Continuous Improvement for Logistics Management
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Logistics management is an activity that requires the logistics industry to always ensure that processes and costs can occur as efficiently as possible. On the other hand, continuous improvement is also a tough challenge for the logistics industry to achieve the expected effectiveness and efficiency in order for the business to run in a sustainable manner. Achieving this, of course, very much depends on accurate analysis. The need for accurate analysis can only be accommodated by the availability of valid data from which insights can be obtained based on such data. Therefore, data are a crucial component to achieve effective and efficient conditions in logistics process management.
Why is continuous improvement important for the logistics industry?
According to data from the Indonesian Chamber of Commerce and Industry (KADIN), Indonesia’s logistics costs reach 24% of the total GDP (Gross Domestic Product) or Rp1,820 Trillion per year. This cost percentage is the highest compared to other countries such as Malaysia at 15% and America and Japan whose percentage is below 10%. The logistics cost percentage in Indonesia also ranks the highest in the world.
So, what components have a large portion of the overall logistics costs? According to the Institute for Economic Research and Development (LP3EI), there are 3 main cost components that cause a high proportion:
1. Transportation costs of Rp1,092 trillion per year.
2. Storage and Warehousing costs of Rp546 trillion per year.
3. Administration costs of Rp182 trillion per year.
If you look at the performance of the National Logistics Industry, the opportunities for improvement and efficiency are wide open. If savings can be made (especially on the three cost components above), of course, it will have a good impact on the company, such as the affordability of product prices in the community. In the end, it will have an impact on the effectiveness and efficiency of the company itself.
How can continuous improvement be made?
Efforts to conduct continuous improvement can be made by implementing the Continuous Improvement Program (CIP). The CIP is designed with the main objective of achieving effective and efficient business processes. Kaizen is one of the strategies for implementing the CIP. This strategy is a cycle continuously conducted to make improvements to business processes.
One of the important stages in this cycle is the ability to analyze current business performance through existing data in the field. Actual and factual data are important to draw conclusions about the conditions of business processes that are happening today. The need for accurate data is crucial to producing reports that truly describe conditions in the field and also have an impact on the formulation of improvement strategies at a later stage. Therefore, the data obtained from the field should be data extracted from business processes without any intervention because the intervention in the data can hide actual events in the field. The solution that can facilitate such a need is to digitize the company’s business processes.
Broadly speaking, the Continuous Improvement cycle can consist of several stages:
1. Know the logistics performance conditions
Actual and factual data are important to draw conclusions about the conditions of business processes that are happening today. The need for accurate data is crucial to producing reports that truly describe conditions in the field and also have an impact on the formulation of improvement strategies at a later stage. Therefore, the data obtained from the field should be data extracted from business processes without any intervention because the intervention on the data can hide actual events in the field.
2. Involve all parties
The success of the CIP program depends on the awareness, involvement, and commitment of all parties involved. All logistics teams involved must know the main purpose of the CIP to be implemented and be willing to make the improvement strategy to be implemented successfully. When all teams have the same commitment and vision to make the CIP successful, all parties can run the program in harmony so that it will have a positive impact on the company.
3. Conduct an analysis of improvement
The next stage in developing a CIP strategy is to conduct an analysis of current business processes. The analysis can be done by exploring operational, financial, and other supporting data. Based on these data, we can make comparisons between current conditions and proper standards or targets to be achieved. This analysis process can lead us to possible problems and this analysis is very dependent on actual data in the field, so inaccurate data can increase potential misinterpretation of problems.
4. Develop a strategic improvement plan
After the problems have been identified, the next step is the preparation of priority scales. By setting a priority scale, of course, we can find out which problems we must fix first. Based on the priority scale, the formulation of various improvement strategies and plans can be designed. The improvement plan should also be broken down into small actions that can be executed by all teams so that its level of success can be measured through clear matrices. By preparing this matrix, all parties involved know what to achieve in the improvement strategy.
5. Execution involving all parties and Monitor the condition of logistics performance regularly
The execution of improvement plans for logistics management should be carried out by all stakeholders maximally. A plan that has been translated into the smallest unit of action will certainly make it easier to monitor the sustainability of the implementation and achievement of improvements.
In order to be able to continuously obtain data and information related to the implementation of improvements, of course, we need a dashboard that can provide an indication of the progress of improvements that have been made or are not yet appropriate. So, if there is a potential strategy that has not been implemented optimally, we can take preventive or corrective actions to make the improvement plan consistent with the targets that have been set.
6. Evaluate and Prepare Next Development Plan
Continuous improvement is actually a cycle that keeps turning. So that we can continuously evaluate the improvement strategies that have been implemented and reformulate opportunities for improvement that can have an optimal impact on the efficiency and effectiveness of the company’s business processes.
By running the Continuous Improvement Program cycle, it is hoped that it can contribute to reducing logistics costs. So that it can provide more benefits to the company and increase the company’s competitive value compared to competitors.
Continuous improvement programs can be seamlessly implemented by using Ritase’s SaaS Enterprise. To know more about SaaS Logistics and the features provided by Ritase by leaving your email address and telephone number on our web page or by sending an email to SaaS@ritase.com.
