To assist managers, To-Increase’s Global Industry Director, Luciano Cunha, has put together a three-step plan to ensure a budget is justified and implementation is successful. 

Step 1: Rationalise the Purchase

 Data collection errors and inefficient picking processes can be very costly, especially over a long period of time. A modern WMS that can offer improved data collection automation and advanced picking functionality can help increase revenue and improve the bottom line.

Step 2: Match Product to Workflow

A bulk of the product evaluation should take place around finding solutions that adapt to a user’s workflow. Improving on existing processes will lead to benefit realisation, rather than transitory hiccups and inabilities. Managers should look closely at the systems that are evaluating to ensure they contain the features necessary for successful implementation and execution.

Step 3: Allocate Resources for Proper Training

Ensuring that management is on board for the deployment and training period is important for success, as well. A great way to rationalise this is to compare the time spent correcting mistakes or for manual entry, and showing the time (and financial) resources that will be saved with proper deployment and training for a new solution. This is an important last step for successful budget acquisition and solution deployment.

For more on this topic and additional resources on warehouse management systems, check out: Warehouse Management Systems Guide.

It is becoming apparent that many companies who have taken decisions to manufacture offshore may not have considered all relevant factors.

For a start, in places where labour markets were previously thought to be in never ending supply, such as China and India, it is becoming increasingly difficult to find workers. And, with wages and energy costs rising, contract manufacturers are starting to feel the pinch.

Add to this, an increasingly demanding customer base, which now expects products to be supplied closer to the source – in other words, we don’t want to wait several days for our goods to arrive.

A recent survey conducted by Accenture in the US confirmed that over 60% of companies surveyed will make the shift, citing cycle/delivery time (higher inventories!), product quality, logistics and supplier/component prices as the factors influencing their decisions. These companies have discovered that managing supply operations that are separated far from where demand occurs has limited their overall operational planning, forecasting and general flexibility, in some cases also driving up costs through the need for complex network management.

According to the survey, companies who are considering shifting their manufacturing closer to their customers are also responding to a need to re-balance their supply footprint to improve flexibility and responsiveness to varying demand and unknown customer requests quickly, with high quality and faster delivery and optimised costs. Whilst this may not always be ‘lowest cost’ these companies recognise that other value drivers, such as the ability to supply customer specific sku’s or customised products quickly, is important.

And while market conditions of Australian manufacturers may differ slightly from their US counterparts, it will be interesting to see if this trend amongst US manufacturers takes hold locally.

Are you, or leaders at your company, considering shifting operations so they are closer to your customers? Are increased flexibility and customer responsiveness now more important now As than low-cost production? Has the complexity of your network management begun to outweigh the reduced production costs off-shore?

As always, I’m interested in your comments. What you are noticing?

Kind regards

Richard

1. Too Much Product Complexity
All firms will admit they carry too many SKUs, and further concede that they don’t have a good process to eliminate under performing products. Yet others have broken through and have a disciplined process in place to manage SKU growth, proving that it is possible to manage SKU growth effectively.

2. Too Much Slow-Moving and Obsolete Inventory
Companies struggle with the problem of disposing of obsolete product in a timely manner. There is inbuilt resistance to reduce price. Unfortunately, slow moving products never increase in value. Instead they sit there month after month consuming cash, taking up valuable warehouse space and incurring inventory holding costs until it is finally scrapped or sold at a large discount, sometimes literally years afterward; a classic case of pay now….or pay more later.

3.Supply Chain Considerations Not Part of the Product Design Process
When product design engineers develop a new product, they rarely consider inventory, transportation, or warehousing issues. Sometimes small changes in a product configuration can yield big logistics savings. This applies to retailers as well as manufacturers. Retailers should not ignore the new product development process in their suppliers.

4.No Supply Chain Strategy
It is surprising that few firms have a documented supply chain strategy. Such a strategy starts with assessing the future needs of their customers. The strategy development process then determines the new supply chain capabilities the company will need in the future to meet its customer’s needs. Eventually specific initiatives need to be chartered to deliver these capabilities. Unfortunately most supply chain organisations are so consumed with the daily battles of cutting cost, managing inventory, and delivering good customer service that that they don’t plan properly for the future, sometimes with disastrous results.

5. Ineffective Matching of Supply with Demand
This problem stems from the classic struggle among functional silos in most companies. On an overly simplistic basis, Sales is driven by revenue generation, while Operations strives to cut cost. Often these goals conflict with each other. Leading firms address this issue by establishing a Sales and Operations Planning process to align the various corporate functions around a plan that matches supply capabilities with demand requirements. Most firms attempt to do this, but most would acknowledge that they still have a long way to go.

6. Physical Network Problems
Where should warehouses be placed in this era of incredibly volatile transport costs? This question is a very prominent topic today. Just a few months ago it seems, transport cost were being driven up rapidly driven by the cost of fuel, driver shortages and other factors. Now everyone expects that situation to return, but who knows when? Logisticians are confused to say the least; and the old answers don’t work anymore. One thing is certain however. All firms should question their physical network configuration under a wide range of future fuel prices.

7. Global Issues and Outsourcing Problems
The global arena offers an even more confusing picture. Many firms are now reconsidering the mad rush to outsource to countries outside Australia and the US, for example. The long supply lines, incredibly volatile fuel costs, exchange rates, the geopolitical risks have all come home to roust. And if a carbon trading scheme comes into play, the ingredients for a paradigm shift in thinking could very well occur. Yet few firms consider the total cost of an outsourcing decision, and even fewer incorporate the additional risk of a global source in their analysis.

Conclusion
Since almost all companies face some combination of these seven issues, a rich database of best practices exists that can be transferred across highly diverse industries. It is critical that all firms engage in networking activities such as forum participation and benchmarking to make sure they understand these best practices. Once they see how other companies address these issues; they need to develop an urgent action plan to implement the essential changes. Supply chain is the frontier of competition. Only by aggressively addressing challenges like those listed above can firms effectively compete in the increasingly intense global environment of the future.