It's not easy being lean

Editorial
It's not easy being lean

“Attempt the end, and never stand to doubt;
Nothing’s so hard but search will find it out.”
— Robert Herrick

Okay, it’s a safe bet that Herrick, a 17th Century poet, didn’t have inventory management on his mind when he penned that couplet, but the sentiment is as timely as it is timeless, especially in reference to 21st Century logistics managers. Taking control of the supply chain and aligning a company’s processes in such a way that improvements are regular and long-lasting are very difficult tasks to accomplish — nobody would dispute that — but oftentimes the hardest decision to make is whether to start the process at all.

The principles of lean manufacturing, for instance, are finally beginning to migrate from the exclusive province of the automotive industry, but it’s taken several decades of waiting-and-seeing. Today, shippers of all types of products are at least looking into lean as a route to eliminating waste, reducing inventory and becoming more profitable. Who wouldn’t want those benefits? Well, it’s not as easy as that.

Improving efficiencies within a lean environment takes more than just wanting it, of course — it takes a concerted and coordinated effort to align all facets of the supply chain toward achieving the same goals. And once a company has all its internal oars moving in the same direction, it has to achieve a similar common route with its main suppliers. Any breakdown in communication with a supplier will see those lean inventories bloat up again in very short order.

In sour economic times, the patience that is required for successful supply chain transformations is often expended after one fiscal quarter, and let’s face it, any kind of company-transforming initiative by definition will require significant expenditures of time, money and other vital resources. Confronted with “put up or shut up” ultimatums from top management, many logistics managers are stymied in their attempts to streamline operations, even in the face of evidence that such efforts are working for other companies.

“For many businesses, the supply chain is a tremendous opportunity area, yet many companies continue to do business as usual, looking only to shave additional costs from their existing operations,” observes William Copacino, managing partner for Accenture’s global supply chain group.

In such a climate, then, it’s easy to understand why outsourcing has become such a popular option. The perception — the jury is still deliberating on the reality — is that going the third-party route can jumpstart a company’s supply chain projects and produce almost immediate results, particularly within logistics.

According to a supply chain research effort conducted by Accenture, Stanford University and Singapore-based INSEAD, the number of companies using third-party logistics providers (3PLs) has doubled over the past decade. What’s more, those companies participating in the study expect to increase the 3PL portion of their supply chain budgets to 34%. Or, to put it another way, one-third of every dollar spent on supply chain projects will go to a 3PL.

Before you get too caught up in that projection, though, consider the results of another study, this one conducted by Georgia Tech. Barely half (54%) of all respondents consider their 3PL partnerships as either “extremely successful” or “successful.”

Most telling of all are some of the main reasons why there are such tepid satisfaction levels with 3PLs:

  • lack of regular and long-lasting improvements (remember our opening paragraph?)
  • service level commitments are not realized
  • time and effort spent on logistics are not reduced.

So there you have it — based on two studies by major research groups, we can conclude that:
a) companies are increasingly outsourcing core logistics functions to 3PLs, and
b) companies are increasingly dissatisfied with the level of performance they’re getting from their 3PLs.

There’s no getting around it — logistics is just plain hard, no matter who’s doing the work. Having attended two logistics conferences in as many weeks — the NASSTRAC fall program and the Council of Logistics Management’s annual event — I came away from both shows convinced that nobody really has all the answers and a lot of companies are asking virtually the same questions.

What is becoming clearer, though, is that every top-performing company, no matter what portion of the marketplace it competes in — whether it be Wal-Mart or Dell, General Electric or Unilever — has aggressively attacked its inventory problems and partnered with its key suppliers to take control of its supply chain.

So yes, improving your logistics operations will be hard, and there are plenty of opportunities for misfires along the way, but don’t be discouraged that your corporate goals will forever elude you. It’ll take time, talent, energy, focus, money and guts to reach those goals — but that’s exactly what it took for the world’s best-run companies to make it to the top. It’s not easy, but it’s worth it.

Dave Blanchard
editor-in-chief

Logistics Today logo
October, 2003

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