It’s a good question.  When a company engages a logistics consultant it most commonly needs to call on a consultant’s experience, skills, focus and perspective to fill gaps in the organisation’s own resources.

An experienced logistics consulting professional will have years of operational experience working with a variety of organisations, a mix of industry types, in a range of different situations.  This experience means that a logistics consultant is able to understand and address your supply chain issues quickly and effectively. When your management team is in need of this across-the-board practical experience, it’s time to engage a logistics consultant.

Successful logistics consulting calls for a particular skillset.  An expert logistics consultant has a repertoire of tools including analytical competence, listening skills, problem solving ability, and proficiency at managing organisational change. When these skills and aptitudes are not available in-house, consider engaging a logistics consultant.

An external consultant can focus on the project in hand until your objectives have been achieved. A professional logistics consultant can become a valuable temporary resource to supplement your internal team members who are likely to have heavy work commitments already. When you have an urgent need for a professional who will focus for a limited time on supply chain management, engage a logistics consultant.

A logistics consultant can bring a fresh perspective to your supply chain activities. A consultant is free from the corporate political pressures, blind spots and other cultural features that hinder an internal team’s efforts. When you need an objective, unbiased approach, ask for a logistics consultant’s views.

A professional logistics consultant brings to the table a combination of attributes – including experience, skills, focus and perspective – that are essential for tackling complex supply chain issues. If your management team requires these attributes, we should talk soon about filling that gap.

As a prime example, only six weeks prior to the launch of the iPhone, Steve Jobs decided a glass screen was more practical than the original plastic screen, which he thought would scratch too easily. With US manufacturers unable to fulfil this last minute demand, Jobs knew he had to look to China.

When the glass for the iPhone arrived at ‘Foxconn City’ in China, the world’s largest manufacturing plant, workers were called out of bed, in the still of the night, and onto the production line to meet the rigid deadline. Such flexibility would make it impossible for Apple executives to reconsider their stance and return to the US for manufacturing.

I’ll give you an idea of what Western manufacturers are up against in terms of competition. Foxconn is said to manufacture 40% of the world’s electronics, employing 230,000 employees, where over a quarter live in barracks, and can be called upon at any one time, without notice. Even in the middle of the night.  Within three months after its launch, Apple had sold one million iPhones, and since then Foxconn has produced 200 million more.

To the Western world these demands are unfathomable.

Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, affirms “They [Foxconn] could hire 3,000 people overnight. What plant anywhere other than China can find 3,000 people overnight and convince them to live in dorms?”

A high ranking Apple ex-employee also adds – “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

China has huge advantages over the West in terms of manpower. When Apple’s executives forecasted nine months to recruit 8,700 engineers required to oversee production, in China it took fifteen days.

Famous for the wrong reasons, Foxconn made news in 2010, when some 23 workers at its Foxconn City plant committed suicide in a period of months. And, two years ago, 137 workers at an Apple supplier in eastern China were injured after they were ordered to clean iPhone screens with a poisonous chemical.

But I suppose it is Foxconn City employees who pay for these ‘advantages’, with expectations for staff to work double shifts and sixteen hour days.  With such high expectations for both product demand and maximum profit, it is likely the working conditions for Foxconn employees will not improve anytime soon.

Is it a question of success vs. ethics?

In this all-consuming and ever-demanding market, can a supply chain, particularly one as large as Apple, continue to thrive with its newly standardised focus on working conditions, costing the company significantly in terms of profit?

It seems only time will tell.

Let me know your thoughts…

Increased pressure from social groups on inhumane working conditions, followed by a string of suicides by manufacturer employees, prompted the compulsory adherence of Apple’s Supplier Code of Conduct as a condition of doing business with the company.

Since its inception, Apple has made every effort to ensure manufacturers abide by their Code of Conduct. Apple now conducts ‘rigorous audits’, introducing training programs regarding humane conditions, educating employees of their rights, and if they fail to meet their criteria – ‘we stop working with them’.

But I wonder, is it a case of too little too late?

And more importantly, how closely will they monitor and police manufacturers who breach their Code of Conduct, whilst maintaining the same labour intensive schedule?

East vs. West

It seems Apple’s decision to manufacture offshore is not due to wage costs alone. When it comes to infrastructure, an ample supply of skilled workers and a quick turnaround, there seems to be several factors in favour of continuing Apple’s manufacturing in the East.

A prime example of flexibility that US manufacturers simply cannot compete with occurred just six weeks prior to launch of the iPhone 4, when the late Steve Jobs made the decision to change the screen of the iPhone from plastic, which he thought would scratch too easily, to glass. He knew he needed to look overseas to make this happen. Chinese manufacturers, who maintained the slimmest of margins, subsequently won the contract.

It is no surprise that by having the iPhone manufactured offshore, Apple exceeded all expectations by meeting the unimaginable six week launch deadline well under cost. And, by having the iPhone manufactured in China, the consumer saves $65.00 per unit.

To the average consumer, this is a substantial amount!

So the real question is:  With such lucrative progress in China, can Apple emulate this success in the US?

We will explore this further in my next post; stay tuned.

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.