It's not Shipping anymore; it's Logistics. Logistics is a process. It encompasses a broad scope of responsibilities, extending from the vendor through to the customer. With the five key issues--Movement of Product, Movement of Information, Time/Service, Cost and Integration, one of the critical issues in business is time.

Time is critical. With quickening obsolesce and technology advancement, new products must be brought to market quickly. Customers do not want to carry any more inventory than they must. So their suppliers must be able to respond quickly to delivery orders to them. This demand for time reduction exists throughout each link of the supply chain.

Company management may focus on different aspects and elements of cycle time. It's very possible they do not understand the total process. They may look at how long it takes to enter an order, or the warehouse time to pick and ship and order, the cycle time from order receipt to ship an order, manufacturing cycle time, time to prepare purchase orders or other measures of time. These are each elements of the total cycle time; they are not the entire process. Without an understanding of the entire cycle and its elements, companies can optimize one element and yet sub optimize the overall system.

With logistics, the cycle time is significant and can be complex. In logistics, cycle time runs from the vendor shipping to you right through to your delivering the customer's order to him. This view of cycle time means there are both internal and external factors. These must be recognized and dealt with an order to manage and reduce the time. And the scope and complexity becomes significant if the vendor is located overseas and/or the customer order is for export. Very often company management does not understand the process and what all is involved to get materials into the manufacturing facility, or finished goods into a warehouse and to deliver orders--all within the time constraints to meet the customer's requirements.

Supply chain management, continuous replenishment, vendor-managed inventory, just-in-time and similar programs are customer driven. You must perform as the customer demands. That is it. Failure to meet the customer's expectations can result in penalties, charge backs and even the loss of his business.

These programs mean that inventory is being pulled, not pushed, from supplier to customer. This is a significant change from the past, where manufacturers made product and pushed it out. That often meant extra and excess inventory, in many stages of production and distribution. Not so now. To meet the new customer demands, the focus should be on a DRP, distribution requirements planning, to complement the pull-process. DRP should then feed to MRP, materials requirements planning, and other systems.

By going from the customer delivery date and working backwards, this requires a rethinking of how to calculate time and to meet it. The old manufacturing attitude of "it's made, now ship it" is not valid. As we said before, it's not shipping anymore. The process must be planned to meet a delivery date. And given the short notice and lead time with some customers, meeting the requirements is easier said than done. It can put expediting to a new level.

Conversely, the sales attitude of "I've got the order, now ship it" is not valid and shows that the salesperson does not know his own customer's requirements. Customers now present and even dictate how their customers will handle their order. From receiving it via EDI, to the use of bar-coding on the cases and pallet, to Advanced Ship Notices and more, customers are specifying how their customers are to perform.

There are external and internal time issues with the logistics cycle. And external and internal concerns the movement of product and the movement of information. Here are some of the ways an order may be handled--

START: Customer prepares order Order goes to an intermediate--sales person, broker, etc. Time for intermediate to review and forward to company Time to enter order and send to warehouse Time to prepare and ship order Time to do ship confirmation and prepare invoice Time for carrier to make delivery appointment and to deliver END: Customer receives order

The external issues are obvious and get the attention, especially if something goes wrong. External issues involve the carrier who brings material from the vendor to the plant, who moves it from the plant to a distribution center or who takes it to the customer. There are mode choices to be dealt with. How fast must it move and what will you pay to have this done? Given these answers, then the carrier must be selected. The carrier must be reliable, even more than speed per se, reliability is important. Also, the carrier should be able to communicate with the various parties. This can be via a computer system, fax or they just have a good customer service group to keep vendors or receivers up-to-date.

External can also involve an outside warehouse. How well do they pick orders? How much notice do they need to pull and ship the order? How quickly do they give their customer shipment information so you can invoice and advise his customer of the shipment status? Or external can involve vendors who repacking or other services.

But perhaps the bigger time issue may be the internal handling of the product and the order. Think about it. A customer prepares the order. He may send it to the salesperson or to the broker. This party may it and send it to the customer service group for order entry. Now what value was obtained by the salesperson or broker handling the order? There should have been some value to the customer or his supplier? The handling delayed the order getting to the supplier. And this time delay can be critical. The customer did not change his required delivery date because of this order handling. So the supplier must still respond to the delivery date.

Then the order must get to the order entry group. They must enter it. Perhaps Accounts Receivable may review the order. Time is ticking away. Yet the customer has not changed his delivery date. Then the order goes to the warehouse. How did it get there--automatically or internal company mail? Time is still ticking away.

The order must be pulled at the right time to meet the delivery date. Is the product in stock or not? If not, how long till it will be? What if it is already too late to deliver in time? What if all the internal handlings have delayed the processing of the shipment so that it cannot be delivered by the delivery date and by the carrier that the customer requested? If that happens, will the company review how it handled the order? Or will it just blame the distribution group for not shipping the order in time?

Let's take the above procedures and situation and add some dates to it. This example is not a typical:

START: Monday, the 1st, Customer in Denver, CO prepares and mails order to broker in Chicago, IL with delivery date of 15th. The order is to be shipped as LTL via a designated carrier, per their written requirements. Delivery appointment is required. The carrier's usual practice is to make the delivery appointment after the shipment arrives at his terminal in Denver. Wednesday, the 3rd, broker receives order. There are other priorities, crises and sales calls going on. Monday afternoon, the 8th, broker reviews order and faxes to company customer service in Philadelphia, PA. Order is received too late that day for entry. Tuesday, the 9th, order is entered into computer system. Accounts Receivable has a watch on that customer and order is held pending review. Thursday afternoon, the 11th, order is released from hold and prints out at Warehouse. It is too late in day to pick and ship order. Friday, the 12th, order is picked and ready to ship. But, there is a problem now, the order will not arrive in Denver, via the designated carrier, in time to make the delivery appointment and deliver by the 15th. Distribution advises Customer Service who then contacts Broker. Broker then calls the Customer who reluctantly agrees to extend the delivery date. Black mark for supplier for not meeting original date. Thursday, the 18th, shipment arrives at carrier's terminal in Denver. They call customer receiving department to make delivery appointment. Receiving gives them appointment for Tuesday at7:30am. Tuesday, the 23rd, the shipment is delivered. (And quite likely, between the 18th and 23rd, the customer has called the broker to complain that the order was not yet delivered. They probably never contacted their own Receiving to alert them as to the priority of the order and to take it in quickly.)

Look at the time which did not involve the actual order receipt, entry and shipping and delivery of the order. It can be significant in the total cycle time, especially given the real requirement was delivering the shipment by the 15th. The cycle should be viewed as a process whose goal is to deliver the order per the customer's requirements. Instead, the various groups who come in contact with an order do their own thing with the end result that the supplier failed to perform per the customer's specification. Yet company management may not understand and look at the total process. If they do not, these service failures will occur again.

Similar issues and times exist for the manufacturing planning. There are internal issues with the fore cast accuracy, getting good on-hand inventory data, reviewing the production schedule, preparing necessary purchase orders and getting these to the vendors. Then for the vendor to handle the order, just like above, and getting to his customer in time so that the customer can do what is required to ship his order on time.

Cycle time grows if the the company is dealing with parts from overseas or shipping an export order. Management must understand and recognize the time required to book the shipment, get the container in for loading in time to make the vessel closing at the dock. And if there is a surge of demand for the ship capacity or airline capacity and over bookings, then there is additional time to actually get a firm booking. There is time required for documentation, export license (if required), certificate of origin, shippers export declaration, invoice and other documentation, actual transit time, customs clearance and transportation to destination. That is a lot to be done.

Time is one of the critical issues in logistics. There are external and internal factors which must be recognized if time is to be reduced effectively. Management must understand the process and the cooperation and integration required. Their customers will not accept excuses, mistakes and failure.

Top of Page ion, actual transit time, customs clearance and transportation to destination. That is a lot to be done.

Time is one of the critical issues in logistics. There are external and internal factors which must be recognized if time is to be reduced effectively. Management must understand the process and the cooperation and integration required. Their customers will not accept excuses, mistakes and failure.

By THOMAS CRAIG
President LTD Management
www.ltdmgmt.com