The Last Mile: Feelings of insecurity

Feb. 2, 2006
As Ford announced its "way forward" initiative that would result in thousands of layoffs, Daimler Chrysler slipped in an announcement that it, too, would

As Ford announced its "way forward" initiative that would result in thousands of layoffs, Daimler Chrysler slipped in an announcement that it, too, would make cuts in its U.S. operations. It, therefore, is no surprise that readers who responded to Logistics Today's recent salary survey cited job security as a top concern.

Contributing to their personal insecurity was a common lack of appreciation of the logistics function on the part of their top management. Those feelings of insecurity are misplaced — they belong in the board room, and here's why.

Logistics and supply chain professionals control 8.6% of the U.S. Gross Domestic Product — over $1 trillion in corporate spending. To borrow from an old automaker, what's good for logistics is good for the country.

Supply chain practice is one of the most scrutinized and closely managed areas of your business. Keeping that pipeline lean while maintaining a smooth flow of goods is a demanding job. Arguably, some of the best technology and operations discipline is focused on the supply chain.

Despite all of this focus on supply chain management and its constituent parts, it is one of the least understood areas of the business. Just consider some of the principal areas for improvement and think about the reception you get when you raise the topic.

For instance, security is a mandate to protect the country from terrorist attack and bad practice can stop your supply chain cold. Security is also good business because it helps reduce loss, but show me a company that can quantify past or current losses in order to target that potential benefit and cost justify the resources for better security.

Want another example? Inventory carrying costs, including terms of sale that determine when you take ownership of that inventory, seem to be a vague notion, in part because the impacts of those costs are spread across various functions that don't communicate well with each other.

One of the core functions of logistics is keeping product flow in line with demand while maintaining strict cost discipline. That's the old, right stuff in the right place at the right time in the right condition and at the right cost. Try doing that while you shift from domestic sourcing to off-shore plants in Asia. Sounds easy, doesn't it?

Until now, automakers have gotten good marks for their efforts to improve supply chain efficiency. Common wisdom suggests the auto industry invented two of the most significant enhancements to manufacturing productivity — mass production and just-intime. But while the automakers have been intolerant of excess in their supply chains, they have failed to apply that same discipline to their demand chain. As a supply chain professional, look at the days of finishedgoods inventory sitting on dealer lots for any of the automakers and ask yourself, if you had that much inventory in your supply chain, would you still have a job?

Until logistics can break through its glass ceiling, it won't be able to help tear down the brick wall between the supply side and demand. CEOs who don't recognize this potential are the ones who ought to be insecure.

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