Resources - Features
Leveraging Supply-Chain Logistics
Starts with Getting Physical and Agile
U.S. manufacturing faces stiff foreign competition in most markets, pressuring U.S. manufacturers to design and build the best-quality products in the shortest time possible. Over the decades the United States has lost significant world marketshare in key industries: wide-bodied aircraft, semiconductors, automobiles, electronics and steel.
Since the advent of just-in-time (JIT) manufacturing in the United States, lead times have shrunk considerably to levels that have substantially spoiled our customers—now they expect quick deliveries, not only for commodity products but for specialized and “customerized” products. In the retail garment industry for example, where retailers used to buy and stock clothing for an entire season, they no longer practice this habit. Instead, they stock minimal quantities at the beginning of the season, and wait to see which of the styles move quickly, and then restock those on a JIT basis. If you supply markets with assembled fabricated metal products, and cannot deliver quickly, you are out of business.
A recent survey of customers for a fabricated metal-products manufacturer revealed that their highest priorities were reliability, availability and delivery. Price? Check the bottom of the list. Quality? That’s a given. Therefore, it is evident that products must be delivered with speed, quality and agility through the supply chain.
Embrace and Leverage the Internet Age
The type of organizational ability required today rests on an agile supply and service chain, quick to respond to customer needs in the blink of an eye. Some companies have responded to these demands by offering electronic drawings on websites, allowing a potential customer to “red-mark” an electronic copy and upload the marked-up drawing to the website for immediate pricing and delivery. Once the order is received, the drawing can be transmitted to production for next-day manufacture, assembly and shipment. From there, getting the product delivered within a day or two within the United States is no longer a “nice-to-have,” but a necessity, requiring a fast logistical network.
Supply and service logistics play a fundamental role in an agile infrastructure, and are required in order for a company to perform on a world-class level. The key lies in refocusing and redesigning your supply and service chains--physically and logically--to meet market demands.
Part of this supply and service chain agility is virtual, with computer servers electronically linking potential customers to sales and engineering departments, and to order entry and production. But the most critical components of the supply and service chain, which can slow the process, are physical: the distribution network, transportation, plant location, and how components are manufactured.
It makes little sense to quickly deliver a “customerized” electronic drawing to the production facility if production lead times are six to eight weeks.
Start with the physical flow of parts through the factory and to shipping. Within the factory successive operations in the work chain must be physically coupled, removing nonvalue-adding functions and inducing velocity. Parts must move with high speed through the work chain. Eliminate and simplify natural points of delay. Close the distance between each point in the flow. Streamline the information chain and electronically link every point, so that information flow is direct, without interruptions and delays.
Business cycle times must be reduced to the time it actually takes to effectively process information. Why move a part through the factory for assembly in two hours if it takes two weeks to enter an order? Reevaluate your distribution network and logistics for fast delivery once the product leaves the factory. Ensure that product can move within most parts of the United States within one or two days.
What are the Benefits?
The benefit to a company is a direct result of the extent of change implemented, and the starting point. Dramatic changes produce dramatic results. The following changes are possible:
- 35-percent reduction in the cost of sales;
- 80-percent reduction in delivery time;
- 80-percent reduction in inventory;
- 70-percent reduction in cost of quality; and
- An unpredictable but substantial increase in market share.
Those successfully emerging from this radical transformation will be the winners and leaders. These enterprises will be world-class competitors, organized to respond to a dynamic market with precision and unprecedented speed in delivery and new-product introduction. They will achieve world-class quality, with substantially less nonvalue-added cost. Each will be developed uniquely to suit its particular needs, but one characteristic will fit them all: agility.
By Richard G. Ligus President of Rockford Consulting Group, Ltd., Rockford, IL; 815/229-2900; www.rockfordconsulting.com.