Reaching Out to Industry ! Philip McCormack HEAD of RESEARCH NITL.

Reaching Out to Industry !

Philip McCormackHEAD of RESEARCH

NITL

“Centre of Excellence for Logistics and Supply Chain

Efficiency”

Buy Make Store Move Sell

Traditionally these functions are managed in isolation and often operate at cross purposes

What is the Supply Chain ?

Supply chain management integrates these functions by managing the information, material and financial flows

Buy Make Store

Information and Money

Information and Materials

What is Supply Chain Management?

Move Sell

Final CustomerThe source of “real” money

Retailer

Wholesaler

Assembler

Component Manufacturer

Raw Material Supplier

Every link matters

PROFIT

“Supply Chain Management is not a “zero sum” game based on adversarial relationships.”

Why is Supply Chain Management Important?

“Effective supply chain management can cut costs, improve service and enhance revenues and that’s just the beginning” Prof. P. Metz, MIT

MIT Survey: Implementation of ‘supply chain management’ in US resulted in:

– 50% reduction in inventory

– 40% improvement in on-time deliveries

– 27% reduction in order cycle time

– Nine-fold reduction in out of stocks

Why is Supply Chain Management Important to Companies in Ireland?

• World Class Best Practice companies have endorsed the concept of supply chain management.

• Companies in Ireland will have to do the same if they are be competitive in world markets.

• Given Ireland’s peripheral location, companies based here must be better at supply chain management than companies in more favourable locations.

• Supply chain management shows that transport is only one, and not even the most important, cost in the total supply chain. Distance from raw material sources and markets need not be a disadvantage if companies in Ireland can be ‘world class’ in the other supply chain management elements.

Why is Supply Chain ManagementImportant to Companies in Ireland?

• These supply chain management elements include, for example:Agile and lean manufacturing; development of supplier partnerships; just in time inventory management; effective use of 3rd party distribution and logistics service providers. If companies in Ireland can be world class in these they can successfully compete in world markets.

• The entire supply chain does not have to be in one country, so supply chain management allows Irish based companies compete in the world market as part of a global supply chain.

• E-business creates ‘virtual’ supply chains.

Market-driven Customer

Service Strategy

Optimum Supply Chain

Cost and Investment

Competitive Advantage Through

Integrated SCM

Implementing Supply Chain Management

Customer Service ‘Sets the Spec for Integrated SCM’

Market Driven Customer Service

Strategy

Performance Specification for Integrated Supply

Chain Management

Improved Financial Performance Measures the Success of SCM

Optimum Supply Chain Cost &

Investment

Financial Impact of Effective Supply Chain

Management

Education & Training

Research Consultancy

Three Inter-dependent Activities

Awareness & Support• Logistics Solutions• NITL Website [www.nitl.ie]• Annual Conference• Technical Factsheets/Self Audit Packs• Logistics Roadshows• Logistics Statistics and Indices• Supply Chain Management Directory• Benchmarking Club

Rationale:“Reaching Out” to IndustryRecent “Logistics Capabilities” study

indicating 60% of Irish companies significantly deficient.

Globalisation and e-Commerce leading to increased vulnerability to new competitive

forces.

Rationale:“Reaching Out” to Industry

NITL’s experience is that the delivery of training without on-site support, has the

potential to be of little effect, as managers, due to business pressures, often revert to type when returning to their companies.

The point of departure being that of the company’s needs.

The Survey• 300 companies across Directorates

• ‘Face to Face’ and telephone interviews

• 600 companies contacted

• 169 interviews completed– International Services sector reviewed, but not

relevant– 80% response rate from Food Sector companies – Survey fatigue

Findings

“Irish companies recognise the strategic

importance of the individual logistics

activities”

• Customer service rates second to quality, and more important than price as a reason for doing business from the customer’s perspective

• Customer service, procurement and inventory management ranked 1-3 in order of importance for strategic development

Findings

“Irish companies do not see logistics as a

broad based senior management function”

• 14% companies had a logistics manager

• 4% had a Logistics Director

• 72% companies had the logistics activities divided among 3 or more managers

Findings

“Companies do not know their logistics

costs, nor do they include all relevant costs”

• 35% did not know their logistics costs

• 100% included transport costs

• Less than 50% of companies included other relevant logistics cost elements

Findings“Companies in Ireland need to make

significant improvements in the application of

IT to logistics management”

• Systems are not well integrated across the company / supply chain

• Systems do not capture real time data, share information with customers or suppliers

• Not using latest logistics’ systems technology

Findings

“Few companies have clearly defined

performance measures”

• They do not know / measure competitor’s performance

• They do not have clearly defined KPI’s for logistics activities

– 51% do not measure customer service

Findings“Transport and procurement are better

managed than the other logistics activities”

• 44% of companies hold obsolete inventory

• 35% of companies do not produce forecasts

• Of the 65% who do, 70% have a forecast period of less than one year

• 68% of companies had not reviewed warehousing costs

“Outreach”

Objective: Bring 60% of companies up to a score of 60+

Evaluation: 30 companies selected with Enterprise Ireland

Four Key Elements

• Targeted and tailored logistics improvement activities for each individual company

• Hands-on support in the company• Measurement of the effectiveness of the initiatives in

terms of movement up the ‘logistics management staircase’.

• The creation of regionally based pockets of logistics excellence which will enhance the ability of other companies in those regions to benefit from NITL’s activities.

Regionally Based

• 2 year logistics improvement programme

• 10 “smaller and weaker” companies from each of the three areas of ...

Waterford

Galway

Cork

Company Requirements

• Costs the individual companies nothing.• Key staff to be sent to a series of structured

logistics training workshops held regionally and involving all participating companies.

• Company commitment obligatory.

• Agreement on 7 one day visits & weekly phone calls from an experienced logistics consultant/researcher to review progress and plan actions.

Workshop Topics

• General Introduction to Logistics and SCM

• Warehousing, Operations Management and Control, Inventory Management.

• Strengthening Supply Chain Relationships including Supplier Evaluation and Customer Service Management.

‘Action Research’ Interventions

• The collection of both qualitative and quantitative information in order to assess the effectiveness of specified interventions

• Interventions and integrated training aimed at improving the companies’ performance in the following areas …..

Interventions & Integrated Training

• Supplier management• Inbound transport• Warehousing of raw material• Production Planning• Warehousing of work in progress• Warehousing of finished goods• Inventory management• Order processing• Outbound transport• Customer service management• Demand forecasting• IT use and integration

Performance Indicators• Turnover

• % exports

• Inventory levels

• Inventory turns

• Average cumulative order cycle times

• % on-time deliveries

• % order fill

• Logistics costs improvement

Outreach Company Selection• Process - Close collaboration with the DMs & DAs.

• Initial visits locating company on ‘logistics staircase’

• Company specific programme development.

• Outline exact ‘real world’ potential benefits to be realised.

• Ensuring commitment of individual companies.

• Final selection of nominated companies

• First visits to all companies completed

• Company appropriate intervention design and implementation initiated

Project Planning – Define Performance Spec

Customer Service to Support Business Strategy

Determine Optimum Logistics System Design

•No. location and size of W/H and DC’s•Plant sources and markets served

•Location and mission of manufacturing

•Vendor sources

•Product assignments

•Capacity rationalisation

•Operating Strategies

•Inventory deployment

•Inbound/outbound transport

•Manufacturing/Distribution trade-offs

•Organisation

•Information

Max return on SC Assets

Revenue/Profit Contribution

Operating Costs/Savings

Assets Employed

Typical Management SCM Concerns• Distribution Network Optimisation

• Transport Cost Review

• Materials Management Integration and Optimisation

• Sales Forecasting

• Master Production Planning

• Raw Material/Spare Parts/Finished Goods Inventory Management and Deployment

• Customer Service Levels

• SCM Organisation Structure

• SCM Performance

• SCM MIS

Undertaking SCM Projects:Introduction

• Internal v External Projects

• Rigour

• Analysis

• Write/present simply

Project Briefing

• Listening

• Opportunity to impress

• Suss out the issues

• Establish the scope of the project

• Establish availability of data

• Understand expectations

Project Proposal• “What is the Problem?”

• Contents– Title– Background – Challenges/Issues– Project Mission and Deliverables– Project Approach– Project Work-steps– Project Management– Costs and Timings

Project Title

• Action oriented e.g.– ‘Managing Consulting Projects’– ‘Reviewing Transport Costs’– ‘Developing a Logistics Strategy’– ‘Controlling Inventory Levels’ – etc

Project Background

• ‘Tell the story’ of how the project developed

• Simple, chronological, bullet points

• End up with ‘…… the proposal below sets out how the project would be conducted.’

Project Mission & Deliverables

• Project Mission: one sentence summarising what the project is about.

• Project Deliverables: what the client will get - they should be ‘real’ i.e. capable of being written on a piece of paper e.g.– list of logistics options– a recommended option– an implementation plan

Project Approach• This is the skill of the analyst - the

analytical approach

• How are you going to do the project?

• Generally– model current situation and validate– identify and evaluate options– develop recommendations– Implementation plan with dates and

responsibilities– Phased representing analytical approach

Project Management

• Specifies who will manage the project

• Establishes Project Review Team– how to pick the project review team

• Work-steps will include formal reporting to Review Team at end of each Phase

Project Cost and Timing

• Using work-steps estimate the man days to complete the task

• Also estimate the ‘elapsed days’ i.e. allowing for delays in getting data etc

• Open ended v.specified deadlines

• Apply man day cost if necessary

• Do not underestimate timing

• Be aware of factors which cause delay

Managing the Project• Proposal is the plan

• Stick to the timetable

• Be upfront about delays

• Rigour

• Client’s premises versus own office

• Regular project meetings

• Continued reviewing of work-steps to check progress

Examples of Projects Embarked Upon• “Improving Spare Parts Delivery to the UK”• “Implementing an automated route planning system”• “Improving the management of our warehouse facility”• “Developing supply chain relationships with suppliers and customers at [Company

X]”• “Identifying 4th Party logistics opportunities”• “Developing a programme of improved process controls within the production

environment”• “Improving the management of customer returns”• “Improving [Company Y]’s delivery dates to our export customers and reducing our

number of backorders on the Irish market”• “Planning and implementing a new warehouse management system”• “Improving customer service and satisfaction”• “Testing forecasting systems for [Company Z]’s Deli supplies”

Expected Project Completion Oct. 2003

WATCH THIS SPACE!

Thank You !!

For further details contact point …

[email protected]