Leading supply chain professionals gathered in London last month for the Extended Supply Chain conference with a programme that included presentations from supply chain award winners. Rosy Hill reports.
JCB’s general manager group transport & logistics, Joannes Van Osta, took to the stage at this year’s Extended Supply Chain Conference in London to explain the company’s strategy and partnership with DHL Supply Chain which saw it win the Automotive, Aerospace and Industrial award in the 2012 European Supply Chain Excellence awards.
JCB, founded by Joseph Bamford in 1945, is the largest privately owned manufacturer of construction equipment with 10,000 employees and 22 manufacturing sites around the world.
It has a range of more than 300 models and its manufacturing model is based on producing a wide range of products with different options but in relatively low volumes.
Its supply chain and sourcing profile has become increasingly global and diverse. In addition, the sales ordering process dictated the need for a reactive, flexible manufacturing and supply chain model.
“Our material management, collection and delivery of incoming goods was not fully engineered to support this business model and was put under review,” he said.
In 2009 JCB identified that its business model needed reviewing. It invited a group of potential partners to present their business to. After six to eight months of decision making, focusing on the business, legal and financial side of possible contracts, the company chose DHL, with whom it spent a detailed two months to complete a business case before signing the deal.
Van Osta said: “JCB Worldwide agreed that DHL Supply Chain provided the best solution to JCB needs, and understood best the uniqueness of our business.
“DHL were then invited to spend two months throughout the JCB business to construct a business case and identify the possible savings in using a lead logistics provider.”
The business case included measures such as involving all key stakeholders and all functional areas within the business, creating quality and comprehensive data sets to paint a full picture and proving their methodology worked to enable the complexity of the puzzle to take shape.
The partnership fully took off in 2011 which saw the business focus on the UK, with Van Osta explaining the key points to their joint approach: “Think big, start small, scale fast and keep it simple,” he said.
He said that the key points to a successful partnership were to understand company goals and objectives, to have a strategic vision and plan and, of course, select the right logistics partner.
Van Osta also suggested that other things to look out for were a properly structured contract with mutual continued benefit, senior executive support and involvement and careful attention to personnel issues, as well as near term financial justification and use of outside expertise.
General Mills, won the 2012 award for innovation in supply chain practice. Dave Howorth, supply chain director UK, Ireland & Nordics and Dan Woodhead, logistics manager UK, Ireland & Nordics, explained the changes to delegates.
The company trades worldwide with a broad distribution of ambient, chilled and frozen products with brands such as Green Giant, Old El Paso and Häagen-Dazs. It is considered the sixth largest food manufacturing company in the world and is seen as a medium-sized business in the UK.
Its factory in San Adrian, south of the Port of Bilbao, Spain, had a warehouse for overspill close to their facility. The plan was to move the warehouse north of San Adrian to cut the overall transport process by a week and to create value.
Howorth and Woodhead explained the main key challenges the company faced at that time, starting with cost inflation.
Other challenges the company faced included demand volatility with promotions being inherently more difficult to predict, requirement for greater responsiveness and sustainability which has remained top of General Mills’ agenda with the need to focus on value in today’s economy.
To address this, the company developed Project Together, which targeted innovation, cost efficiency, service and quality.
“Together started with two simple questions,” said Woodhead. “Are our containers full? And if we’re going to have to add storage shouldn’t it be in the North of San Adrian, on the way to the UK?”
General Mills changed the stock holding location which enabled the company to fill 26 floor locations by using double stack part pallets meaning an efficient load building with a mix of heavy and light loads.
The increase in load fill aimed to reduce shipments and was therefore seen as a long term robust solution for future savings.
The order lead time, newly reduced by one week, meant increased agility, better customer service and improved reliability. And changes in quality meant a reduction of inbound damages.
General Mills then teamed up with MacAndrews Shipping Line who it appointed as its contracted warehouse partner.
A 10,000 sq m warehouse was built 150km north of San Adrian, in Port Land, Bilbao. It has a racking design of UK and Euro bulk stack and took just under nine weeks to complete.
The new warehouse’s location enables the transport process to be cut by a week which sees environmental benefits such as direct delivery to customers in Ireland, reduced total shipments and reduced number of road shipments, saving 300,000 road miles.
In 2011 the company managed just over 25 pallets per container whereas they can now handle over 26, nearly 27 pallets per container.
Project Together also enabled a week out to be taken out of the overall transport process, making them less reliant on road loads, saving 2.5 million road miles per year and allowing them to deliver directly to Ireland.
“By changing our mind set throughout our project, it doesn’t stop, we can continue our innovation, said Woodhead. “In the last 4-5 weeks we have started trials in the new warehouse. It isn’t just about physical logistics but about a supply chain, there’s a real end-to-end supply chain feel about this.
“Short sea routes have replaced road loads and are a real innovation in the business industry.”
Howorth added: “In today’s economic situation, consumers are wasting less and volumes are down. They are thinking more about how they shop – online banking, convenience stores etc. They want to spend less but shop more often and use less fuel.
“Innovation isn’t just a good idea – it has to be delivered.”
The challenges & opportunities of building a consumer driven supply chain came under scrutiny in the presentation from Calum Lewis, operations director at toy manufacturer Lego. Lewis highlighted the fact that consumers are focusing more and more on price and value when choosing a retailer for toys.
And that inevitably increases the drive for cost reduction in supply chains, often with a short term perspective. In addition, he said, in the current economic climate with increasing retail competition, promotions and deals are now expected. That leads to more volatility in demand which in turn has an impact on the efficiency in the supply chain. Buyers are under pressure to increase margins – and a one margin point improvement could have a major impact on the bottom line. However, a simple margin focus did not take account of full value chain costs.
“I would argue that to support the commercial necessity of promotions while managing costs creates the opportunity for collaborative planning and working on a selective basis,” he said. Lewis went on to argue that there were opportunities for new ways of working but, he cautioned: “One size does not fit all”.
He identified different stages or levels of collaborative working:
– Planning:?joint business plans, shared forecasts, promotional plans, new product launches and so on.
– Inventory:? transparency on sales and stock in the chain, vendor guided or managed inventories.
– Synchronised:? true links between consumer demand and inventory/production at manufacture, so product made and flowed when needed to meet demand and within guiding parameters.
The approach needed to be tailored in terms of scale and capability, said Lewis. “Does the structure of the supply chain support effective supplier/retailer collaboration? Are supply chain processes across retailer and supplier aligned? Can they be in terms of deadlines and key decision points?
“Even if a retailer/supplier link has the scale, can this particular supply chain respond to information and demand with tangible impact?”
Looking at supply chain flexibility, Lewis said a key aspect to qualify and understand was the progressive importance of forecasts for decisions/actions in the supply chain and at what lead time do “important” forecasts need to be made – can these be matched with available information on demand and with retail planning cycles?
He also highlighted the importance of new ways of working tailored to individual supply chains. In the context of tailored collaboration then potential benefits can be targeted. “Commercial pressures dictate there should be clear benefits and within a defined timescale. However it should be kept in mind that collaborative working is not a quick review. There may be some areas of short term improvement but more substantial benefits are likely to take time and commitment.”
Lego choices in terms of supply chain design included: manufacturing close to market; design for commonality; lead time reduction; and postponement.
“Regional scale of operation means that many retail customers are served from the same distribution centre, inventory and production, so ‘synchronised’ supply chains are not likely. Efforts are focused on collaborative planning and vendor guided inventory with some VMI at the moment,” he said.
Nokia- Innovation is a supply chain issue
Ask anyone to describe the innovation process and what they come up with will probably involve a small group of boffins working isolation from the rest of the world. But the world is changing, as Kari Kulojärvi, senior vice president, smart devices supply chain at Nokia, made clear in his opening presentation at the Extended Supply Chain conference.
Nokia, until recently the most successful mobile phone maker on the planet, has had to restructure its business dramatically to take on the challenge of the iPhone and Android devices.
And as part of that it looked hard at the innovation process, concluding that this cannot be done in isolation – it needs the active participation of the supply chain.
Increasingly Nokia is seeking to collaborate with suppliers to innovate together. One of Kulojärvi’s goals as senior vice-president supply chain is now to help bring innovations into Nokia products.
Clearly, this raises a whole series of new issues for supply chain professionals, starting from: “How do I get suppliers to innovate for me and with me?”
Kulojärvi also pointed out that innovation introduces a host of risks – including technological, supply chain and ramp-up risks.
“We cannot use conventional supply chain tools to mitigate these risks,” he said. Holding buffer stocks and having alternative sources of supply simply don’t address the issue when innovation comes from one place.
Other mechanisms are required, he said, notably transparency in the relationship. “You have got to know what the supplier is doing.”
Social media- You are never too old for Facebook
Social media is becoming increasingly important to supply chain professionals, speakers at the Extended Supply Chain conference have revealed.
During a panel discussion at the conference, Roger Staplehurst, vice president in strategic supply chain at CSR plc, said: “You are never too old for Facebook or Twitter. Social media is important in the commercial world, more and more gadgets etc are coming out and you end up running blind because no one really knows about them.
“You need to become your own forecaster and research the products on social media websites. Comments you see on them give much more helpful information then press reviews or articles.”
Travis Perkins’ group supply chain director Robin Proctor and Oracle’s EMEA practice director Mo Khurana also spoke about social media being critical nowadays although Khurana pointed out that social media and new technology alone will not improve something, the people have to be able to use it.
Chris Poole, Diageo’s global customer service development director, said: “More savvy pieces of kit are coming out and customers are becoming more demanding.
“Companies and the economy are more competitive than ever and to create a faster supply chain we need the use of new technology, for example 3D images and 3D copy- some will take off, some won’t.”