Qualifying, Monitoring Key To Supply-Chain Success

Source: Industry Week


Mike Cannon, Solectron Corp.'s CEO and president

Mike Cannon: Geography and quality issues can impact performance.

Nov. 1, 2005 -- Solectron Corp.'s CEO and president, Mike Cannon, talked to IndustryWeek about best practices in global supply-chain management. Solectron, based in Milpitas, Calif., is a $3 billion company that provides electronics manufacturing and integrated supply-chain services. Its Columbia, S.C., plant, which focuses on contract manufacturing for the electronics industry, is one of IndustryWeek's 2005 Best Plants.

IW: We've heard from manufacturers that components and materials sourced overseas are sometimes below their standards, but they don't find out about it until there's a failure in the field. How can manufacturers ensure quality within global supply chains without adding steps such as stepped-up inspections, which increase costs?

Cannon: The longer it takes to find out about problems and issues in the supply chain, the more expensive it is. The sooner the problem is identified within the supply chain, the better it is.

There are several ways to detect quality issues early in the process. [One is] working with suppliers that conform to standards such as ISO certification or specific certifications such as TL 9000 or ISO 13485.

[Also] having a Lean Six Sigma supply chain, a Statistical Process Control (SPC) at critical steps of the manufacturing process and empowering workers to stop the line when they see poor quality products being developed [helps] avoid costly inspections at the end of the process.

[Additionally,] reevaluate the supply chain and continue to reduce it by shrinking lead-times. This disciplined approach will escalate results of poor performance to plant management's attention for more immediate resolution.

At Solectron, we have implemented a system that enables us to stop the process at the first sign of an abnormality. This is a practice we have closely modeled on the Toyota Production System. Only when partners throughout the supply chain join hands to drive SPC and provide continuous improvement to shrink lead-times, can the goal of a zero-defect supply chain be achieved.

IW: You've talked about the "geographical implications behind product strategy" and how that should determine manufacturing location. What do manufacturers need to keep in mind here?

Cannon: The process for identifying and qualifying new sources is critical. A stratified approach to this process often helps: Qualify the supplier, qualify the process and qualify the part.

By qualifying the supplier, you can assess if its systems and processes are designed to meet acceptable international standards for its products -- ISO certification or TL 9000 for example. You also can assess if the organization is focused on quality and if it is continuously looking for ways to improve.

By qualifying the process used to make the component, you can see if the capabilities and attributes of the process will yield the quality product required.

Finally, by qualifying the component, you can verify that the performance characteristics of the component have been appropriately captured.

Another key consideration is the impact geography makes to the "total landed cost" of the product. Factors that influence total landed cost include labor rates, material costs, localization of supply and logistics costs based on location of suppliers and customer ship-to addresses, tax rates, tariffs and duties. Some other costs often underestimated are the amount of inventory in transit, the carrying cost of this inventory, the cost of change orders with this inventory and the time it takes to phase-in material cost reductions due to this inventory. Additionally, there is a cost with missing the opportunity of capturing sales in the event there is a demand shift with a long lead-time supply chain. As these factors change, so does the appropriate solution. Utilization of a supply-chain-simulation modeling tool can help evaluate multiple alternatives and determine the sensitivity of one factor over another. Additional attention should be given to social considerations such as political stability of the country, availability of skilled resources, competition for skilled resources, and pending political and tax policy changes.

By taking all of this into account, the customer can select and develop suppliers that will meet their quality standards arbitrary of the suppliers' geographical location.

IW: What processes does Solectron use to ensure compliance of country-by-country regulations (i.e., environmental) within the supply chains it builds and manages?

Cannon: Environmental compliance is a major initiative for Solectron as we recognize the threat non-compliance can pose to OEM customers.

Solectron partners with its OEM customers and has developed a three-step conversion process to meet the specific requirements of the different regulations, ensuring an OEM's business is not disrupted and keeping reliability and quality products the focus. The three-step conversion process:

Product preparation -- Process of evaluating components contained in customers' manufactured products.

Production re-entry -- Involves redesigning the product using alternate components.

Process integration -- Environmental compliant product is reintegrated back into the supply chain as a next-generation product.

Solectron has robust systems to ensure compliance with global environmental regulations including an internal Environmental, Health and Safety (EHS) Department at the corporate level; site-by-site EHS compliance professionals and a global government affairs program that monitors developments worldwide for Solectron and its customers.

Empowering the pharma planner

Source: LogisticsIT.com

Dr Nigel Shires, Application Development Manager, Preactor International

Is the Pharmaceuticals sector showing us the way to be truly lean and agile?

Much has been written about lean manufacturing over the years and one of the major ‘wastes’ that lean manufacturing initiatives target is inventory in all its forms, raw materials, WIP and finished goods. If you have read what has been written, or paid for a lean practitioner to advise you, you will have inevitably concluded that IT will play no part in any lean initiative, and that visual production control (VPC), typically in the form of kanbans and supermarkets, is the only way forward.

We can all learn by looking at how other people solve their problems, and then developing a solution for ourselves based on their experience, but in manufacturing it is rare to get this type of ‘cross pollination’ between different verticals. For example, how often do staff or consultants move between, say, pharmaceuticals and precision machining? They are typically seen as having no commonality and no one would consider experience of one sector to be useful in the other.

Preactor International is proud of the broad spread of its user base, and unlike most manufacturing professionals we are in a position to compare the different planning, scheduling and production control techniques used in different verticals. One of those sectors is small batch pharmaceuticals production for clinical trials, and using the inventory definition this sector has always been lean, because they have no choice. When you have products and raw materials destined for a single clinical study that may never be repeated, carrying significant inventory has never been an option.

On top of the intrinsic lack of inventory extreme agility is often also required. Say you are running an active pharmaceutical ingredient (API) manufacturing facility. You will have to make simultaneously many one-off small batches of API. Each API manufacture may required a different set of processes and machines, and a laboratory to make it in, all of which has to be cleaned before and after the batch has been made, and will require other resources such as staff who have the required level of training and competencies have to be assigned to the many processes.

Dealing with variables
Quality assurance (QA) checks required at various points during the manufacture cause a large amount of variability in predicted when processes can take place. These checks could obviously mean rework is required, causing a disturbance to the schedule, and in addition the QA resource will only have finite capacity, and thus delays to your process can be caused by waiting for QA resource.

All of this is compounded by the variability in demand caused by factors such as clinical trials which have been planned for months suddenly being cancelled, yet another trial hits the news bulletins and is suddenly top priority, so the production schedule is never repeatable in any way.

Planner power
So if you visit one of these companies will you find the kanbans, etc., which are seen to characterize lean processes? No, the use of VPC is rare in this industry for the simple reason that kanbans are WIP, and VPC essentially creates a make to stock process. Any variation in demand would soon lead to WIP that is not required. So how do they cope with controlling these ultra lean processes and the variable demand? The answer is that they aim for the ultimate lean implementation, make to order (MTO), and in many cases the pharmaceutical sector is bucking the trend for empowering production personnel to make scheduling decisions, and is empowering the planner instead. Is this a good idea?

If you use VPC scheduling decisions are based on empty kanbans. The emptying of a kanban triggers it to be refilled by the operators at the upstream process. This works well with stable demand, however the operators are working in isolation because they have no other visibility of other processes, late arriving orders, etc., nor do they have visibility of company wide key performance indicators (KPIs) such as minimising late deliveries, minimising production costs and so on. Variations in demand will cause problems that the operator cannot be aware of.

Seeing the whole picture
An empowered planner, on the other hand, can see the whole picture and will make scheduling decisions, such as changes in priorities for customers, based on company wide KPIs. With the whole picture the planner can make the trade offs that are bound to be required, e.g., utilisation (fewer changeovers and cleans) vs. delivery performance (small batches), and variations in demand are handled easily. Ultimately the production facility has only to cope with a single KPI—schedule adherence, safe in the knowledge that the company KPIs have been taken care of by the planner.

How do we empower the planner? Simple, we give them the tool no lean practioner will mention, a computerised Advanced Planning and Scheduling (APS) system. This will use a finite capacity model, that takes into account both resource and material availability, to rapidly produce a good schedule for the production facility that meets the company KPIs. If necessary the planner can quickly perform multiple ‘what ifs’ on the schedule, comparing the results to determine the best compromise for the KPIs.

The APS will dynamically aggregate the small batches of the same or similar products that an MTO environment inherently produces, so in our API manufacturing facility we can balance our attempts to minimize cleans with the needs of delivery performance. The aggregation will be re-calculated each time we re-schedule, so we are sure that our process utilisation is as good as it can be under the current conditions.

The planner will re-schedule as often as required by process disruptions and demand changes, often several times per day. In the most planner empowered plants the APS becomes an intrinsic part of the production control system, and no schedule decisions are made without first testing them on the APS. When an issue arises the planning and production staff will gather round the APS to resolve the problem whilst still striving to meet the company KPIs.

Case studies from the pharmaceutical sector show the impact that APS systems are having on what are already lean processes, such as optimised workflow with minimum bottlenecks; massively increased flexibility to quickly re-schedule if order requirements change at short notice, or even mid production run; the ability to run various 'what-if?' scenarios. Whilst not all the techniques used in the pharmaceutical manufacturing sector can be applied to more general manufacturing, we can certainly learn from their use of APS software to make lean processes even leaner.

The JIT jump may take some convincing

Source: Purchasing.com

David Hannon, Managing Editor -- 10/20/2005

The role of the logistics organization is key to any major lean supply chain initiative, but getting the logistics organization to think "lean" may take more work than many companies expect. While many lean strategies happening within a plant or on the factory floor may be logical to the manufacturing organization, the logistics and transportation-related strategies behind lean may be counterintuitive to what the logistics operation has been doing for many years.

The first step in getting logistics in line with a lean initiative is to gain control and visibility into the inbound network from suppliers. Without that visibility and control, the lean network simply won't happen. Often, a lean implementation requires changes in routing, modes, and timing of shipments and if suppliers still manage the carriers, those changes are significantly more difficult.

"One of the key lean principles is visual management and without network ownership you can't have visibility into the movements," says Robert Martichenko, president and founder of LeanCor, a third-party firm in Florence, Ky. that specializes in lean logistics. "A lean logistics network is a planned logistics network. Window times for deliveries are planned, dispatch times are planned to the minute, and unloading times are planned. It's similar to the way airlines have planned times and loading."

If a company does not have control and visibility into its inbound logistics network, a buying organization may have to negotiate with suppliers to extract the freight costs from the total part cost, which often gets complicated.

"The supplier may send a [cost] which is not really a competitive price for transportation and the procurement organization has to negotiate back and forth until it gets a more realistic number. Many organizations never get past that hurdle in their move towards lean."

In addition to network ownership, there are two other core logistics principles needed to drive a lean initiative: creating an accurate supplier file and creating an accurate packing file. The supplier file needs to be specific to logistics and include every supplier's address, including the addresses they ship from, not just their headquarters, so transportation decisions can be made. A supplier file should also include a description of the supplier's shipping capabilities—the type of dock it has, its shipping hours, manpower, etc.

A packaging file involves creating a detailed list of the sizes and types of packages that a supplier provides. Lean initiatives mean maximizing the use of container and trailer space, which requires a detailed knowledge of packaging/palletizing practices. Unfortunately, the only way to do this at many companies is to take the labor-intensive step of measuring all of the boxes, crates and packages that come into each facility.

In a recent presentation at the Northeast Supply Chain Conference, consultant Robert Abair recommended lean organizations prioritize inbound inventory into A, B and C categories, and focus primarily on A parts, which would account for 80% of inventory costs. He said reviewing and optimizing the size of packaging used can better allow the most important items to flow directly to the point of consumption on the factory floor instead of spending time on the dock being unloaded and repackaged for the trip from the dock to the factory floor.

Lean vs. global
Universal Instruments, an electronics manufacturer in Binghamton, N.Y. learned a valuable lesson about the contrasts between lean supply chain and global sourcing. The company has been focusing on a lean network for its U.S. factory, but in an effort to create competition in its supply base, began sourcing some parts overseas. While its current suppliers took notice of the move, the impact on its inbound logistics network to the lean manufacturing site was educational to say the least.

"We learned we have to keep most of our sourcing local if we want to achieve our lean goals," says Scott Gerhart, director of strategic sourcing and a 20-year veteran with Universal. "We started with large containers coming weekly from China but because we had to order six weeks out, we could not get the right quantities to run in our lean plant. That meant we were either holding inventory or expediting shipments by air, which defeated our lean goals."

For the majority of its U.S. supply, Universal has a milk run set up that visits suppliers every day or two and runs parts into the New York plant. The frequency of delivery depends on the cost of each part—the more expensive parts are delivered more frequently to avoid inventory holding costs.

Every Sunday night, the company's ERP system provides the week's requirements direct to each supplier. But the majority of its efforts in the short-term are focused on reducing the number of total parts brought in-bound to the plant so the flow of materials can be smoother. On the carrier side, Gerhart says Universal will be asking for more data from its domestic logistics providers to help drive the lean movement.

Seeing the forest
But perhaps the most difficult challenge in creating a lean-friendly logistics network is to see the big picture instead of focusing solely on cost. There are some steps to creating a lean environment that many logistics and inbound supply managers will view as costly.

"Lean focuses on total system cost and recognizes that you can't look at costs in isolation," Martichenko says. "Even though transportation costs show up clearly on the P&L and they're high, the focus needs to be on total logistics costs, which includes inventory and supplier management as well as transportation. The inventory costs can be half of what transportation is and it's not on the P&L or visible."

Gerhart says he continually has to remind buyers that "cramming more stuff onto a pallet is no longer our goal" in reducing shipping costs and optimizing inbound flow of materials.

For example, in a lean logistics network, there are three key changes that need to be made, according to Martichenko: Reduce standard lot sizes or orders; increase the number and frequency of deliveries into a plant; and level the flow of materials into a plant. The first concept flies in the face of the "buy in bulk" mentality of many supply and logistics organizations that have been working to fill truckloads with larger shipments.

And the increase in frequency of shipments often creates visions of clogged docks and angry truckers while increasing transportation costs dramatically. And leveling the flow of materials? Many supply chain managers would say that's just not possible.

"But it's been proven time and again that these things can be done and can reduce inventories while reducing transportation costs at the same time," says Martichenko.

In a lean logistics network, window times for deliveries, dispatch times, and unloading times are planned, almost similar to the way airlines have planned to the minute. That level of service from carriers may require a weeding out of providers that can't meet that service level at any cost. Once the lean network begins functioning, carriers often find they can better utilize their assets because at least one of their customers is working to a predetermined schedule.

"Typically in a lean environment you want to protect the plant from LTL shipments," says Martichenko. "That doesn't mean LTL is eliminated, but it needs to be consolidated as much as possible at a cross-docking facility so milk runs can pick measured shipments up for more regular delivery."

Outsourcing in lean
The decision to outsource logistics in a lean environment should be based on a careful review of current and future core competencies within the organization. Martichenko says there are three core competencies an organization should review in this decision: logistics engineering including the staff's level of sophistication and the technology available in-house; transportation infrastructure; and facility infrastructure, including a cross-dock facility.

"If you've got that in place, then you should be ready to take on lean on your own," Martichenko says. "But if that's not present and not on the priority list, then a 3PL might have the people and process ready you needed to gain those competencies."

In his book, The Toyota Way, Jeffrey Liker compares the lean manufacturing and logistics strategies of Toyota to those of Ford Motor Co., both of which leveraged third-party logistics providers in their move to lean. Liker points out that the executive in charge of Ford's logistics at the time, "handed off an amazing amount of responsibility to an outside vendor with which Ford did not have a strong partnership-at least not in this area and on a project of this magnitude."

Liker goes on to point out that the partner Ford worked with did not have specific knowledge and background on Ford's lean objectives and goals and was therefore doomed from the start. The lesson: If you do entrust part or all of your logistics network to a third-party in a lean environment, be sure it is a close partner and is clearly educated and updated on the goals of the entire lean initiative, not just the logistics portion.

Simple math
Logistics is about managing inventory.
Lean is about speed, flow, and the elimination of waste.
Six Sigma is about understanding and reducing variation.

1+2+3=Lean Six Sigma Logistics which can be defined as: The elimination of corporate waste through disciplined efforts to understand and reduce variation, while increasing speed and flow in the supply chain.

SOURCE: LEANCOR






Data prerequisites for lean inbound logistics

Supplier data
Inventory—packaging data
Transportation data
Facility data
Design tips for lean inbound logistics

Analyze volumes
Group suppliers
Develop routes
Develop summaries
PDCA (plan/do/check/action).
SOURCE: LEANCOR

No more lost baggage?

Financial Express

Airlines and airport authorities around the world are using RFID technology in an attempt to overcome the problem of mishandled baggage, says Abhinav Singh

ABHINAV SINGH
Posted online: Monday, October 03, 2005 at 0000 hours IST

On an average, airlines globally spend as much as $1.6 billion a year on mishandled baggage. Dealing with each lost bag costs an airline about $100, not to mention the loss of customer goodwill. According to sources, British Airways loses about 18 in every 1,000 bags, and the airline reimburses an average of $100 per mislaid bag. Luggage is lost largely due to damaged, misread or lost sticker barcodes. The International Air Transport Association (IATA) has also issued guidelines for compensation for lost baggage, whereby an airline passenger is entitled to make a claim, with maximum liability of the airline being limited to $20 per kg or a maximum of $635 per piece of checked-in baggage.

The use of radio frequency identification device (RFID) technology by airlines and airports is set to revolutionise baggage handling by making it very difficult to lose bags; along the way, it will help airlines and airports save large sums of money. It has been proved that RFID tags have accuracy rates exceeding 95 percent, and can help reduce baggage losses to the minimum. RFID technology has been endorsed by IATA, which says that the technology will improve customer service considerably in terms of reduction in mishandled baggage, security requirements, and maintenance costs. Let us take a close look at how this technology is shaping up, and about the deployment of the technology across airports in different parts of the world, including India.

A tag on my bag

As a bag with an RFID tag passes through a scanner, a pulse of radio waves awakens the tag, which responds by transmitting a small burst of data. RFID tags can be inserted into luggage, reducing the likelihood of them being separated from bags. These tags can be read without direct line of vision. The system comprises a baggage tag consisting of a microchip with an antenna. Reader units located in airports send out electromagnetic waves that activate the tag and enable it to send back the information required to ensure that the bag is dispatched to the right conveyor, to the right aircraft, and finally retrieved correctly. Explains Ravi Mathur, CEO of EAN India, "RFID technology does not require any line of sight, and can be read by the antenna from any direction. The technology can play an important role not only in solving the problem of mishandled baggage, but also in the safety of the airport as scanners can at once catch any unauthorised baggage piece lying with the rest of the passenger baggage."

Need for standardisation

There have been talks to bring about the standardisation of RFID technology. Take for instance baggage bound for London via Dubai from New Delhi that is in transit at Dubai airport. Now the RFID tags attached to the baggage should be able to talk to the RFID readers at Dubai airport and then those at London airport upon arrival at its final destination. Mathur says, "Standardisation in RFID can help ensure that the technology can be used by multiple trading partners in a global supply chain scenario so that different tags and readers can talk to each other without any problem."

A step has been taken in this direction as EPCglobal is helping to create an industry-driven standard for the Electronic Product Code (EPC) to support the use of RFID technology. EPC-based RFID technology is the result of the research and innovation undertaken by the Auto-ID Centre, MIT, with funds from 100 of the world's largest organisations such as Wal-Mart, Metro AG, Carrefour, the US Department of Defence, US Food & Drug Administration, Coca-Cola, Philips, IBM and Accenture. EPCglobal is focussed on creating global standards for the EPCglobal network with the aim to increase visibility and efficiency throughout the supply chain, and higher quality information flow between companies and key trading partners.

A healthy pace abroad

Airlines and airports in the US, Europe and Japan began looking at RFID systems in 2003. In 2004, Delta Airlines made the most significant commitment to RFID when it announced an investment of between $15 million and $25million to use this technology across its US network; the airline plans to have its entire system online by 2007. Schiphol airport and Dutch airline KLM are currently operating smaller pilot RFID schemes, as are Japanese Airlines and All Nippon Airways. Hong Kong International Airport has deployed the largest RFID network in Asia; the technology will be deployed across the airport's extensive baggage-handling facilities alongside the existing bar-code system.

Outsourcing “points of pain” in the supply chain

By Del Williams
Industrial Distribution October 5, 2005

Sophisticated third party logistics providers are partnering with companies to handle global sourcing differences, improve product fill rates, and eliminate other "points of pain" in the supply chain.

CEOs and senior executives typically focus on making the sale, the product, and driving down unit cost, but seldom devote the same attention to improving the logistics side of the equation: customer fulfillment or inventory management.

Yet considering how quickly a missed delivery or incorrect shipment can sour a customer relationship and even cause the loss of customers, this is surprisingly short sighted.

Furthermore, problems caused by poor supply chain management often appear to be caused elsewhere in the company. For example, sales starts blaming production for lost revenue; production starts blaming sales for client losses—while in-house logistics and inventory management often are the true sources of the problem.

So how can you know if your logistics operation is the source of the problem? If, as a company executive, you've heard any of the following, then you very likely have “points of pain” caused by the supply chain:

“Sales are up, but overall profits are down, due to the cost of re-investment for in-house logistics to meet specific customer shipping needs.”

“One of our biggest customers just called and chewed us out for missing a delivery. They're telling us to get our act together, or else.”

“Our customer is delaying payment because we didn't ship the right quantity of product and it was late. Now they're asking for a price accommodation.”

“Production is complaining that sales aren’t selling enough to keep production running efficiently.”

The high cost of poor logistics
A company has two main chances to impress a customer—at the point of sale and receipt of product. While slipping up on delivery may seem like a forgivable oversight to a company's internal shipping department, it can not only damage a company's balance sheet but also cost them customers.

“Because the market is so competitive, I need the right part, at the right place, at the right time to be successful,” says Ron Maltarich, president of Tendeco Sales, Inc., a supplier of aftermarket pulleys and tensioners for the automotive industry. “Get it wrong and I've lost a customer. Or I've racked up extra cost and complexity through re-ordering, back-ordering, canceling, or expediting.”

Stock-outs can be particularly painful to a company's bottom line when the out of stock product is part of the 15 percent that typically accounts for 80 percent of a company's sales.

A mismanaged supply chain can also contribute to inventory loss, slow inventory turns, inaccurate inventory balances, delayed collection of accounts receivable, as well as lost resources spent handling delivery errors better spent elsewhere.

The Internet further complicates the manufacturing landscape by raising customer expectations of order availability and customization. Previously, a customer may have accepted slow shipment and standard packing, but today they're more likely to seek out a competitor's alternative or insist on expedited delivery, special packing, labeling, or tracking.

Moreover, globalization has stretched out lead times and added complex layers to product sourcing and distribution among global, domestic, and regional suppliers and customers.

Yet many companies remain married to outdated, in-house logistics practices based too often on how things have always been done. They lack flexibility, speed, and accountability. These companies are often unaware of the extent of their logistics problem.

“In-house logistics departments lack the flexibility to service special customer requests,” says Maltarich, who spent much of his career in senior management at a Fortune 500 company before starting Tendeco. “They may attempt a special label, packing slip, or order entry if important. But this invariably disrupts processes and ends up costing more than it's worth.”

Outsourcing pain
With the complexity of global supply chains, and the expense of updating warehouse management systems, companies are re-evaluating the wisdom of keeping critical supply chain management/customer fulfillment services in-house.

Instead, many companies are turning to a new breed of third-party providers. These "sophisticated" 3PLs do far more than just offload, store, and ship product—the routine functions of a standard third-party logistics provider.

Sophisticated 3PLs literally partner with the company to protect the performance of its brand, ensuring that customers receive what they ordered, when and how they need it. They do this transparently, so the company's brand receives all the attention. To achieve this, they integrate fully with customers at all the touchpoints of shipment, including invoicing, inventory management and reconciliation.

These 3PLs not only enable just-in-time delivery, system integration and real-time Internet tracking, but also inventory analysis to maximize a company's fill-rates, inventory turns, and ROI.

As a result, the company doesn't have to make its own ongoing capital investments in logistics, which can run an initial half-million dollars or more for sophisticated 3PL capability.

To safeguard customer commitments and optimize inventory levels, 3PLs can coordinate supply line variations from global, domestic, and regional sources to ensure on-time production and shipment. Tendeco, for example, used Kenakore Solutions (Perrysburg, Ohio) to facilitate their 3PL needs.

Product can be consolidated from multiple sources so customers get a single, complete shipment rather than multiple partial shipments. Special requests can be accommodated, such as kitting, assembly, labeling, packaging, and private branding.

Dana Corp., a partner to automotive, commercial, and off-highway vehicle customers with employees in 28 countries, understands the importance of optimizing the supply chain to better service its customers, who made $9.1 billion in purchases in 2004.

“To succeed in the future, companies will have to master their supply chains,” said Vicky Black, vice president of Dana’s service parts division. “Since so many products are becoming commodities with global competition, product availability and on-time, error-free deliveries are becoming essential differentiating factors in making the sale.”

Recently, Dana relied on sophisticated third party logistics for warehouse management, product consolidation, kitting, and packaging.

“With all the resources that go into R&D, production, and marketing,” explains Black, “we certainly didn't want to miss the last link of the sales chain. Acting on inventory analysis, we improved the product availability of our fastest selling products by 30 percent.”

In today's demanding marketplace, a sophisticated 3PL provider can be a practical, cost-effective way to eliminate pain in the supply chain, without diverting capital to train and upgrade traditionally inflexible, in-house logistics departments.

Del Williams is a technical writer based in Torrance, Calif.

DoD adopts new business practices to manage supply chain

dcmilitary.com

WASHINGTON- The Defense Department is adopting a more customer-focused approach to acquisitions, technology and logistics, the department's top AT&L official told a group of more than 300 industry leaders at the National Defense Industrial Association's September luncheon here today.

"The customers ... expect us to prepare and provide the capabilities they will need to defend America and her interests, not just today, but into the future," Kenneth J. Krieg told the group.

He identified AT&L's customers, or stakeholders, as the secretary of defense, Congress and the taxpayers, who "wisely invest their hard-earned money in their nation's common defense."

To serve all of these stakeholders well, Krieg said, AT&L must adhere to some basic principles, including making decisions based on facts, aligning authority and responsibility, balancing the costs of various choices and building processes that have both agile performance and strong oversight.

"As we incorporate these basic principles into our daily routine, we also are mindful of how business in the Department of Defense is changing," he said. "And it is changing very dramatically. Our job is less about moving paperwork and more about moving knowledge. It is less about bending metal and more about integrating systems. It is about joint and integrated endeavors."

To meet the challenge, he said, AT&L is developing a new set of business practices affecting five broad areas: supply chain, medical readiness and performance, acquisition, ordinary and strategic process integration, and DoD corporate governments.

In the review of these areas, Krieg said, three overarching guidelines are being applied: being responsive to customers, ensuring decisions are made based on facts and at the appropriate level and redirecting work efforts. All of these are geared toward achieving effectiveness and efficiency, he said.

For example, he noted, technology, such as item-unique identification and radio frequency identification, that allow the tracking of both products and procedures will help to attain those goals. "The key to future success lies in working smarter, not just harder," Krieg said.

He cited performance-based logistics, or PBL, as one way to give DoD's stakeholders the best value on the roughly $80 billion the department spends annually on supply-chain activity.

"PBL helps us to work more efficiently and gather data and facts we need to measure success and uncover roadblocks to achieving our goals," he said. "Even more importantly, we're able to factually report those successes to our stakeholders and work together to remove those roadblocks."

Also, Krieg said, he intends to introduce Lean Six Sigma techniques, a widely used business strategy, to further streamline AT&L's practices. Lean Six Sigma emphasizes speed and efficiency in improving business processes and transactions.

"I intend to use its principles to consider the effectiveness and efficiency of the administrative processes of acquisition documentation," he said, "allowing our staff to streamline their procedures and free their time to focus on other customer needs." He added that AT&L will seek to apply Lean Six Sigma techniques to its business activities.

"In an era where people are devoting more and more hours to their work," Krieg said, "it's not sensible to further increase the time ... we spend. Instead, we must increase the efficiency of our business products."

American Forces Press Service