Living in the past?

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All too often, global logistics has been manufacturing’s poor relation, says David Warrilow, managing director of Audax Software. now is time for a change.

Consequently, but with some exceptions – for example warehousing and domestic retail distribution – the use of technology in logistics, particularly global logistics, is even now way behind the use of technology in manufacturing.

Manufacturing has surged ahead in its use of technology in the range of high value goods it produces (increasingly to just-in-time demands) and when relocating to far off places. Supply and delivery chains then become stretched.

Logistics, generally suffering from under-investment and a lack of thought leadership on how to gain and retain improvements, is at a cross-roads.

The value and volume of product in the supply chain is now so great, and the security surrounding some product so intense, that, coupled with the demand for just-in-time manufacturing and time defined delivery to the customer, global logistics must respond with robust technology-led solutions that operate within models that secure the best performance for the manufacturer and customer.

The rapid growth of globalisation has seen production gravitating to areas of lowest cost. The result is lower production costs, but also an inescapable problem; in terms of time and cost, the supply and delivery chain gets longer and produces higher expense.

There is an increased risk of service failure leading to customer dissatisfaction and possible loss of business. A robust solution should address these issues while seeking to cut costs still further – for example, by closing or shrinking regional distribution centres in high cost areas such as Europe and US and switching processes to the export gateways in the country of manufacture.

To keep costs down, companies plan to use the lowest cost transport, such as sea, but increasingly, air is needed to meet urgent requests or to overcome a service failure. Most companies factor in a percentage of air for priority traffic but even then they usually budget too low.

Some manufacturers (typically of high value and high tech products or pharmaceuticals) accept that air is the only option. Global logistics models and solutions need to take into account the issue of air transport.

Air transport offers two broad options; freighters (cargo only) or scheduled (passenger) flights. Freighters offer the capacity but are more expensive kilo for kilo. Another factor is the trade imbalance (for example, Asia to the United States) meaning freighters risk returning empty, making them even more expensive.

The resulting dependency on scheduled flights therefore is increasing faster than the industry can support. To complicate matters further the major players (third party logistics providers) have already pre-booked the available capacity. Scheduled flights are the only economic option but you have to use a major third party logistics provider if you want to get the space.

Global logistics has been manufacturing’s poor relation. Too often, the accent has been on using the lower or lowest cost solutions in any part of the supply or delivery chain and trusting that product will arrive on time and will not be compromised anywhere en route, warehouses included.

This attitude is not tolerated by many of the major brand names which manufacture computer components and telecom equipment – or pharmaceuticals – and which insist that product must arrive on time and in the volume ordered, sometimes amid high security.

Import Gateways – where the freight is broken down into its individual shipments – are particularly vulnerable and require careful management. Checking the freight at the individual piece level, assembling shipments for final delivery and managing the despatch process are vitally important.

The software to automate these processes already exists and gives total visibility to the process. That sort of visibility delivers better information to the shipper and the customer.

To conclude; in some significant respects, global logistics is living in the past and is hindered by old ways of doing things. In other respects it has moved on and is very much in the present – as demonstrated in the very competitive, high value, just-in-time, demand-it-on-time sectors. But, even here there are still gains to be made in terms of cost savings and overall efficiency.

Performance improvements elsewhere can be expected to be huge when proper, “grown up” global logistics solutions and models are adopted.

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