Lean Supply Chains– keeping stock levels low, customers happy and money in the bank

On a recent trip to Osaka I was privileged to tour a Toyota Assembly factory and along with other delegates, had face time with some management there. The conversation got onto ‘lean manufacturing’ (though some of us didn’t know it) and the question was asked

“How many days worth of stock do you hold?”          The answer startled many;

“Two days… a bit less”.

A phenomenal achievement in supply chain management considering I watched a Toyota ‘Yaris’ get assembled in 26 minutes. If Toyota (whom makes a car every two minutes) is able to reduce their inventory that much – why can’t you? You can! But you need some clever technology, some fresh thinking and very, very good suppliers.

Why go lean?

Stock on the shelves is cash tied up – cash that could be put to better use, even if it’s just in your bank earning interest. NB: For calculations around this, google ‘cash-to-cash cycle’ and see how it could help you.

Lean is less about urgent overnight couriers and more about good planning. To know what you will need you really need to understand where you are now.

Close the data-loop

Utilizing real-time integrated ecommerce and reporting systems will be a major step forward. Presume nothing, data is everything. Your biggest selling product may not be this year – as with your biggest client, and so on.

Online Access for Customers and Suppliers alike

You need to automate as much administration as possible. Firstly, get clients ordering via EDI or online – essentially you will be outsourcing your data entry to them. Make sure inventory information (as much as you dare show) is available to clients as well as suppliers. It can be hard to keep track of inventory levels and big orders from clients can wipe your QOH out. Make sure you have systems in place to vet unusually large orders. You would rather fill 100 client orders than 1 key-client order at a lower margin.

Allowing supplier’s access to your QOH makes them more effective partners. They want you to buy more – and therefore will ‘log in’ and check your stock levels of their own volition making sure you have what you need.

Good carriers. Make sure your freight partners have online capabilities and wherever possible, can integrate with  your systems. Time chasing parcels that have already arrived is time you don’t need to pay for.

Involve your staff

One lesson we should all take from Toyota (who took it from Henry Ford) is that there are golden ideas to make your business more efficient, effective and to lower costs, provided staff are encouraged to think about them and share.

By closing the loop from stock order, to client order, to dispatch and stock re-order you can work to refine your processes and learn from mistakes. With every repeating cycle it will get better, which is better for you, your customers and your bottom line.

3PL what is it and is it right for your business?

What is 3PL?

At the most basic level Third Party Logistics Providers (3PL’s) will look after your stock, receive it, put it away, store it and when orders come in they pick, pack and dispatch on your behalf.

Until the mid 00’s 3PL was almost the exclusive realm of large corporate, as the 3PL’s investment in storage space and infrastructure meant unless you were Nike or Coke… you weren’t worth it. However recent advances in technology (particularly ecommerce) coupled with increasing price pressure from large corporate has made the small-to-medium client market more appealing to 3PL’s. Online ordering now makes receiving orders from small clients the same admin cost as large clients, except small clients are happy to pay a ‘premium’ in comparison to penny-pinching margin-squashing brethren , not that you would know it. After all – it’s still much cheaper than renting a warehouse, installing your own racking and inventory systems, hiring warehouse staff and hoping to goodness you can keep the shelves full (but not too full) and the stock moving.

3PL’s allow you to take more (or less) space that you can vary with seasonal or economic demand fluctuations. Read; no more wasted rent! Most 3PL’s charge very little for storage and mostly make their money on activity (put away and send out) allowing businesses to adjust their overheads with their sales. This helps cash flow and profitability.

Is it right for my business?

There are two parts for this question – the first is are you ready? This is an easy overheads calculation. If you have outgrown your current warehouse (or garage for that matter) and are looking to expand, contact a local 3PL and see what it would cost based on your projections to 3PL your stock instead. You may find that your profit per item reduces, but you won’t be left scrambling to make payroll on a bad month because (in theory) you are only paying logistics overheads on stock you have actually sold. Most business’ would rather be in the black every month than having ‘over’ and ‘under’ months hoping that the ‘under’ months don’t happen too many times in a row or worse, around tax time.

The second part is what is your stock? I hate to say it; but if you sell anything fragile, anything that leaks, is flammable (or worse explosive), has a high theft rate (cigarettes, alcohol and anything made by Apple) or is of large dimensions (what 3PL’s call ‘ugly freight’) then it will be harder to find someone wanting to carry it.

If you are in the business of selling Jack Daniels filled porcelain missiles using iPhone guidance systems… you are probably out of luck. But if it’s any consolation; you are the kind of person I wouldn’t mind being stuck on a plane next to.

It is important to note that you must have some kind of automated link with your 3PL to realize full advantages. If there is none available (or offered) and you are manually emailing dispatch and receiving shipping advice, then they are not a 3PL, they are a ‘Warehouse Management and Distribution’ Partner  aka WMD  (you can see why this term has become unpopular). Using a WMD partner you may end up losing any efficiency gain running around finding lost orders and constantly checking inventory levels.

If you are lucky enough to have small to medium sized stock that is inert and stable; then take a look at 3PL – it could be the biggest benefit to your business since the internet.

Making it big overseas – Unlimited Magazine Article April 2010

By Pauline Herbst
Auckland-based software company XM Developments proves that two guys can still make it big from a garage

Moving boxes around the world is like manipulating a giant Rubik’s cube: everything has to be in the right place, at the right time or it becomes an exercise in frustration. The problem with supply chains is that it’s harder to manage stock when it’s scattered across several continents.

What’s needed is an effective online management system that takes the data from any warehouse and automatically pulls it onto a website. It took two Kiwis, Brooke Anderson and Blair Watkins, to make it happen. Plus a credit card, a strong sense of self-belief and a ridiculous amount of luck… (MORE)

NZ E-Commerce – at the tipping point

This article has just ticked over a year old – Wonder if the online stats will prove the theory?

10:42 AM Monday Nov 10, 2008 – NZ Herald,

Is e-commerce ready to become that cash cow that has been promised for so long? Photo / Jeff Brass

There’s a growing belief New Zealand is on the tipping point of E-commerce growth. One of our most experienced online retailers said:

“We are at a turning point and this year is going to be a critical one for us.” Richard Harrison, Woolworths E-commerce manager, (Herald, Feb 9, 2001).

Note the date – almost eight years ago – but you can hear any number of E-commerce advocates saying the very same thing today. By any estimate, online turnover has not reached even 1 per cent of total new goods retail sales in New Zealand yet. Why… ( more http://tinyurl.com/yfannfr )

Retail in 2015 – the commoditization of EVERYTHING

Article – DC Talk.co.nz

With 97% of internet users now researching online (http://tinyurl.com/ygkdoc6 ) and most deciding what they want before even hitting the stores, there are two deciding purchase factors at play;

Convenience vs. Price.

I will buy a cell phone charger today for $40 that I KNOW would only cost me $15 online because I need the damn thing… http://preview.tinyurl.com/yevjfg2

NZ Online shopping set to soar

NZ Herald – By Beck Vass -  Thursday Nov 12, 2009

Online shopping in New Zealand is about to boom to $1 billion a year but DVD rental stores, book shops and appliance stores may start to struggle, a retail consultancy firm has predicted.

In its November issue of Retail Examiner, RCG (Retail Consulting Group) states that books, stationery and appliances were popular online purchases in a trend about to take off even further.

Accpac e-commerce, XM Oxygen

http://tinyurl.com/yafv9vb

 

Integrated Commerce and wiring up boat trailers for friends

So I was on the couch, sore after a long day of awkward angles wiring a mates boat trailer up. Summer is almost here after all. My wife asked why my mate hadn’t gotten an electrician to do the job. He had, but after three hours they couldn’t get it sorted. We managed to… after about five hours.

My wife said “You’re always solving other people problems aren’t you?” and it struck me she (as always) was right but in more ways than she realised.

What XM does as a company is solve one big problem, a problem that effects all product based businesses – too much administration overhead tacked on to every sale. Be it ordering, fulfillment, stock control or customer services.

The less common solution we use is called ‘Integrated Commerce’.

In both B2C and B2B models, CRM and eCommerce systems lack the kind of cross-function visibility and information sharing that can drive greater business knowledge and performance. An alternative approach is required to bridge the gap between the two technologies. Integrated Commerce has emerged as the way for organisations to fully realise the benefits of both technologies.

Simply put; we are now at a technological stage where we can get all your systems to talk to one another in real-time without ‘human’ intervention and for fraction of the cost of five years ago. In fact the smaller you are the easier it can be.

We did this for Malcove Distributors and now they can process twice the volume of orders with 2/3 the man power. We did this for Nestlé and they saved an estimated $110,000 on printing costs last year alone.

Now we are doing this on a smaller scale with Target Furniture, Fashion Biz and a few more NZ companies who have agreed to be our guinea pigs. Possible thanks to some programming and networking breakthroughs from our development team.

We are now ‘pulling’ data directly from our clients accounting systems onto ‘out of the box’ ecommerce web pages. When their customers go to the website and order, they see their correct contract pricing and shipping cost for them. When they ‘place’ the order it drops straight into the accounting system, no manual order entry required. From there the customer is automatically invoiced and the order is sent to the warehouse for pick pack and dispatch. Once dispatched, the customer automatically receives an email notification including tracking number and link to the carrier’s website. They can also log in to see their current credit limit, pull out any previous invoices (web ordered or not) and check on who else in their company has ordered goods and where they are in the supply chain.

So let’s compare – with our systems there is no more manual updating your website with products, prices or information. No armies of customer services people keying orders, checking credit reports and running off previous invoices. In fact our clients have shown 70% less phone calls and 98% less ordering mistakes when using Integrated Commerce.

Conceptually this is not new, but the technology we have developed means now that this is not longer the exclusive tool of Forbes 500.

How does no money down and $500 a month sound? Wouldn’t you agree – that’s a big problem solved?

Accpac e-commerce, XM Oxygen

Guest Editorial – FTD Magazine

Petrol at $3 a litre? Thank goodness! I admit it’s easy for me to sit at my desk, located a mere kilometer from my home, and take the ethical high ground about the rising price of oil being a good thing. Within days of this being published, I expect an angry truckie to drive their semi through my wall for uttering such a comment.

Change comes from either pain or innovation, and prices at the pump of over $3 a litre suggest one hell of a lot of pain to me. (click here for more -http://www.ftdmag.co.nz/articles/oct08/articles/editorial.php)

Cheaper than China, bigger than Texas

Published June 2008 – FTD Supply Chain Magazine

Brooke Anderson, a director of XM Software, thinks one of the biggest opportunities for better New Zealand business is in supply chain technology. But he would say that, wouldn’t he?

Never call a software developer an IT guy – it’s like calling a Kiwi an Aussie. Let me state from the outset that I have nothing against IT people – quite the opposite. They are a crucial part of any operating company. That said, my opinion is there needs to be a change in the IT industry approach to supply chain and ‘integration’.

You may find this odd coming from a director of a software company, but let me explain. IT deals with ‘electronically enabling’ the current process, be it software, hardware or both, and implementing processes as business needs change. IT does not create anything new in order to solve a ‘new’ problem. Software development, however, does. It is the creation of new technology by looking at the entire process, refining it and sometimes removing the process altogether as it may no longer be necessary. (click here for more -http://www.ftdmag.co.nz/articles/June08/logistics/cheaper_than_china.php)

Endex Supply Chain and Logistics article

Most logistics specialists would welcome anything to ease the frustration of stock management. In the fast-paced world of supply and demand, chasing up stock reports and pinpointing at exactly which nook in the supply chain an errant stock line currently resides can eat up a great deal of time.

Fortunately, there is an easier solution to simplify life other than taking up the practice of Zen – it’s called XM Lava. Developed by Auckland-based start-up, XM Software, XM Lava is a new online ordering system designed to streamline the way companies access their stock, whether from their own warehouse, or – as is fast becoming the norm – from the warehouse of a third party logistics supplier (commonly known as a 3PL).

Click here for more…  http://www.endex.co.nz/article.php?id=859