The Layered Look of Supply Chain Cost-Cutting

5/29/2013
Even if you're not an apparel professional, the concept of layers requires no introduction.

It's one of the best ideas ever to happen to fashion because rather than making one item of clothing 100 percent responsible for keeping its wearer warm or cool, it allows several items to work together to achieve the same end.

Effective logistics cost cutting is much the same. 

At any given time, there are usually numerous opportunities to trim supply chain expenses at various levels – or layers – of an operation.  And each, no matter how large or small, can help create a better bottom line.

Base layer: efficiency improvements at the individual employee level
For example, think about the impact that folks working on your warehouse floor can make provided they're given the proper empowerment.

Six years ago, my company did just that when we launched a formal JDI, Lean and Six Sigma initiative at our distribution centers.  Instead of creating a specialized quality team at the corporate level, we opted for a more grassroots approach that involved training a handful of professionals at each facility and then letting them drive their individual operations' continuous improvement projects.

To date that decision has resulted in documented savings of more than $29 million and some very innovative project ideas that might never have been identified if we'd elected to pursue a more ivory tower approach. 

Middle layer: forklift task interleaving
If you want to drive costs down a little more literally, consider addressing the issue of how your warehouses roll instead – or more specifically how your forklifts do.

These expensive pieces of equipment pull considerable weight when they're moving from Point A to Point B.  However they're usually generating nothing but waste and extra cost when they're traveling back to Point A, because they're rarely traveling with a load on board. 

Forklift task interleaving has the potential to eliminate most of this waste by rearranging forklifts' workflow into a more circular motion – or some other highly effective route configuration that makes better use of their traveling time. 

Like some of today's most popular looks, interleaving is not an option that everyone can pull off equally well; among other things it requires the help of a fairly robust system, some highly trained engineers and a warehouse management staff that's fully prepared to embrace change.  However its potential yields are tremendous, especially for operations that use numerous forklifts. 

Top layer: labor management systems
For even higher-level savings, your company may be ready for a step that is both systems- and labor-intensive – and that coordinates well with many warehousing operations. 

I'm talking of course about a Labor Management System, a tool that gives companies the ability to measure and monitor the functional tasks in their warehouses – and to enhance their workforce's resulting productivity– like never before. 

Among other things, an LMS improves individual accountability, increases management efficacy, and enables better planning and scheduling.  In the process it usually lowers companies' warehousing costs by anywhere from 5 to 15 percent. 

Not surprisingly, an LMS doesn't do these things overnight, or without a substantial initial investment of time and money that can easily add up to $1 million per facility (although some very productive systems are available for as little as $70,000), which is why it may not be the kind of thing you can launch for every facility at the same time.

However based on my own company's highly positive experience in deploying LMS at some of our busiest operations it's an improvement well worth pursuing on any scale.

Outer layer: co-shipping or co-warehousing
Although the idea of sharing supply chain activities with another company may seem about as enticing (and likely) as the option of routinely exchanging clothes with total strangers, there are many highly compelling economic reasons to consider engaging in multi-company supply chain collaboration.  These include splitting the costs of fuel, facilities and personnel and being able to build more cost-effective shipping loads.

In fact, these benefits are so well known that you probably don't need to hear about them at all. 

What you do need to hear however is that you don't necessarily have to find a company whose supply chain is a mirror image of your own in order to take advantage of this practice. All you need is some sort of supply chain parallel or intersection. Maybe, for example, there's a shipper that manufactures near the end of your company's delivery routes, a factor that could enable its cargo to fill trucks one way and your cargo to fill them the other way. Or perhaps there's a shipper that needs a reliable resource to handle pick-ups of unsold product (and other reverse logistics services) from the same retailers you serve.

In other words, don't wait to try this practice until you find a partner that's a perfect supply chain fit. Not only are they likely to be few and far between the longer you wait to approach other potential partners,  the more you run the risk that the best ones may be snapped up by someone else. 

All of the above
The beauty of all of these recommendations is that each can work as a standalone, and be added to your supply chain “outfit” one piece at a time. 

Just as important each also has the potential to complement or blend seamlessly with the others and to work even more effectively when used together, because anytime you involve a wide range of professionals – with jobs ranging from the most basic to the most complex – in your efforts to maintain a healthy bottom line, everybody stands to gain.

In fact, the more diverse and multi-layered your economic initiatives are, the less likely you are to sweat today's still-tough economy and the more likely you are to weather any financial challenges that come your way.
              

David Frentzel is vice president, global contract logistics of APL Logistics, an apparel industry provider of warehousing, transportation and other global logistics services. 
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