Supply Chain Efficiency Gets A Grilling
All You Really Need To Know About Transportation, You Learned At Your Backyard Cookout
Imagine for a moment that you’re planning a family barbecue gathering for the upcoming Memorial Day holiday.
You ask your spouse to go to the grocery store and pick up some steaks. Next, you direct your son to go to the same store and buy some fresh corn. Need some beverages? Your brother can go to the supermarket and grab a few. The menu proceeds through potato salad, onion rings and dessert—with each one delivered to your backyard by a separate family member.
Okay, that’s ridiculous. No one organizes a party that way. Instead, they make a shopping list and send just one person for everything they need.
Why, then, do manufacturers put up with that kind of disjointed logistics for their inland deliveries? At Morgan, we’re in the business of transforming supply chains—finding ways to lower cost and raise efficiency. Increasingly, we find ourselves reviewing transportation models in which every overseas supplier routes its freight independently along the highways to final destination as part of door-to-door service. Often, they’re moving to the same inland destination from the same gateway.
That means if you have five international freight forwarders, each one is arranging for its own truck to drive to the same gateway. One truck brings a pallet of resin. Another brings three pallets of PC boards. A third truck delivers chassis. Pass the potato chips and hot dogs.
That result is obviously less cost efficient than a coordinated truckload of freight from gateway to destination. But there’s more: All those deliveries create dock congestion. And, there are more transactions to manage and track.
In a world with increasingly volatile spot-transportation rates and availability, creating fixed transportation networks adds cost certainty and reliability, where regular volumes allow. Coordinated ground networks also enhance security, quality and control.
All this might seem like common sense, but it’s surprisingly tricky when inefficiency gets buried inside layers of service levels and contracts. That’s why two of Gartner’s Top 10 Global Manufacturing Supply Chains rely on Morgan to grill and transform their supply chain practices. If you’re ready to turn down the heat on your own transportation operations, let us know. We’d love to review your current system and see if we can help.
Heard On The Dock
“It's shocking to me how much I have learned [this year] about the supply base.”
-- Jim Farley, CEO, Ford Motor Company
While You Were Shipping…
More Recent Stories You May Have Missed That Caught Our Eye
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"Our cloud-based platform connects all partners of the supply chain with real-time Internet of Things sensors for active condition monitoring," said John Hoyt, Managing Director of ChronosCloud. "ChronosCloud actively responds to any temperature fluctuations, so shippers can ensure continuous quality. This powerful platform plays an important role as a part of Aon's vaccine delivery initiative."
The Problem With Packaging (Modern Retail, tiered subscription access) As e-commerce grows, so does cardboard waste. By 2020, more than 3 billion boxes were delivered along with their contents just for the holiday surge period. Now, startups like Boox are taking up the challenge to reuse and recycle the boxes behind the direct-fulfillment revolution.
You Can’t Spell CEO without S-C-M (Supply & Demand Chain Executive) Time was, CEOs came from revenue or finance roles. According to a Forbes 2000 survey of CEOs shared by SDCE, it’s becoming more popular to recruit bosses who have both finance and operations experience, especially supply chain management. Said former Accenture Strategy’s David Axson, “What seems to be happening is that a lot of CFOs are now being given operational responsibilities. So, they are moving out of the CFO suite and heading a line of business that is complementing their CFO skill set with a business leadership skill set.”
Manufacturers Put ‘Just In Time’ On The Shelf (Wall Street Journal; subscription access) More global manufacturers are shifting supply chains away from ‘just in time’ plans, according to the WSJ. “The just-in-time model is designed for supply chain efficiencies and economies of scale,” Nissan COO Ashwani Gupta told the Journal. “The repercussions of an unprecedented crisis like COVID highlight the fragility of our supply chain model.”
The lesson is being learned from more than just pandemics. February’s historic Texas snowstorm disrupted a refinery that makes 85 percent of the resins used in everything from car bumpers to steering wheels and seat foam. As the story points out, it’s hard to sell a new car without seats.
Other auto execs like Ford CEO Jim Farley agree. “Most other industries use safety stock for critical components like chips,” he told an audience recently. “And many of these companies pay for chips upfront, years and years ahead of capacity requirements. It’s shocking to me how much I have learned [this year] about the supply base.”
Adds Bindiya Vakil, CEO of supply chain risk software provider Resilinc, “Time and time again the stuff that brings us to our knees is not the expensive stuff. It’s the tiny stuff we don’t manage closely.”
