Lean year in prospect for logistics managers

Andrea Harris (pictured), a consultant at logistics advisor Davies & Robson, says that in addition to reducing production or purchasing costs by outsourcing to or sourcing from distant locations, manufacturers and retailers continued to challenge their logistics managers to reduce both transportation costs and inventory in the supply chain. She explained: "Although the logistics manager will always aim to use the most cost-effective transport modes, given the distances involved, the trade off for doing so is a significant increase in lead time to market. At the same time, reducing inventory in the extended supply chain also comes at a price, by increasing the risk of costly stock shortages. Despite the considerable skill and best efforts of most logistics managers, balancing these conflicting factors in supply chains which rely on the vagaries of forecast demand is nigh on impossible. "In many cases, this means that the cost benefits of sourcing from distant locations are effectively cancelled out by the cost of failures in the supply chain – a classic case of robbing Peter to pay Paul." By adopting lean techniques which align supply to actual, rather than forecast demand, logistics managers can configure their supply chains to more reliably, accurately and cost-effectively meets future customer demand, regardless of variability or the distance between point of origin and point of consumption, argues Davies & Robson. By establishing a stock holding at source, the cost of shipping and handling in the destination market can be postponed until absolutely necessary. This allows the flow of product to be switched from push to pull, allowing production to be driven from customer demand through the use of Kanban signals to trigger replenishment of product as it is withdrawn for despatch. This effectively prevents costly overstocks and removes over-reliance on forecasts. "The most efficient supply chains match the transport mode as closely as possible to the production replenishment cycle, to improve flow and minimise lead time to market," concludes Harris. "By adopting these and other lean principles, logistics managers can increase flexibility, reduce lead times, improve cashflow and reduce total delivered cost to ensure that the cost saving benefits of sourcing from distant locations are fully realised."