Supply Chain Brain

Supply Chain Management
Done the Holistic Way

You can indeed unlock the cash in your supply chain, Hogg says, which must come as welcome news in this economy.

For instance, seldom has there been a better time to utilize lean concepts to identify waste. A careful continuous improvement effort can drive out costly layers of non-value-added business processes. And three other areas of your supply chain could likely use some optimization analysis: finished goods inventory, freight and packaging.

Hogg says he works on a gain-share basis. He takes a sample of clients’ inventory, freight or packaging spend, analyzes them at his expense and works up a recommended improvement initiative.

Some clients have saved as much as 18 percent in inventory costs, says Hogg. Fluctuating fuel costs, among other factors, affect the freight side, so careful analysis is clearly called for there. Decisions affecting packaging cannot be made by one department alone. A truly integrated approach that aligns each business unit that “touches” packaging can lead to ideal box sizes, greater payload per pallet, and space utilization in the warehouse and on the trailer.

Hogg says savings of 10 percent or more in packaging are quite likely with the proper optimization analysis.

As for green initiatives, Hogg notes that while many companies don’t launch such programs because of the costs, many do because they feel such projects will in fact save them money in the long run.

You should carefully pick your green projects, he advises. Where it may be prohibitively expensive to build a new warehouse from scratch in accord with the latest environmental rules and regulations, it may be easier to start with consumables where very little capital is involved up front.

“The supply chain is about reducing costs,” Hogg says, “but you have to look at it holistically.”

Lean manufacturing, business process design/

continuous improvement, and supply chain opti-

mization are the key money-saving components

of holistic supply chain management, says John

Hogg, president of Straight-Forward Consulting.

To view this video interview in its entirety, visit www.SupplyChainBrain.com.

Ocean Shippers Leverage
Dynamic Rating Environment

The advent of confidential rate negotiations

in the ocean freight arena and of a more

dynamic rating environment overall have

increased the need for shippers to use technol-

ogy tools that can help maximize savings

opportunities, says Martin Hubert, president

and CEO of Freightgate.

Hubert’s company provides on-demand software solutions to manage freight contracts as well as rating, routing and scheduling of transportation.

Because Freightgate’s solutions follow the entire logistics management lifecycle, “we are able to see all the various trends in the market,” says Hubert. “We have helped many of our customers rationalize their rates and the dynamics of those rates over the last couple of years.” Surcharges have become very dynamic during that time and differ vastly from carrier to carrier, he says. “It has become imperative to take these charges into account when making decisions. Just looking at the pure ocean transportation rate alone will give you an erroneous picture of the best way to ship your cargo,” he says.

The current economic downturn has made the rate situation even more dynamic with some providers actually lowering rates and charges in order to attract or retain business, says Hubert. “Space on a ship is like perishable inventory for ocean carriers,” he says. “Once a ship has sailed that inventory is lost forever. You can’t put containers on a ship after it has gone.” As a result, says Hubert, “we are seeing some tier-one carriers, which traditionally competed purely on service and charged a premium for that service, now undercutting tier-two carriers on price.”

Moreover, he says, recently Freightgate has seen some shippers take aggressive steps to ask carriers to revisit contracts more than once a year, while some carriers are attacking the rate issue proactively. “The situation is becoming much more dynamic and that requires dynamic tools to help make the right routing decisions,” says Hubert. “You can’t just distribute a static routing guide anymore.”