Reaching Out to Industry !
Philip McCormack
HEAD of RESEARCH
NITL
“Centre of Excellence
for Logistics and Supply Chain
Efficiency”
What is the Supply Chain ?
Buy
Make
Store
Move
Sell
Traditionally these functions are managed in
isolation and often operate at cross purposes
What is Supply Chain Management?
Supply chain management integrates these
functions by managing the information,
material and financial flows
Information and Money
Buy
Make
Information and Materials
Store
Move
Sell
Final Customer
The source of “real” money
Retailer
Wholesaler
Assembler
Every link matters
P
R
O
F
I
T
Component Manufacturer
Raw Material Supplier
“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 Management
Important 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.
Implementing Supply Chain
Management
Market-driven
Customer
Service Strategy
Optimum
Supply Chain
Cost and
Investment
Competitive
Advantage
Through
Integrated
SCM
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
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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 Industry
Recent “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
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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
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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
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Turnover
% exports
Inventory levels
Inventory turns
Average cumulative order
cycle times
• % on-time deliveries
• % order fill
• Logistics costs
improvement
Outreach Company Selection
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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
Determine Optimum
Logistics System Design
Customer Service to Support Business Strategy
•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
Revenue/Profit Contribution
Operating Costs/Savings
Max return on SC Assets
Assets Employed
Typical Management SCM Concerns
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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
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Internal v External Projects
Rigour
Analysis
Write/present simply
Project Briefing
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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
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Title
Background
Challenges/Issues
Project Mission and Deliverables
Project Approach
Project Work-steps
Project Management
Costs and Timings
Project Title
• Action oriented e.g.
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‘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
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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
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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
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“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 …
philip.mccormack@nitl.ie