The management of a company’s logistics is now a fundamental element of its competitive advantage: it switches from a model where the overall structure of all companies confronted each other, to a new confrontation directly with the organization and the efficiency of the organization. production and distribution system.
In this context, the management of the supply chain becomes a central element, at the heart of all the concerns of business leaders in 2019.
What is likely to optimize your costs, your deadlines, the productivity of your employees, the satisfaction of your customers, your supplier relationships and the profitability of your company? The answer lies inevitably in the management of your logistics .
The logistics is a series of internal processes with many steps of placing the order through procurement from suppliers and to delivery to the end customer. This is, step by step, estimate the fair value added to the product based on customer expectations and constraints. At <a href=”http://zoetalentsolutions.com/”>Zoe Talent Solutions</a> you will find various courses which explain more about logistics management for business.
The supply chain is also the main lever for managing its productivity on the market. It is at the intersection between the strengths of its suppliers and its customers, while observing potential entrants and substitute products. It is impossible not to consider it as the centerpiece of its competitiveness, in a context of open markets and increased competition. And for good reason, in 2019, supply chain management is once again one of the most important concerns for business leaders.
- What is logistics management?
A complete supply chain not only manages all of the company’s internal processes, but extends well beyond that, with support for all flows maintained with its environment.
Supply chain management refers to a set of theories and practical advice for supply chain managers to concretely improve performance. Many theory books concentrate methods, resources and resources directly at your disposal to help you better manage and improve its performance. At each step, you need to optimize the agility of your structure, the speed of the processes and the adequacy between your services and the expectations of your customers. Although we will discuss later the issue of KPIs ( Key Performance Indicator), the satisfaction rate of your customers is a compass to never lose sight of. The larger your business, the more complex the logistics processes, the more sophisticated the methods, and the more they require special attention. An optimal supply chain combines speed, quality and efficiency.
Improving your logistics function is therefore an organized approach, which must be accompanied by the staff of your entire company. It is a vast and methodical collective project for better management of flows, and in particular cross-functional flows. However, many pitfalls must be known: burying your business in too restrictive, burdensome and expensive processes is the main risk in which it is easy to fall. Be careful not to weigh down each step unnecessarily, and know how to adapt the device according to your needs. Everything is therefore a question of method. Easier said than done ? Let’s take a closer look at how to get there.
Before looking at how you can improve supply chain management , let’s start by finding out each step:
The supply , is the selection of the best suppliers, products and raw materials
The ” supplier-raw material ” pair refers to the supply of raw materials to the company, with the aim of transforming them into goods or services.
The ” customer-product ” pair refers to the product ordered by an end customer, professional or private
The customer management
The inventory management and warehouse is in the heart of the efficiency of your supply chain
The transport of goods
The distribution of goods
Product recycling , also called “reverse logistics”.
Ultimately, your objective is indeed to improve the quality of the service rendered to your customers to increase their satisfaction rate, and to conquer new market shares.
- How to measure the efficiency of your supply chain?
Before you go all out in a campaign to improve your logistics , you still need to know where to focus your efforts. Conduct an internal audit of each step to better know the precise points to which it would be better to make corrections.
- How to improve the satisfaction of your customers?
The satisfaction of your customers must remain your first priority, and is determined by the quality of your response to meet their expectations. To measure it, pay attention to the rate of service . It is an indicator to measure the overall efficiency of the production chain. It’s a fundamental KPI for evaluating your performance. You will be able to know the quantity of products delivered according to the conditions stipulated in your sales contract (conformity of the nature and quality of the product, delivery times, etc.)
The rate of service is high when your orders are delivered on time, when the nature and quality of products coincides with the expectations of your customers. It is, therefore, a question of determining the quantity of each product to be held in stock (we will return more precisely on this aspect later), in order to protect you against the possible breaks. The more expensive an out-of-stock situation is (longer delivery times, and possible short- and medium-term customer losses), the more you have to increase your quantity of stored products , and vice versa.
The service rate must, therefore, be calculated over the duration of an exercise in order to be truly representative. To measure timeliness, divide the number of orders delivered on time by the total order quantity. To measure the quality of service, divide the number of disputes on orders less the number of orders delivered out of time by the total quantity of orders. So be careful to weight each criterion, in order to obtain reliable results.
To improve your service rate, you can assign a letter to each product based on its priority in achieving your revenue:
“A” for the 20% of the most important products, we speak of critical products .
“B”, for the next 25%, we speak of intermediate products .
“C” for the remaining 50%, we are talking about secondary products .
Otherwise, it is possible to directly compare the costs generated by the storage with that of a stock-out. It is difficult to really evaluate the consequences and losses generated by a rupture, especially in the medium term. As far as possible, it is therefore necessary to seek to improve the service rate of Category A products, or those whose cost of out of stock is very high.
- How to optimize the management of your stocks?
At each stage its own KPI. There are some to evaluate the efficiency of all your logistics. The inventory management is key to reduce logistics costs. In fact, not only must a warehouse be available, but also all the machine tools and infrastructures needed to make it work. The larger the warehouse, the larger the equipment, and the higher your capital and operating costs. It is not therefore a question of reducing the level of stocks at all costs, but of making it as close as possible to your needs.
The issue of replenishment is therefore central. The Wilson formula is an effective solution for the best use of your abilities, keeping costs orders. Also known as Economic Order Quantity (QEC), Wilson’s formula determines the optimal quantity of replenishment of a production unit. The optimal balance is achieved when an order is placed in order to reduce the cost of owning stocks, avoiding the shortage. Only 3 parameters must be taken into account to achieve this: the demand in quantity over the period (D), the cost of an order including the transport and the reception of the goods (CC), and the unit cost of possession of the stock (CS).
III. How to optimize the management of your stocks?
Several methods make it possible in practice to improve the management of your stocks, and, in the first place, the DDMRP allowing to establish a dynamic management of “buffers” (buffer stock). Logistics management is driven entirely by demand, and buffets are fully included in workflow management. By introducing buffer stocks at strategic points, you ensure excellent responsiveness to your business, and always keep a close eye on demand. This method helps to mitigate market fluctuations between 20% and 30%. Companies subject to high volatility, whose lead times are important and whose complex assembly processes are well worth applying this method.
“Pulled” production consists of placing the customer as a generator of production orders . He makes a request, and the company provides the desired product. This limits the stock, and may even totally remove it in some cases. Other products require too long production time and can not be subjected to this practice (cars or agricultural products for example). For this reason, it is possible to apply one or more intermediate stocks throughout the production chain.
In contrast, the ” pushed flow ” is based on demand forecasts to organize production . The product is manufactured before the customer has made his order. The company is not certain of selling its products, and constitutes stocks. This method allows the customer to be delivered very quickly after the order has been placed.
Finally, cross docking is a method that is booming in World and internationally, and especially among merchants, distributors, wholesalers and distribution centers that do not have stock. Specifically, you move goods from the unloading platform to the shipping dock without going through the warehouse . The products therefore only transit. Exit preparation of the order, reshipment, picking and packing. Speed of treatment and cost reduction are some of the expected benefits of this method. This system is widely applied in supermarkets or for daily newspaper delivery men, for example.
- What other good methods and practices to adopt?
Let’s start by looking at logistic picking . This is an unavoidable step, and too often neglected. It designates the moment during which a product is taken from the stock, then collected before shipping in an order. The organization of products in the warehouse is therefore essential. It must obey a strict consistency, with a precise reference for each product. Some WMS (Warehouse Management System) software can optimize pickingchoosing the best path to take to collect each product and not return to the same place several times. The management of several orders at the same time must also be based on a powerful transmission of information solution. Tracking order picking is possible with on-board computer terminals with a barcode system.
The e-commerce logistics is at the heart of all the attention, and focuses on many issues that are unique to it. Competition in the market forces companies to always guarantee the availability of products while optimizing storage costs. In the eyes of customers, shipping costs occupy a very important symbolic dimension. A price of less than € 5, or € 10 for a bulky item is recommended. Beyond, it constitutes a consequent brake. Finally, be sure to offer a range of delivery methods at various rates and times, to adapt to the needs of your customers. Finally, your returns policy must be flexible and well organized to build trust. More and more e-commerce players decide to outsource certain tasks with low added value.
The supply chain is now crystallizing the concerns of many business leaders because of the strategic challenge it represents for the growth of the company. The numerous practical examples quoted in this article are enough to prove it: a good management of your supply chain is a decisive competitive advantage to increase your market shares and maintain the durability of your company . Visible and significant progress can be made in a very short time, provided that the appropriate methods and tools are provided. To go further, do not hesitate to consult our guide, to have an overview of all the solutions.
Written by Zoe Talents Solutions