What is the problem in logistics? I have the answer — and the solution!
How do I bring goods from A to B in the desired time? The answers I get when I talk about problems in supply chains and logistics are always different and, in my opinion, seldom the right one. In most cases the respondents refer to their specific field of expertise. I then learn that the challenges are transport, warehouse management, partners, or lack of transparency. However, I often feel that the big picture is missing when we discuss the question of why the transport of goods from A to B does not work as planned. And I think it does not solve the real problem when solving many symptomatic challenges. At Evertracker, we believe that you will automatically resolve the symptoms by solving the root of the problem.
Why ETAs are of little use
When I ask about the basic problem in logistics, I often get the answer that a precise ETA would solve the problem of transport and logistics — but in truth that’s not right. If I want to go to the theater at 8 pm and send a message to the theater at 7:30 am that I’m 10 minutes late, they are still not waiting for me. I have to be able to get there on time. This also applies to logistics. If I’m to deliver a product at 9 am, I’d better be there by 9 am, not sooner, not later.
The biggest challenge in working with supply chains and logistics is really understanding my customers and the value I add. That’s why I have to focus on my clients in all my work and keep every promise I make.
Why my wife is like a car manufacturer (I hope that somehow counts as a compliment …)
I like to compare the processes of a supply chain with my private life because I see many things in common. My wife and I have children. My wife works in an office, my children go to school and also have extracurricular activities. Keeping this ecosystem alive requires a highly efficient, standardized and reliable supply chain. It works because my wife retains control of all processes and meets the highest standards. It can be compared to the operation of an automobile manufacturer. As long as there is no dependence on external factors, the system runs smoothly. She has full control over every single step. However, my wife has implemented me as part of her supply chain and is now dependent on an external factor. To keep this system alive, it now demands of me that I live up to expectations and keep my promises.
But if my wife has to attend an event, the burden on the system increases. She can not handle both things in parallel because she can not take our children with her.
What every manufacturer has in common with our family logistics
We now have two options. For one, we can invest in a reliable babysitter, which increases costs. Second, I can take care of the kids while my wife is attending her business appointment. Both options are similar to a company’s supply chain.
A manufacturer in turn has three options to choose from. First, he can keep the process internal, which ties up resources and capital. Second, he can outsource the process step to a more expensive but highly reliable supplier or service provider. And third, he can choose the cheapest external service provider, which keeps costs down, but results in lower process quality.
In order to save costs, I take care of my children during the event of my wife. Now I am both supplier and logistics service provider. Production (Ok, that should not be the pet name for my wife but to stay in the picture…) has given me a specific time frame for delivery. For example, the earliest time of arrival is 6 pm because there is no one else to be cared for. The latest arrival time is 6.30 pm, because then my wife has to leave at the latest. This is comparable to a production process. Products can not be delivered before 6 pm as the gate is still blocked and after 6:30 pm all production will be delayed.
About transportation: Why delays never have anything to do with traffic
So, in order to to deliver on time, I need to know that the transport has no impact on the supply chain. What is the traffic at the time? Are there other incidents on the track that can lead to delays? If I do not reach the given time frame, then I started either too early or too late. Important: Both have nothing to do with traffic or unexpected incidents — it’s all about faulty planning.
Why is that. From experience / thanks to satnavs we know the time we need for a certain distance. And we know about construction sites that can lead to delays. We know about the weather conditions, rush hours and so on. Any delay that occurs depends on the risk I want to take. Did I deliberately allow only short time for my track? Did I include my internal processes? If I have planned the process correctly, I have calculated that I succeed in a timely delivery.
Manage all processes that lead to optimal down-time
The only control and steering mechanism that will reliably bring me to my home — or my products in the expected time frame to my customer – is managing all the processes that lead to optimal down-time. This is important, because I have the experience: The closer manufacturers get to completing their end product, the more control they have over the processes. But the further the completion of the final product is, the less control companies have over their processes.
So, considering my task I have to decide how much risk I’m willing to take. And I have to be able to handle the risks properly. If I start too early, I waste time on my production and will not be able to complete all the tasks. If I’m late, I’ll be late or cause high costs.
Even though steakholders are integrated, full control of the entire value chain is possible
And I have to include, in addition to the transport, another factor in my process planning in order to pick up my children on time: the stakeholders. To manage my on-time delivery, I start planning my day from the end of the process, that is, from 6:30 pm. What are all the tasks that I have to do this day? I know that I have to schedule 30 minutes for a call of 20 minutes. The same goes for the team meeting. But it is difficult to control these workflows because I depend on the different stakeholders. When a customer visits us, I am dependent on his punctual arrival.
That’s the problem of modern supply chains. Every step of value creation depends on many different stakeholders. And if one or more stresses the system too much, my actual promise to be at home — or to deliver my part of the supply chain on time — is not completely under my control. So I have to plan with larger time frames and have certain parts in stock. Which in turn means that more capital is tied up and costs rise. This reduces competitiveness due to high prices or leads to dissatisfied customers due to unreliable service offerings.
Companies must take full control of their entire supply chain
To stay competitive while satisfying customers, companies must take full control of the entire supply chain. They have to react flexibly to incidents and have to be able to control all processes precisely. They must be able to understand all sorts of discrepancies that may arise in the context of different stakeholders.
But today, most processes are very static planned and executed, which binds the working capital and causes higher costs.
Processes must become more flexible and controllable
The solution to the problem of logistics is that processes must become more flexible and controllable. Changing fixed and rigid parts of the process, such as transportation, does not solve the problem by just putting the service provider under pressure. Also, the problem is not resolved by sending updated ETAs to the recipient because they rely on a working workflow. If I send my wife an update about my delay, she will not be able to be on time for her business meeting.
That’s why we give our customers full control over the entire value chain
That’s why at Evertracker we give our customers full control over the entire supply chain and value creation. Again, the solution to the problem of logistics is to make processes more flexible and controllable. Therefore, Evertracker’s goal is not to burden the system any further, but to respond flexibly to incidents and changes. Our solution helps companies control the parts of their supply chain that they are highly dependent on to cut costs, free up working capital, and fasten the order-to-cash cycle. We believe that constant learning, understanding and precise control lead to greater competitiveness.
Want to learn more? www.evertracker.com
