you use," advises Gareth Smith of Wincanton. "If you are in a low margin business you need a partner that's going to offer best value and that's not the cheapest." It's a bit like buying an airline ticket. If you go budget then expect to pay a high price for anything above and beyond the original agreement. Instead of buying purely according to cost, manufacturers should suss out the quality and range of services a logistics firm offers says Phil Shaw of Norbert Dentressangle. "Look at the design of the service and the quality of the management. Customer references are also a good indicator." When it comes to agreeing a final price the options are as extensive as logistics firm's range of added value services. Those wanting a classic A to B delivery service are advised to adopt a closed book system. This involves paying a logistics firm an agreed fee to move your product. However, projects that require some creative thinking are more open ended. Most logistics firms will want payment to be incentivised with both parties pocketing from a gain in productivity. Distributors will also want lengthy contracts as security for their services. Get it right and gain share can be a winner for all parties says John Padbury of TDG. "It's the open book model that tends to drive continuous improvement programmes," he says. Finding the right partner is a little like looking for love. Go for someone with common interests, get to know them and if you like what you see don't be afraid of making the first move. Padbury concludes: "Do some research. Select a sample number of firms. These have got to be a good fit with your organisation. Allow them as much access to your business as possible and spend the time getting to know one another." Your guide to choosing the right logistics partner Basic or enhanced? Logistics firms operate in two distinct ways. Decide at the outset whether you want firms to act as a straightforward distributor moving boxes from A to B. The alternative is a more cerebral set up where the logistics firm advises on improving your supply chain through their range of added value services. Do your homework Researching logistics providers at the outset could save you a lot of headaches further down the line. You need to find a partner with experience in your manufacturing area. The logistics firm must be a good fit with your business and you should get to know the management team you'll be working with. It's also worth asking previous customers for references. Don't judge purely on price Going with the cheapest option could be short sighted. Some firms could look to balance low quotes by charging extra for services you take up outside of the original agreement, Think about the range of services that you might need first and go for something which offers flexibility. More than just moving products from A-B Your guide to some of the value added services logistics firms provide Sequencing: The logistics firm ensures a supplier delivers the components at the time they are needed and in the right order. Sequencing helps reduce in house inventory, boost production efficiency and maximise assembly line space. Inventory management: An analysis of your stock to determine the optimum balance of goods you need to hold to service demand. The process also identifies products with low demand that might be taking up valuable warehouse space. Pre-assembly: Components can be pre-fitted by the logistics firm and delivered to the production line when required. The technique can help reduce production costs and in house inventory