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GLOBAL LOGISTICS--Logistics Transportation Distribution Consulting Services Shipping
GLOBAL LOGISTICSINFORMATION IS A KEY INGREDIENT;
June 1996By THOMAS CRAIG President LTD Managementwww.ltdmgmt.com
Globalization: When we use the term "Global", we talk about imports from Asia to theU.S.; we talk about exports to Europe; we talk about movements within NorthAmerica - and we talk about more; products, components and finished goods,which never touch the U.S. They move from a vendor in Singapore to amanufacturing plant in the Philippines. Or they move from Hong Kong toGermany. They move within Europe. Global supply chain. Worldwide logistics.Exciting and dynamic.With such a complex scope of locations, plants, warehouses, vendors andcustomers, the five key issues of logistics are especially critical withglobal logistics-- Movement of Product Movement of Information Time / Service Cost Integration--within your company between you and your customers and between you and your vendorsWithin these issues are additional influences and factors. For example,time zones. People in the Far East, Europe and North America are all networking at the same time. There is too great a difference in the timezones. This means there must be firm understanding of plans and strategiesby each element. Or, there are cultural factors. Different cultures viewand understand business topics differently. These understandings and theircomp- lexities can compound if the strategies and plans for doingbusinessare not the result of collaborative effort with input by all groups.Plus the company is very decentralized. Different global areas have to meettheir own needs, yet must work together to share product and information tomake it happen.All this comes into play, for example, with air freight forwarder and oceancarrier selection. Given the needs of all parties as to cost, availabilityof space/equipment, responsiveness and delivery/cargo release, a pool offorwarders and carriers can be selected. Primary and secondary designationsare assigned for the respective origin-destination lane. But if specialsituation arise, the origin plant should be given the flexibility to useother than the primary forwarder. He must stay within the list of approvedforwarders. Yet if special price, space or other matters develop, he has theexplicit approval to make changes. He does not have to wait to contactsomeone in the U.S. or other location.Or, conversely, instead of price, he must understand when service isrequired. Service does not mean getting it on the plane. Service meansgetting it delivered within the time demanded. A great rate is not good ifthe shipment does not arrive in time. Or delivering the shipment via adestination airport which delays actual door delivery is not acceptableeither. Everyone must understand the responsiveness and adjust as circum-stances dictate.This is just discussing shipping in the global company. Doing it requiresintegration, information, transfer of product, service and cost. In otherwords, logistics. Change, and responding to them, as to service or costshould be recognized in the information, data and communication used amongthe regions. It takes more than late night phone calls and faxes.An Example.Maybe the best way to discuss global logistics is to work through ahypothetical example. You are the worldwide director of logistics for apersonal computer manufacturer, Nittany Computers. (We will give adisclaimer here that this discussion does not knowingly reflect or is itbased on any computer firm now in business. But the additional complexitywhich this product has adds to the illustration.)The sales plan for the fiscal year is built--for each quarter. It reflectsthe input of the sales people throughout the U.S., Canada, Europe and otherregions. While "a rose is a rose," a PC is not quite a PC in global sales.There are differences as to size of memory, speed and other features. Thesefeatures may be similar within certain countries. One country may have ahigher demand for CD-ROM's than another. Or one may require more unitswith modems than another country usually does. Adding to the differencesand product options is a basic component - the computer keyboard. Differentcountries use different keyboards.This reflects alphabet/language, currencykeys, even the number of keys on the keyboard. So if our company here buildstoo many of a model which does not sell well in the intended country, thenthe cost for returning the excess units and reconfiguring them for anothercountry's needs can be time-consuming and expensive. It must be done right,the first time.From the sales plan, the Operations group gets together. First amanufacturing build plan is started. Let's say that Nittany Computers hasplants in the U.S., Germany and the Philippines. And from this comes apurchasing plan so that the components arrive. Their vendors are in manycountries, and are especially located throughout Asia. Inventory reportsmust be accurate for raw materials, work in process and finished goods. Plusthe logistics plan which must support both the build plan and the salesdelivery plan. Logistics runs from vendor shipment to customer delivery.For cost reasons, the basic PC units are built at the plant in thePhilippines. The units are sent onto the warehouses in Europe and the U.S.Units requiring special upgrades and configuration are sent to the plantsfor additional, specific work.With the continuous changes evolving in the PC market, the sales plan, whichis actually developed in the prior quarter, can change. The changes flowthrough to the build plan, purchasing plan and logistics plan. This meansthat finished units, built in Asia, must be reconfigured when there arechanges. Additional components, including keyboards, must be ordered anddelivered in time to the plants. Flexibility and responsiveness are arequirement of these plans. And Purchasing and Logistics have worked closelywith their key vendors, carriers and logistics providers to develop the planreflecting each group's abilities and needs. The plan is shared readily as aworking document and is integrated into everyone's operating plans. Time forshipping, customs clearance and delivery is incorporated.To have thisresponsiveness, while managing costs, the logistics plan for the shipmentsfrom the Philippines to Europe and the U.S. is multi-modal. During thequarter, Nittany ships to Germany via sea freight. Sales build during thequarter. Given existing inventories for components and finished goods, whichwere part of the plan for the prior quarter, there is time to send the itemsvia ocean.Then as the sales and build plans change during the quarter, Nittany shipsto Europe now via sea-air. This reduces the transit time with ocean, yet isnot as expensive as air freight. Then as the quarter starts to close,demand breaks loose. Time is urgent. Now Nittany ships its units via airfreight. They did similar with the U.S. requirements, shifting between seafreight and air freight for the units.To have this responsiveness, while managing costs, the logistics plan forthe shipments from the Philippines to Europe and the U.S. is multi-modal.During the quarter, Nittany ships to Germany via sea freight. Sales buildduring the quarter. Given existing inventories for components and finishedgoods, which were part of the plan for the prior quarter, there is time tosend the items via ocean.Then as the sales and build plans change during the quarter, Nittany shipsto Europe now via sea-air. This reduces the transit time with ocean, yet isnot asThis process takes its toll with freight costs, inventory levels,manufacturing, sched- uling, vendor capabilities and more. No matter howresponsive Operations is, there are inherent delays from the time Salesrealizes that their sales plan must be changed through to the changes beingmade and flow through of those changes to Planning, Manufacturing,Purchasing and Logistics. So the Operations group sits down to see if itcan improve the time it takes, reduce costs, including inventories whileadding to its ability to be flexible and respond to changing countryrequirements during each quarter. They look at the cost and time requiredto accommodate the sales changes, and at the inventory at the end of eachprior quarter, both component and finished. They also look at how muchrework they had to do reconfigure units from one country version to another.This impacts ability to meet sales and costs. Then decide to take a blanksheet of paper and see what they can develop collectively as a team.Vanilla Strategy. From the teamwork, they develop the Vanilla Strategy. (You have to givethese things names. Not sure why, but you do.) The key aspect is shippingpartially made units -vanilla models- to the plants for final assembly.Shipping the basic models this way creates cost and time savings andpostponement manufacturing to reduce inventories and create value-added.If a country has clearly demonstrated a strong ability to accuratelyforecast its sales requirements, a certain portion, say 75%, of theirfinished product will be sent to them from the Philippines and will arriveper the work week sales they planned. It will not go to the plant in Germanyor the U.S. This will save cost and time. But if a country is not very goodat forecasting, it will get a lesser portion, say 25%, of its quarterlyrequirements direct from Asia. A country which is good at forecasting mayget 50% ofits requirements directly.Then for the remaining units, Vanilla kicks in. This means units will befinished at the higher labor cost plants in Germany and the U.S. However,there will be freight savings by shipping the partially-compl- leted unitsin the special, reusable pack. Nittany will be able to get 250% more unitsin an ocean container that it can with the finished units. This offsets thelabor. In addition, there is less need for air freight.As part of the program, the plant in Germany will print keyboards. Ratherthan buy finished keyboards from the supplier's facility in Malaysia andthen having problems if the various country requirements change, they willbuy mostly blank units. This improves their responsiveness to sales changes.In addition, they are able to reduce inventory by 20%. In addition, theGerman plant will supply the country's weekly requirements within 48 hoursof its request.Not bad. Logistics cost savings, less rework, lower inventories, less hasslewithin the company and with the suppliers. Better sales responsiveness andmore sales. Okay, end of example. This did not cover every aspect withglobal logistics, but hopefully it gave you some understanding, especiallyas to the five key issue of logistics. There is movement of product,movement of information, time/service is important, as is cost, and there isintegration.World Wide Web/Internet.Global logistics is dynamic, not only in what is done but the way it isdone. No where can this be better illustrated is with the technology and themovement of information. Text and spreadsheets can be moved betweendifferent departments and companies via E-mail. Even freight booking andmanagement is going hi-tech. There is a new web site recently developed byNet Logistics in alliance with Microsoft. Its address is http://www.wwship.com. This is a new, pioneering and exciting way forlogistics users and providers to find, gather and exchange information. Adatabase; book shipments; obtain rates; global E-mail and more. Electronicglobal commerce. The potential is unlimited. Timely, cost effective andglobal. It will significantly aid global logistics.
Top of Page
.
No where can this be better illustrated is with the technology and themovement
of information. Text and spreadsheets can be moved betweendifferent departments
and companies via E-mail. Even freight booking andmanagement is going hi-tech.
There is a new web site recently developed byNet Logistics in alliance with
Microsoft. Its address is http://www.wwship.com. This is a new, pioneering
and exciting way forlogistics users and providers to find, gather and exchange
information. Adatabase; book shipments; obtain rates; global E-mail and more.
Electronicglobal commerce. The potential is unlimited. Timely, cost effective
andglobal. It will significantly aid global logistics.
Top of Page
Global Logistics
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