The theory is easy: the right part, the right place, the right time. But achieving that takes real expertise, as a panel of industry leaders made clear at our round table sponsored by Unipart.
In an industry where the sole aim is to get equipment and services to the right place at the right time, every aspect of a supply chain must be looked at. From inbound, to outbound, and aftermarket supply chain demands, this isn’t just logistics, this is mission critical logistics.
“A lot of people are talking about mission critical logistics,” said global logistics director at Unipart Logistics, Bernard Molloy, when he kicked off our round table. “People nowadays are not only much more risk averse, but fashions have changed substantially, compared to 20-30 years ago – the UK now has a very different set up when it comes to logistics.” Indeed Mike Varnom, managing director of aftermarket logistics at Unipart Logistics, has worked across various industries, and seen these changes for himself.
Varnom is now responsible for Unipart’s automotive industry clients, but had previously headed the company’s supply chain consultancy practice, and worked with many retailers.
“It has all changed and it is still all changing, he said, the world’s changing with growth in the emerging markets – China, Russia, India – it’s adding a lot of complexity into supply chains. “But then, there are the new emerging markets as well, and some of those customers are probably even more demanding than some of the customers here.
“Customers in general are becoming more demanding, and it’s really important for us to be agile enough to be able to not just meet, but exceed these customers’ needs going forward.
“What we try and do at Unipart is not just look at one aspect, or function, of the supply chain, but focus on optimising the whole end-to-end supply chain – it’s a real critical aspect for us.” General manager of global logistics and genuine parts at Triumph Motorcycles, Paul Checkley, agreed. He said Triumph’s approach is ultimately about satisfying the customer.
“Everything we gear around is about making ourselves easy to trade with – taking the hassle out of buying and owning a motorcycle for our customers,” he said.
“All of the focus, particularly in aftersales, is all about the consumer and the finished vehicle, so that’s looking at getting the finished vehicle at the right place at the right time.
“People don’t wait three/four/six months for a motorcycle, as they would for a new motorcar – we make a leisure product, not a mode of transport. If it’s forecast to be a nice March, for example, people will go to their dealers and buy the bike they want then and there. If they can’t, they will go and buy the product elsewhere.
“It’s very demand driven, and very much focused on the end customer, even though we’re not a retailer in the dictionary sense of the word, everything we do is geared around supporting that retail transaction.” But with the advent of new technologies and the ability to track and trace parts throughout the supply chain, has Checkley seen a change in the way Triumph works? He believes retail leads the game there, in particularly online retail.
“But it has a strong influence on us, with people demanding visibility. New technology is very much to the full, and as e-commerce becomes more important, it does become more of a pressing issue. ”We have an e-commerce presence in North America, but we don’t have an official one elsewhere yet, although that’s something that will come, with technology and visibility being at the forefront of that.
“All of these things are pushing our industry, the expectations of the consumer, and motorcycle consumers are quite demanding, but it’s a push and that push is good.” On the topic on new technologies, Molloy said he sees track and trace as critical within the end-to-end supply chain.
But this depends on how well your track and trace works, said project procurement manager FPSO Topsides at BP, Andy Dovey.
“You can track and trace in the warehouse – that’s really easy,” he said.
“The point is once it leaves the warehouse and is in transit to wherever it’s going – do you know exactly where it is? A lot of the time we lose that ability to actually track it.
“The equipment we send out, we now track via satellite, from the moment it leaves the suppliers, until it’s received, so we know where every single part is in the transit route. And that has been really quite critical with our contractors.” Equipment Dovey explained that BP use RFID to identify what exactly is in a specific container, because it is impossible to install a GPS on the millions of small parts they offer.
“These small parts are normally offshore or industry type equipment, we could be talking something that’s worth £30 million, or something that’s worth a few hundred. So depending on the size, we would use RFID.
“For that we would identify exactly what’s in the case, so we know every single part, quantity, all the details, and we would track that through the system. If we ship that abroad in a container, we install GPS on to the container, so we know which vessel the container has gone on.
“Exactly the same goes for large equipment; we’ll put a GPS on it, and track it on satellite, so we know exactly where it is.
“The key issue we have is that once it goes in the hold of a ship, you lose the GPS. So we then track the ship until it arrives at the port – As long as we have the processes and the training in place, the rules that tell people what they have to do, we can track anything anywhere.” But Will Winder, sales director & head of emerging sectors at Unipart Expert Practices, questioned how exactly you would manage products that might disappear through the supply chain, such as an oil tank going through a desert.
“I suppose it depends on how much you want to invest into the subject,” said national logistics manager at Vaillant Group, Bob Hitchcock.
“We spent some time studying it and realised that for our market, going through a merchant route, there is no demand from the merchant for this technology, but it is important for us as a company, as we want to know where our products are. ”So we were able to justify an investment in an internal RFID project, not for the track and trace benefit, but for the retention of title benefit. For example, if we can say this very product, which a person (the merchant) has purchased on terms, hasn’t been paid for yet, then from an insurable risk point of view, it helps to raise the amount of credit.” Andrew Maclagan, director of UK procurement & interpart at BAXI, pointed out that any investment in new technology is a strategic decision.
“Successful logistics starts with clear strategy; are you there to have operational efficiency? Are you there to have customer intimacy? Be clear on your strategy, then you can communicate to your business what you’re trying to achieve and hopefully it will follow.” But Atty Hussein of Fortnum & Mason points out that the ambient and perishables sectors handle logistics in a very different way.
Director of retail and operations there, Hussein said: “Fresh food is directly delivered into the store, and with fresh you have all the problems of temperature control, storage, and all year round that is manageable, but when we get to Christmas time it becomes a completely different operation.
“Some of our suppliers will deliver to us three to four times a day, that’s not a problem, but with our Irish suppliers, for example, we take one big hit, and then get into a completely different conversation about dates, because you want product on your shelves that is going to last until Christmas Day or Boxing Day.” Although fresh is a completely different ball game, Hussein explained Fortnum & Mason has the luxury of having five restaurants in its store, in which the company can make use of short date stock.
So these five restaurants in fact become customers and help the company reduce its waste margin.
“The menus in our restaurants therefore reflect what we’ve got in stock at the time,” said Hussein.
“The idea of the Gallery Restaurant, for example, is that any ingredient used there you can buy within our food halls.
“Then when it comes to ambient foods, we put the responsibility on the supplier – it’s up to them to deliver. They deliver to our Cambridgeshire distribution centre, which is third partied out to iForce, and as soon as a trailer’s booked in, iForce has 48 hours to get the product onto our shelves.” Time is a critical factor in a lot of operations. Global head of services delivery and operations at Electrocomponents, Anne Bruggink, said: “Although in a lot of occasions 48 hours is fine, sometimes you want to push something through a quicker channel.
“In the past we’ve had internal replenishment, we went to 48 hours, but also created an eight hour quick-channel, in a different order time, so we can short track through the doors and through the system.
“Lately we’ve been pushing cut off times, in the UK our cut off time is now 1am, with Parcelforce still delivering next-day throughout the country. Our customers didn’t ask for it, but it’s something we can add for free and is helpful to them.” Bruce Taylor, head of operations at Nissan Motor Parts Centre BV, said in any business you must focus on your customer, even when you are looking at new ways to improve the company itself, the customer must always be key.
This operation supports dealer networks for Nissan and Renault.
“We’re now expanding the transport leg of our business and I think that’s quite important – more than 50 per cent of our business costs are in outbound logistics.
“For us it’s all about maintaining high levels of service. It’s about staging everything in the supply chain and having it where it should be, so that when the dealer demands it, they can get it.” Taylor said that when taking on any project within a company, you must always ask yourself what is the benefit of it to your customer.
“What we feel is the right thing to do is to balance the cost of operation with the service provided, and you have to take both things into account, because it isn’t always the case that you invest heavily in your supply chain to get that higher level of service,” he added.
Bruggink agreed, pointing out that the important thing was service and value for money.
“We believe we should give the customer a choice – the customer knows if they’re in a hurry or not. But this has to be a relevant choice – that means both online and real time systems, excellent links with transport providers, and that’s something we’re working on, to become more relevant and show people they are paying for value.” So to what extent is the supply chain now becoming part of what you need to retain a customer?
Chairman of the event, and editor of Logistics Manager, Malory Davies pointed out: “It’s no longer just a matter of what a customer will pay for a service, it’s the fact that it’s now so easy for a customer to go somewhere else, e-commerce is at a push of a button, you don’t even have to walk next door anymore.”
Hussein explained some of the measures put in place from a retail point of view: “We’ve introduced nominated days and same-day delivery services, and are now also delivering products to people’s workplaces around London. “In the capital it’s very rare to have a home delivery address, so we’ve introduced things like the electric van, and we’ve now got two bicycles.
“Sometimes the cut off is 2pm that day, so if they choose a nominated day, we’ll deliver it early, and if a customer’s just around the corner, they have this pleasure of ‘wait a minute, I’ve just ordered this’.”
But in terms of customer satisfaction, Hitchcock said: “We have two customers, who represent about 75 per cent of our business, and they’ve both invested heavily in distribution, but they recognise the challenges they have internally, so we go to meetings with them to discuss things that we can improve together.
“Neither of these two companies has yet invested in RFID, because they are not ready to do it. But ours is very much a customer orientated business, so as soon as they are, telephones will ring. ”We can do things that benefit our end, but if the customer doesn’t want that, why add cost in unnecessarily?”
Checkley highlighted the importance of understanding the circumstances of your customer. In recent years Triumph has launched in Brazil and India which had offered different challenges that needed to be addresses. Hussein touched on how Fortnum & Mason deals with the return processes abroad.
“At the moment we don’t do freepost or anything like that for any returns, which works in our favour because people will think twice about sending something back,” she said.
“If it’s a quality issue, we’ll pick up that cost at some point, in terms of refund, but there aren’t a lot of returns from the international market, unless of course we send over a £10,000 safe and it gets there and the door is not working.
“There have been times where we’ve sent someone out, because it’s quicker to send the supplier out to go and fix the safe than get it returned, plus the chances of it getting back to you in one piece, without just the broken door, are low.
Relationships “But the returns in the international market are nowhere near those in the UK.” BAXI of course, does not have to deal with returns, but it still has overseas relationships in terms of manufacturing. Maclagan said: “We tend to assemble our products in the UK, but what’s actually manufactured here is about 15 per cent; in Western Europe, it’s something like 60 per cent; and then beyond that, in Eastern Europe and the Far East, it’s around 40 per cent.
“When looking where to go for a supplier, it’s not quality as in making good products, it’s the technology, it’s the skill set, you have to go with the skill set of suppliers, wherever in the world they may be.” Forecasting is the key to unlocking the magic door though, according to Checkley: “Everything you do with logistics complements a good forecast.”
“Forecasting is the big challenge for us, you talk about seasonality and trends, and we often get sectioned in with the big automotive guys, but I’d argue the car industry has a relative stability compared to motorcycles.” On the topic of forecasting Varnom said: “You really want to start that from the customer’s perspective, get access to actual customer demand and pull that through.
“Unipart has developed a system to help dealers manage their inventories, because when we deliver 80-90 per cent visibility, the dealers were only given 50/60 per cent to their customers, and they were doing that with twice as much inventory as they needed.
“If you can get customer demand and then flow that through the supply chain, it helps the forecasting so much.” Explaining the system, Molloy added: “We have created a platform, a global control centre, so it starts with forecasting and scheduling, it looks at what’s in production, it looks at what’s in packing, and it looks along the whole supply chain.
“Individuals have responsibility for forecasting and scheduling, they have responsibility for transport, but with this platform they can view where things are.” So with visibility being critical, and having to focus on what’s important for the customer, you have to ask yourself; are you really delivering what the end customer wants? “It’s scale,” said Hitchcock, “you can open doors using logistics channels.
Originally appeared in Supply Chain Standard, April 2014