How to carry lean management in logistics and supply chain

Gasgoo.com: What are the inefficiencies in logistics and supply chain management of China’s auto industry?

Roger: Some challenges that lead to inefficiencies are transportation bottlenecks, such as capacity of roads, railways, and ports. Another biggest will be a lack of developed IT system. In lean supply chain, we want to achieve full and accurate visibility of where the inventory is at all points so we can stop problems as they occur. Supplier dependability and not meeting quality standards, fragmented carrier base, tariffs, tolls, and provincial red tape, all of these can lead to higher logistics cost as a percent of total vehicle cost. Difficulty to implement planned and level loaded JIT systems with scheduled deliveries and window times, and insufficient real-time problem exposure and resolution – leads to fire fighting.

Also much like what we see in the United States, full visibility to real-time supply chain information is an issue. We want to make daily logistics and supply chain decisions based on their impact to total logistics cost. This can be quite a problem if our organization is not set up for cross-functional collaboration and information sharing. Also challenges are created when our performance measures are functionally based as that can have a negative impact on the system as a whole.

Gasgoo.com: How to carry out lean management in logistics and supply chain?

Roger: To begin with, we must have the right supply chain vision and strategy deployment process in place. All of our daily work should be aligned to execute that vision. We also need to expose problems daily and engage all stake holders to solve those problems through a disciplined PDCA process. It is important the we have the right KPI’s and metrics to prioritize out problem solving activity, fill-rate, quality, on-time performance, efficiency such as cube utilization, and total cost. Most importantly we need to ensure we are learning every day. The infrastructure and operating climate in China will require companies to be quite innovative in their logistics strategies.

Gasgoo.com: What are the main challenges in logistics management of the auto industry? How to overcome those challenges?

Roger: Traditionally a lot of companies are not sharing the right information according to different supply chain functions. We must make sure that our process is set up so that we are able to communicate between different functional areas. A lot of the automotive companies have grown up that they are functionally based. We need to find ways to make all information available to make the best decisions.

Economies of scale pricing from logistics partners and suppliers provide quite a challenge here. To avoid the batch and queue mentality and make materials flow without stopping until the point of consumption, we must work with our vendors to help them support us in our endeavors to move smaller lots (batches) more frequently so we can maintain a just-in time inventory strategy. As inventory is a function of lead-time, this will help us increase velocity and respond with more agility to changes in the marketplace. Milk-run routing and efficient packaging design can help us overcome economies of scale pricing from a transportation standpoint. They will also have positive impacts to level loading operations.

Gasgoo.com: Supply chain management in the auto industry, especially in international purchasing, is more complicated than in other sectors. How to overcome the difficulties in auto industry logistics? Is there any good solution?

Roger: First off we need to make sure we are making the right purchasing and sourcing decisions. We need to measure these decisions with their impact on Total Landed Cost. Many companies are not doing this at all or are doing it with very simple models that leave out critical factors.

Some of the soft costs that are rarely considered are impact to unplanned freight, INCO terms, exchange rates over time, accessorial charges, cost of building relationships and supporting collaboration, and learning curve (quality and stability). The challenge is this type of analysis can be quite time consuming and these inputs need to come from many different stakeholders. Our processes need to be set up so this information is available quickly and we should build the right models to automate this work on some level so these decisions can be made with minimal effort. If companies can do that they stand to benefit greatly from a financial standpoint and achieve supply chain stability and real time visibility.

Gasgoo.com: As we all know, you have done logistics analysis for Toyota, GM and Suzuki. What are the similarities and differences in logistics and supply chain management between those enterprises?

Roger: There are similarities in some of the ways they plan and all are typically using lean tools. The biggest difference is the level of the problems solving. It’s more of the culture aspects. You know it’s one thing to understand those tools, it is another thing to understand the thinking behind those tools. They must make sure that they are getting better and learning everyday so that they could understand their problems occuring on the daily base and working with their supply chain partners to solve those problems. But some of our western automotive companies saw their problems, but did not always address them at the root cause. This leads to fire fighting or having to face the same issues time and again. The learning culture is not as well developed at some companies as it is at others.

Collaboration - Expectations of supply chain partners and how those relationships are managed have also impacted the success of the various companies. Focus on extended value stream continuous improvement and collaboration can create a competitive advantage.

Gasgoo.com: How could the third-party logistics such as a logistics company take part in and make some contribution to the operation of manufacturing enterprises?

Roger: Obviously, the third-party logistics helps. But they must be able to manage all of this information and have the expertise to execute the most efficient logistics network. It is one thing to understand what a lean supply chain is. It is another thing having practice executing it. That experience and practice can help companies avoid many mistakes that are common with implementing lean principles in the supply chain. These companies also have developed processes over many years and learning which have helped with designing the right enabling technology solutions.

Gasgoo.com: Any advanced technologies to develop the logistics networks in China?

Roger: The right visibility systems to track inventory real-time whether in transit, at our vendors, at a crossdock, or at a factory (GPS in trucks, pipeline visibility tools, Warehouse Management System-WMS). There are different routing systems that have optimization engines or allow logistics engineering teams to develop and compare multiple models quickly to arrive at the right solution. Many supply chain software solutions now contain an engine to help measure and mange total landed cost as well.

Aout Roger Pearce:

Roger joined LeanCor in February of 2007 and is responsible for the recommendation and implementation of Lean Fulfillment Stream strategies into LeanCor's network of customers including the management of LeanCor's Training & Education and Consulting teams. He has a strong background in Lean logistics operations with experience that includes management and director level positions in Supply Chain, Logistics Engineering, Transportation and Route Management, Material Handling (crossdocks, sequencing centers, and service parts operations), Yard Management, and Fleet Management. He has also worked extensively in procurement and supplier management. In these roles, Roger has worked with companies such as Toyota, General Motors, Suzuki, Yamaha, Emerson Electric, Bombardier Recreational Products, Kubota Manufacturing of America, Mark IV Automotive, and Standard Furniture. Roger has also led Lean Six Sigma projects and facility start-ups, provided logistics network analysis, implemented supplier scorecard and measurement systems, and performed returnable packaging studies and process audits. Roger holds a bachelor's degree in logistics from Auburn University and currently resides in Fairhope, Alabama.