L o g i s t i c s

A N D
s u p p l y
c h a i n

R E P O R T 2 0 0 9

Sponsored by:

In association with the Lean Enterprise

Research Centre, Cardiff Business School
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.

It’s a new world

Are you feeling brave?

When the world KPMG firms are here We are well positioned
is suddenly a very to help you adapt, to advise today’s
different place, how are develop and grow in manufacturers on how
you managing? Are you this new environment. to unlock cash, improve
prepared for a world KPMG’s Diversified efficiency, reduce risk,
where cash is scarce, Industrials practitioners increase control — and
but risk is not? Ready are accustomed to prepare you for growth
for a world that demands dealing with the capital- when the world turns
performance, but is intensive nature of global again. So plant your feet
merciless on costs? manufacturing operations. firmly on this new ground.
Visit kpmg.com/succeeding
 E d i t o r ’ s p a g e

An evolving landscape
W
elcome to the Logistics and Supply Chain Report
2009, sponsored by KPMG and produced in
association with the Lean Enterprise Research Centre
(LERC) at Cardiff Business School. This guide aims
to examine, in-depth, the shape of logistics and supply chains within UK
manufacturing today.

Our industry-wide survey this time around sought to discover exactly how your
logistics and supply chain policies and procedures are changing and evolving as
constraints on finances and trading terms become ever tighter. Unsurprisingly,
cost saving has proved a major theme this year, with cost of service cited as the
number one driver of supply chain improvement mentality among our survey’s
Editor
Becky Done respondents. In addition, cost saving is named as the most important factor
b.done@sayonemedia.com
T 01603 671313 when considering whether to outsource aspects of your operations offshore.
Art Editor
Martin Mitchell Elsewhere in the report, you can read our thought-provoking article from
m.mitchell@sayonemedia.com
Keivan Zokaei, director of the MSc course in Lean Operations at LERC.
Production Manager
Alexis Catchpole His piece provides valuable insight and real-life examples on boosting the
a.catchpole@sayonemedia.com
T 01603 671303 effectiveness of the supply chain.
Business Development Director
Henry Anson We also have plenty of stories from companies who have tackled their
h.anson@sayonemedia.com
own set of supply chain and logistics challenges. We hear from innocent
Chief Executive Officer
Nick Hussey Drinks about how it managed its expansion overseas during a period of
n.hussey@sayonemedia.com
rapid growth. There is also testimony from Tata Steel on using technology
to improve its supply chain processes and keep up with the rapid pace of
Terms and Conditions change in the steel industry. In addition, pallet network Palletways sheds
Please note that points of view expressed
in articles by contributing writers and in light on firming up your transport strategy in an economic downturn.
advertisements included in this journal
do not necessarily represent those of There is also useful advice on visibility, integration and co-ordination within
the publishers. Whilst every effort is the supply chain from Sterling Commerce.
made to ensure the accuracy of the
information contained in the journal,
no legal responsibility will be accepted
by the publishers for loss arising from As prices rise and pressures increase, the reality for manufacturers today
use of information published. All rights
reserved. No part of this publication may is that margin for error within the supply chain is slim. We hope that this
be reproduced or stored in a retrieval
system or transmitted in any form or by report will prove to be a useful and indispensable tool by which to measure
any means without prior written consent your own operations against those of your peers, gain valuable insights into
of the publishers.
how you can improve and thereby better prepare yourself for the challenges
SayOne Media can accept responsibility
for omissions or errors. of the coming year.
Copyright © SayOne Media 2009.

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L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 0 3
 C o n t en t s

05 Sponsor statement
Partners from our sponsors KPMG comment on this
year’s report

06 Logistics and Supply Chain Survey 2009

The questions we asked – and the answers you gave

24 Results analysis
What the survey results mean and what they teach us

26 Cost optimisation for the credit crunch

Experts at KPMG share their views

30 It’s all about effectiveness

Keivan Zokaei explores effectiveness and efficiency in the
supply chain

34 Increasing supply chain efficiency

How Transwide helped the Carmeuse Group improve operations

38 innocent and the connectivity journey

Expansion overseas throws up many complex supply chain
challenges, as innocent found out

42 The quality keynote

Mike Debenham of the Chartered Quality Institute looks at
quality in the supply chain

46 Steeling the show

Tata Steel has updated its supply chain processes, with
impressive results

49 Economical

downturn
pallet networks in an economic
Looking at transportation options in tough times

52 The importance of being smart with your

supply chain
Sterling Commerce on the importance of visibility and
alignment in the supply chain

0 4
 k pm g SPO N SO R ST A T E M E N T

L o g i s t i c s A N D
s u p p l y c h a i n

R E P O R T 2 0 0 9

A word from our sponsors

A
n efficient logistics and supply chain
is essential in a challenging economic
environment and even more so during
today’s turbulent times. Within our
Diversified Industrials sector we work globally with
clients helping them innovate and optimise their
performance in this area.
Few organisations have all the necessary skills and
resources in-house to optimise all the individual
elements that contribute to a best-in-class logistics
and supply chain and complexity has increased
dramatically. To be successful, organisations must
continually innovate, deliver outstanding services for
their customers and generate the required return for
their shareholders.
Execution is key: you can make a number of losses,
but you only run out of cash once! This report
provides an excellent insight into what organisations
are currently focused on in improving their supply
chains, where they think the priorities are and what
many consider to be key components of this. It is
interesting, but not unsurprising, to see that cost
optimisation is the number one driver of supply
chain improvement initiatives; however, only 27%
of respondents consider the tax effectiveness of their
supply chain which I think is an important element
these days.
My conclusion from this report is that despite what
organisations have done to date – with some making
impressive steps forward – on the whole there is still
much work to be done, presenting opportunity for
those wishing to embrace it.
KPMG is therefore delighted to be sponsoring this
report, which I hope you find an interesting and
value adding read.
Graham Smith, Partner
Global Head of Engineering & Industrial Products
KPMG LLP

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 0 5
 L o g i s t i c s A N D
s u p p l y c h a i n

s u r v e y 2 0 0 9

1. At your company, is the supply chain managed

as a whole or within individual functions?
R E SU L TS

Managed as a whole 51%

Functions managed individually 49%

2. Is there board or senior executive level supply

chain responsibility?

No 24%
Yes 76%
SU R V E Y

3. Do you have a formal supply chain strategy?

Which of the following statements comes closest?

A formal written plan with detailed objectives and

timescales for achievement 25%
A written plan but less formal or structured 27%
No formal written plans 15%
Some aspects are written down but it’s rather
piecemeal 33%

0 6
 SU R V E Y R E SU L T S

4.
Although you may or may not be there yet, how
much impact do you feel a fully integrated,
collaborative supply chain management strategy
could have on each of the following factors
affecting your company’s performance?

A: Improved speed and quality of decision making

Major impact 22%
Minor impact 21%
Significant impact 57%
None 0%

B: Improved revenue and profitability

Major impact 25%
Minor impact 17%
Significant impact 58%
None 0%

C: Cost control/reduction
Major impact 32%
Minor impact 16%
Significant impact 51%
None 1%

D: Efficiency and productivity improvements

Major impact 22%
Minor impact 19%
Significant impact 58%
None 1%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 0 7
 E: Ability to deliver competitive advantage
Major impact 24%
Minor impact 24%
R E SU L TS

Significant impact 51%

None 1%

F: Flexibility to respond to market opportunities

Major impact 20%
Minor impact 33%
Significant impact 45%
None 2%

G: Streamlined and speedier systems and processes

Major impact 17%
Minor impact 25%
Significant impact 57%
None 1%
SU R V E Y

H: Optimised channel activity

Major impact 10%
Minor impact 41%
Significant impact 47%
None 2%

0 8
 SU R V E Y R E SU L T S

5.
Which if any of the following potential benefits
have been achieved through such supply chain
improvement initiatives as you have undertaken?

Cost savings 94
Optimised resource utilisation 39
Inventory reduction 73
Increased revenue and profit 55
Speedier response to changes/opportunities 45
Improved on-time in-full delivery 75
Ability to manage partner performance 24
Ability to track supplier’s capacity and inventory levels 16
Improved product development 18
Improved time to market 39

6.
What drives your supply chain
improvement mentality?

Cost of service 62
Efficiency 49
Effectiveness 54

7.
To what extent have you been able to monitor
and measure such benefits?

Full financial ROI quantification 16%

Most benefits quantified financially but not all 46%
Most qualitative assessment only 36%
Primarily an act of faith 2%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 0 9
 8.
What is the target payback period for a return
on your investment in supply chain management
and integration?
R E SU L TS

Less than one year 19%

1 to 3 years 45%
3 to 5 years 4%
More than 5 years 1%
No such target set 20%
Don’t know 11%

9.
Did you consider the tax effectiveness of your
supply chain and the benefits it can bring?

No 73%
Yes 27%
SU R V E Y

10. How detailed is the information you currently

receive from your channel partners? When
making this assessment please consider all
areas of potential data flow including customer
records and purchase orders, design drawings
and data, production schedules and pricing and
cost information

Very detailed 10%

Quite detailed 51%
Minimal/none 6%
Not very detailed 33%

1 0
 SU R V E Y R E SU L T S

11.
And how detailed is the information you
currently provide to your channel partners?
Again, please include all areas mentioned above.

Very detailed 19%

Quite detailed 3%
Minimal/none 23%
Not very detailed 55%

12.
In the past 12 months, did the number of
suppliers in your supply chain expand
or contract?

It contracted 61%
It expanded 39%

13.
If it expanded, by how much?

0-10% 72%
11-20% 24%
21-30% 0%
31-40% 2%
41-50% 2%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 1 1
 14.
If it contracted, by how much?

0-10% 55%
R E SU L TS

11-20% 32%
21-30% 9%
31-40% 2%
41-50% 2%

15.
Are you currently implementing or involved in any of the following supply chain
activities? Do you have any plans to begin to implement improvements in any of
the following supply chain activities within the next 12 months?
(Figures are numbers of respondents).

A: Sharing manufacturing schedules with

key suppliers
Current 57 Planned 15

57 15
SU R V E Y

B: Collaboration on new product design

Current 55 Planned 9

55 9

C: Electronically integrated supplier/customer

transactions (including CPFR)
Current 24 Planned 35
24 35

1 2
 SU R V E Y R E SU L T S

D: Web/internet based supplier

and customer collaboration
Current 15 Planned 45

15 45

E: Use of web exchanges

Current 30 Planned 15

30 15

F: Extending lean into the supply chain

Current 41 Planned 24

41 24

G: Vendor managed inventories

Current 51 Planned 14

51 14

H: Co-managed inventories
Current 31 Planned 19

31 19

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 1 3
 16.
How important do you rate each of the
following potential obstacles in terms of
their impact on implementing a supply chain
R E SU L TS

management and integration strategy?

A: Concern over data security

Not at all important 8%
Quite important 12%
Important 25%
Very important 27%
Essential 28%

B. Concerns about giving away ‘company secrets’

Not at all important 8%
Quite important 15%
Important 21%
Very important 25%
Essential 31%

C. Internal staff skills shortages

Not at all important 17%
SU R V E Y

Quite important 18%

Important 38%
Very important 25%
Essential 12%

D. Internal management skills shortages

Not at all important 8%
Quite important 18%
Important 36%
Very important 16%
Essential 22%

1 4
 SU R V E Y R E SU L T S

E. Supplier/customer cultural barriers

Not at all important 8%
Quite important 25%
Important 31%
Very important 29%
Essential 7%

F. Supplier/customer staff skills shortages

Not at all important 9%
Quite important 21%
Important 39%
Very important 25%
Essential 6%

G. Problems with technology/systems

Not at all important 8%
Quite important 24%
Important 33%
Very important 25%
Essential 10%

H. Coupling SCM with overall strategy

Not at all important 10%
Quite important 25%
Important 35%
Very important 22%
Essential 8%

I. Supp/customer management skills shortages

Not at all important 7%
Quite important 26%
Important 34%
Very important 24%
Essential 9%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 1 5
 J. Internal company cultural barriers
Not at all important 12%
Quite important 16%
R E SU L TS

Important 36%
Very important 27%
Essential 9%

K. Proving ROI
Not at all important 8%
Quite important 20%
Important 34%
Very important 24%
Essential 14%

L. Increased costs
Not at all important 8%
Quite important 17%
SU R V E Y

Important 25%
Very important 29%
Essential 21%

M. Increased risks
Not at all important 10%
Quite important 13%
Important 26%
Very important 35%
Essential 16%

1 6
 SU R V E Y R E SU L T S

17.
How important is an efficient IT system to the
management of your supply chain?

Not at all important 0%

Quite important 4%
Important 17%
Very important 24%
Essential 55%

18.
How would you describe the level of IT
investment in the supply chain or specific supply
chain activities over the last 12 months?

Low 22%
Not very high 30%
Quite high 37%
Very high 11%

19.
How would you describe the success of
any past supply chain IT investment projects
or initiatives?

Not at all successful 5%

No such projects undertaken 14%
Not very successful 24%
Quite successful 40%
Very successful 17%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 1 7
 20.
How likely is this company to invest in IT to
facilitate supply chain improvement within the
next 12 months?
R E SU L TS

Not at all likely 23%

Not very likely 42%
Quite likely 20%
Very likely 15%

21.
Do you run a fully integrated software solution
across all your supply chain functions or employ
piecemeal ‘point’ solutions as appropriate?

Point solutions 67%

A fully integrated solution 33%
SU R V E Y

22.
Does your company use or plan to introduce
RFID/wireless technology to run any part of its
supply chain management/logistics activities?

Already uses 16%

No plans at present 61%
Sometime in the future 11%
Within the next 12 months 8%
Within the next two years 4%

1 8
 SU R V E Y R E SU L T S

23.
If you do use or plan to introduce RFID/wireless
technology to your supply chain/logistics
activities, what do you/will you use it for?

Inventory control 21%

Warehouse operations 22%
Tracking and tracing 21%
Inventory control 17%
Logistics 15%
Work in progress 4%

24.
Do you handle distribution in-house, is it
fully outsourced or is it split, part in-house and
part outsourced?

In-house 38%
Fully outsourced 27%
Partially outsourced 35%

25.
How satisfied are you with the performance of
your outsourced logistics supplier(s)?

Not at all satisfied 0%

Not very satisfied 8%
Quite satisfied 48%
Satisfied 31%
Very satisfied 13%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 1 9
 26.
How satisfied are you with the service you
currently receive from your palletised
logistics provider?
R E SU L TS

Not at all satisfied 3%

Not very satisfied 12%
Quite satisfied 40%
Satisfied 30%
Very satisfied 15%

27.
If you do not use palletised distribution services,
are you considering using them in the next
12 months?

Yes 12%
No 88%
SU R V E Y

28.
What services do you receive from a third party
logistics provider?

None 13
Delivery of parts/supplies to the site 49
Delivery of finished goods to the customer 82
Warehousing of supplies and sequenced JIT to the plant 13
Warehousing of finished goods 29
Order picking and packaging 18
Customisation/finishing of product 4
Management of the supply chain 2
Reverse logistics 6
WEEE compliance 3
Other 4

2 0
 SU R V E Y R E SU L T S

29.
If you use a third party logistics provider, which
company do you use?

Ceva/TNT 20
DHL/Exel 26
Eddie Stobbart 2
FSL 1
Gefco 2
Norbert Dentressangle 7
NYK Logistics 2
Parceline 8
UPS 15
Wincanton 2
Other 44

30.
How satisfied are you with the service you currently
receive from your third party logistics provider?

Not at all satisfied 0%

Not very satisfied 3%
Quite satisfied 38%
Satisfied 44%
Very satisfied 15%

31.
What proportion of your materials or
components are sourced offshore or are likely to
be so within the next 2 years?

A. Now
75-100 per cent 11%
10-24 per cent 33%
25-49 per cent 16%
50-74 per cent 16%
Less than 10 per cent 24%
None 6%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 2 1
 B. Within 2 years
75-100 per cent 8%
10-24 per cent 21%
R E SU L TS

25-49 per cent 22%

50-74 per cent 16%
Less than 10 per cent 14%
None 4%

32.
From which of the following regions do you
currently, or within the next 2 years, plan to
source any materials or components?

A.Now
EU 80
Non-EU western Europe 29
Non-EU eastern Europe 21
North America 37
Far East & China 53
India/sub continent 27
North Africa 5
SU R V E Y

B. Within 2 years
EU 59
Non-EU western Europe 22
Non-EU eastern Europe 24
North America 28
Far East & China 43
India/sub continent 27
North Africa 2

2 2
 SU R V E Y R E SU L T S

33.
When choosing to outsource offshore,
what are the most important criteria affecting
that decision?

Product quality 83
Cost savings 85
Identifying/locating an appropriate supplier 35
Speed of response 32
Ease of partner/relationship management 31
Design capability 15
Language issues 13
Cultural issues 2
Distance of supplier from your plant 15

34.
How satisfied are you with your offshore
sourcing arrangements?

Not at all satisfied 1%

Not very satisfied 11%
Quite satisfied 41%
Satisfied 42%
Very satisfied 5%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 2 3
 Results analysis
Dr. Keivan Zokaei, director of the MSc Course in Lean Operations
(Service) at the Lean Enterprise Research Centre at Cardiff Business
School, examines the results of this year’s survey
I
n nearly a quarter of the supply chains covered by
this survey there is no senior level representation
A N A L YSIS
for the supply chain function, e.g. at board level.
At the same time, nearly half of the respondents
seem to have no formal or written plan for managing
the supply chain. Evidently, there is an endemic lack of
attention to the value chain. Logistics and supply chain
operations are undoubtedly fundamental to any company’s
competitiveness; in fact, more than 80% of our sample
thinks a fully integrated, collaborative supply chain
management strategy could considerably enhance their
revenue and profitability, and almost 80% think it will
lead to improved speed and quality of decision making.
Maybe an even more interesting point hidden in the results
of this survey is about what supply chain improvement
initiatives typically lead to (question number five). While
94 respondents said they have delivered cost savings and
73 reported inventory reduction, only 39 stated that their
value chain initiatives have improved time-to-market. This
gap could demonstrate that most supply chain initiatives
are aimed at delivering cost reduction and are arguably less
concerned about improving consumer value. It is the same
R E SU L TS
with the level of attention to supply chain collaboration.
In the same question, only 16 respondents mentioned
improved ability to track supplier capacity and inventory,
and 24 said they have achieved improvements in terms of
managing partners’ performance. Low levels of partnership
improvement responses, compared to inventory and cost
reduction, signals that collaboration is currently viewed as a
secondary issue.
Question 15 asks what supply chain activities companies
are involved in, or plan to be in the near future. The
percentage of the total sample with collaboration of
product design is close to 50%. In most categories in this
question, the overall ratio is low; worst of all, only around
a third of the companies who participated in this survey
have extended lean across their supply chains. Indeed, less
than 50% have VMI or CMI in place within the chain.
2 4
Interestingly, this survey demonstrates that there seems
to be no consensus among respondents over the obstacles
for implementing a supply chain management and
integration strategy. In other words, no single category
has an importance weighting of less than 65% (i.e.
categorized by respondents as important to essential).
Moreover, while 96% of respondents think efficient IT
systems are “essential” or “important” to the management
of supply chains, only 17% describe their experience of
past supply chain IT investment projects or initiatives as
“very successful” and 30% express that they have had very
bad experiences in this area. My personal experience is that
many large IT investments in supply chains go wrong and
too much money is wasted in this area. Major IT solution
providers are yet to fully grasp the potentials of ‘simple’
and ‘effective’ solutions. Lean and IT may need to begin to
learn how to become mutually reinforcing.
In our sample, more than 60% of companies have partial
or full outsourcing of distribution. This clearly shows the
vital role 3PLs and 4PLs can play. However, experience
shows that collaboration with logistics providers stands at
arm’s length. At the same time, the survey shows that the
levels of satisfaction with outsourced logistics suppliers
and palletised logistics providers seems to be satisfactory,
suggesting they are performing well.
Finally, a surprisingly large percentage of companies who
participated in our survey use offshore sourcing (only 6%
don’t do any off-shoring!). Demonstrably, this is likely to
stay more or less the same for the next two years both in
terms of percentage outsourced and regions outsourced
to. Even more interesting is that 85% of the respondents
seemed to be satisfied with their offshore sourcing
arrangement decisions. This could reflect a strong focus on
cost reduction, given the economic situation many firms
currently face. When looking at the most important criteria
affecting the outsourcing decisions, it seems cost reduction
and product quality are much more important than ease of
partnership, speed of response and design capabilities.
 tran s wide
A word from our sponsors:
In bad times, prepare for
good times…
I
n the midst of the current turmoil, some
companies actively steer their way through,
while others merely duck and weather the
crisis out. But all have only one goal in mind:
control costs to survive.
Companies can no longer rely on rising sales for profit
growth and are looking for cost savings. They often
start by looking at their supply chain and it is indeed
a good place to start, as the supply chain is one of the
most important value drivers in a typical organisation.
Traditional cost-cutting focuses on process
harmonisation and streamlining. Organisations focus
on minimising the cost pressure by improving their
internal processes. At the same time, if businesses
are to maximise profits in the long-term, they need
to anticipate and prepare for growth. Rebounds, just
like crises, have a habit of happening unexpectedly.
Companies have to prepare in advance and invest for
the good times ahead.
The extended enterprise builds efficiency on
streamlined processes that collaborate efficiently
with external partners. Value is created through
better collaboration. Continuous improvement of
information flowing between logistics partners is
essential for success.
L o g i s t i c s
SPO N SO R ST A T E M E N T
How can organisations make sure they survive the
current crisis and yet prepare for the good times
ahead? These are two seemingly conflicting goals; yet
to reconcile them can lead to soaring results.
The path to success is built from difficult strategic
choices, where short ROI supply chain projects are
like golden nuggets. But in the end, the difference
between a great strategy and great results is the
quality of your execution.
Investing to make sure your plan is carried out to the
letter, while cutting your costs and improving your
efficiency, is the ultimate achievement in 2009.
This report will give you a very accurate description of
how companies view their logistics and supply chains
and how they intend to reconcile the two conflicting
goals. You’ll be able to benchmark your strategic
decisions as well as your execution performance.
We are proud to have sponsored this highly
professional report and I hope it will be informative
and helpful to you in this climate of turbulence.
A N D s u p p l y c h a i n R E P O R T 2 0 0 9 2 5
 Cost optimisation for
the credit crunch
New rules and tools for these troubled times:
three experts from KPMG share their views
I
f necessity is the mother of invention,
then recession is surely the mother of cost
reduction. In fact, the most significant
developments in cost reduction methodologies
for organisations have often been driven by major
global or sectoral downturns.
For example, the manufacturing sector has responded
to a series of recessions with the adoption of new
strategies for improved quality while ‘doing more
with less.’ These strategies included quality circles
in the 1980s, followed by total quality management
(TQM) and total productive manufacturing (TPM)
in the early 1990s. More inclusive approaches such as
lean manufacturing and Six Sigma were introduced in
the late 1990s and early 2000s.
2 6
Each new strategy in cost reduction is based on
lessons learned in the past. At the same time, each
strategy must be forward-looking, developing new
perspectives that reflect current market conditions
and, more specifically, recent changes in cost
structures. Therefore, we need to ask how the
current economic downturn will shape today’s
cost reduction strategies and how companies can
move beyond the tried and tested methods of
previous eras.
The first step is to understand how this recession is
different from previous downturns. We also need
to consider what elements of a company’s cost
structures have changed the most since the
last recession.
 c a s e s t u d y k pm g

A different set of challenges
Today’s crisis has already passed a number of dismal
milestones, including the worst economic decline
since the Great Depression of the 1930s and the
sharpest decrease in stock market performance the
FTSE has ever experienced. At this point, no end is
in sight.
Along with the sheer magnitude of these market
declines, the crisis is unique because companies
are now focussed not only on cost reduction – the
norm during any recession – but also on cash release.
Indeed, a recent KPMG International survey of
business leaders found that 85 per cent
The first and most obvious change is that many
of the cost reduction opportunities amenable to
TQM, lean, and Six Sigma strategies have already
been captured. Nowhere is this more true than in
the manufacturing sector, where previously defined
levels of manufacturing excellence have now become
the norm. As a result, the hunt is on for new fields
of opportunity, which increasingly appear at the
boundaries between processes and departments.
As an example, many manufacturing companies lack
sufficient integration between their supply chain and
finance. Most manufacturers recognise that determining

“
of respondents saw cash management as
a key priority, and 24 per cent identified A recent KPMG International survey
it as their top priority for 20091. of business leaders found that 85 per cent
of respondents saw cash management as a
This recession is also unique because
cost reduction is being driven to a
much greater degree by external factors.
key priority, and 24 per cent identified it
“
Previous cost reduction responses have as their top priority for 2009
been focussed internally, improving
performance from a historical base and showing true customer profitability by taking into account
sustained benefit. Insofar as companies could show cost drivers such as credit and logistics is simply good
these improvements, they were given the benefit of the practice. However, 14 per cent of companies in our
doubt. Today, however, a widespread concern around KPMG International survey still report poor visibility
financial viability has prompted financial institutions of cash flows – often caused by inadequate linkages
to retreat into the most conservative assessment between operations planning and the treasury function.
methods of their clients. Accordingly, companies must
now prove their cost control credentials in relation The second change in cost structures involves the
to their peers. ‘Better than last year’ is no longer the extent to which cost drivers now lie outside the formal
appropriate reference point. Companies must show boundaries of the company. Volatile commodity prices
that they are better than their entire sector, with little and exchange rates, increased financial pressures on
heed given to companies that claim to operate under suppliers and market downturns have all introduced
special circumstances. uncertainties that require a different set of tools for
cost reduction. Understanding the true costs of low-
In terms of cost structures, we can identify two cost sourcing, and weighing supply chain risk into
significant changes that have emerged since the your equations is a difficult but necessary discipline
last recession. that must be mastered.

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 2 7
 In short, the current recession demands much more
than a traditional, inward-facing perspective. In fact,
we can say that cost performance is relevant only
in relation to an external viewpoint, and you must
become masters of your external cost drivers as much
as you have mastered your internal ones.
Cost reduction in action
KPMG in the UK recently helped an
automotive company gain better control over
its cost base. The company was struggling with
a rapidly changing market focus and problems
in delivering large contracts. In addition, its
fixed costs were significantly higher than those
of its competitors. After careful study, KPMG
in the UK implemented a Cost Optimisation
programme that included challenges to the asset
base, a detailed inventory appraisal and indirect
cost-base re-assessments. As a result of this work,
KPMG in the UK has delivered annual cost
savings of £9 million to the business.
The right approach for the right time
KPMG member firms have been helping a number
of companies review their cost bases across numerous
engagements within a number of sectors. Based on
this experience, we offer the following lessons:
2 8
1) Gear your cost reduction against external
comparators. Whether looking at stock
turns, IT costs, HR, back office, finance or
engineering, the ultimate test is not your
internal ability to change, but your ability to
beat your peers. By using both internal and
external databases of cost comparators, you can
better determine your real positions.
2) Plan for both immediate cost reduction
and ongoing cost optimisation. Many of
our clients started their cost campaigns well
before the onset of the credit crunch. Their
aim was not only to survive the downturn
but also to be well positioned when the
economy recovers. Sustainability should be the
watchword of your activities.
3) Adopt an aggressive but focussed stance
towards your cost. In many instances, we
use an approach based on private equity
valuations of the business. In effect, this
approach asks whether there is unrealised
value in the business and focuses on critical
areas where specific costs can be reduced.
By following the money in a disciplined
and realistic way, companies can reduce the
chances that valuable resources are being
devoted to poor opportunities. Just think of
highly paid production engineers who might
shave a few seconds off machining time
while significant costs from unreliable supply
delivery go largely unchallenged.
4) Look at your costs from a variety of angles
and leave no stone unturned. The standard
accounts are designed to show costs in
ways that make reporting easy rather than
cost drivers more transparent. Considering
costs from a process viewpoint (cost to
 c a s e s t u d y k pm g

serve), a full lifecycle viewpoint (total cost And finally:

of acquisition), and P&L/balance sheet
viewpoints (cost of stock) can often reveal
areas for new improvement. Also make sure
that all opportunities are examined properly.
For example, tax is often seen as a given,
and yet this is possibly an area for cost
optimisation through strategies
such as tax efficient supply chain
management (TESCM).
5) Consider your capabilities in terms of
both time and skills. Few companies in
“Have a good plan,
execute it violently,
do it today”
– General Douglas A. MacArthur
Above all, get on with it; time is not on your side.
KPMG member firms are ready to support you in
securing benefit realisation from initial opportunity
diagnoses to implementation. end

manufacturing have ignored cost in the past,

and yet the conversion rate of projected 1
The Importance of Preserving Cash in a
savings into actual savings typically stands Downturn: Insights from 2008 research into cash and
at less than 40 per cent. Think about working capital management, KPMG 2008
your organisation’s ability to deliver a
concentrated bout of cost reduction using
combined approaches of accounting and
subject matter expertise. If you cannot do it
internally, get some help and bear in mind
that every month of delay is a month of
savings foregone.

6) Cost reduction starts by ensuring that

you do not incur unnecessary costs. With
the increased levels of business failure,
your supply chains have never been more
fragile. Balancing your pursuit of cost
reduction with an appropriate appetite for
risk is critical. Some of your suppliers will
be under serious financial stress in 2009.
This is fine if they handle your window
Andrew Underwood is a partner, Guy Dunkerley a
cleaning contract but not so good if they principal advisor and Michael Mowat an advisor, all
are the sole source of a critical component. at KPMG in the UK.
KPMG member firms can provide a unique
The information provided here is of a general nature and is not
combination of capabilities to help you intended to address the specific circumstances of any particular
identify and mitigate risks to your individual or entity.
supply chain.

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 2 9
 It’s all about
effectiveness
Dr. Keivan Zokaei of the Lean
Enterprise Research Centre
at Cardiff Business School
examines how supply chains
can boost their efficiency and
effectiveness by eliminating all
too common mistakes
T
he economy is rapidly slumping into
a deep recession but did it really need
to be this way? The Big Three auto
manufacturers are in big trouble and
even Toyota, the all-time legend of efficiency, has
dived into the red for the first time since its records
began in 1941. Toyota has hit the red as exports
screech to a standstill, partly to be blamed on a
soaring yen. We are simply used to Toyota always
making profit, oblivious to the fact that the volume
car makers’ business models are very vulnerable to
sudden falls in demand, especially if in the process
of expanding capacity like Toyota. An insurance
company, or even a chain of supermarkets, doesn’t
have the same level of asset specifity that volume car
makers have.
Toyota has cash reserves more than enough to
cope with the current climate. However, experts
such as Richard Schonberger have been warning
about falling inventory turns at Toyota1 alongside
3 0
many other motor manufacturers all along. The
Times now reports that Toyota’s finished cars
inventory levels in the US are about “twice the
level considered appropriate”2, i.e. around 90 days’
worth of cars in stock. I believe Toyota’s inventory
levels increased as they expanded into various
markets and attempted to deal with what Taiichi
Ohno called “market diversification”3 – or in
other words, the ever-increasing range demanded
by the customers. Ohno, the father of the Toyota
Production System (TPS), explained that TPS
is capable of coping with market fluctuations in
terms of variety and volume even when the overall
demand is steady. TPS is designed to absorb these
fluctuations through the principles of just-in-time
and autonomation.4
Yet even Ohno did not claim that Toyota could
cope with sudden slumps in demand, so it is
inevitable that Toyota suffers like most
other businesses.
 s u p p l y c h a i n effe c t i vene s s

But what happened for Toyota to remain profitable
through the recessions of the past but not this time
round? Let’s revisit the history of manufacturing
before the oil shock of 1973. Back then, you could
sell practically whatever you were able to produce. In
the era of mass production, what seemed to matter
was the economy of scale, and what management
focused on was the unit cost, i.e. producing in large
batches through dedicated processes and monumental
machines. Management’s aim was simply to sweat
assets. Still much of what is taught in business
schools around the world is influenced by the mass
production way of thinking. Then
requirements are in order to provide the most
effective solution to their problem.
Tesco has been one of the leading firms to realise
economy of purpose. Its core business purpose
is to gain customers’ lifetime loyalty. There is no
mention of share of your pocket, cost or efficiency
in Tesco’s purpose. It’s all about what consumers
value; it’s all about effectiveness. In this new age,
value enhancement is arguably more important than
waste reduction. Tesco rigorously and systematically
communicates its core purpose across various levels

“
came along Toyota, which showed
us that we can (and indeed should) The severity of the current economic
lower costs by producing only what
the customers want at the pull of
shock is suggesting that even flow
the customer. TPS demonstrated thinking alone is not a good enough
that cost is in flow, rather than scale.
solution and it can be argued that we are
Management thinker Professor John
Seddon of the Lean Enterprise Research
Centre (LERC) refers to this as the
progressing into an era of ‘economy “
“economy of flow”. Between the oil of purpose’
shock of 1973 and the recent recession
in 2008, the management focus has been on learning of the organisation. Its CEO, Sir Terry Leahy, is
the principles of flow thinking, many of which were often quoted as saying: “If you are in doubt, ask
developed in Toyota during the time before 1973. the customers”. Tesco deploys Clubcard data to
Sadly, companies and their supply chains are yet to create the most effective supply chain the industry
learn some very basic principles and the full-scale has witnessed, where individual store range and
implications of TPS, as I will explain below. offering depends on the local shopping profile, and
promotions are customised to individual shopping
However, the severity of the current economic shock needs. As such, Tesco runs a supply chain that dwarfs
is suggesting that even flow thinking alone is not a that of WalMart (ASDA) in both effectiveness and
good enough solution and it can be argued that we efficiency (see the industry data on sales per square
are progressing into an era of ‘economy of purpose’. foot). Opportunities are endless; and we have yet
Leading companies in different industries are not to grasp the full-scale implications of the post-2008
only producing what the customers demand at the economic era.
pull of the customer, but are working together with
their customers and customers’ customers to gain a Against this background, I would like to draw
deeper understanding of what the end consumers’ attention to some of the most immediate issues in our

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 3 1
 supply chains. The reality is that many supply chains
are desolately fixated in paradigms and practices of
the mass production era. We have fallen desperately
short of the TPS standards, let alone getting ahead of
Toyota to cope with the current climate (as arguably
Tesco has done). On LERC’s executive MSc in Lean
Operations programme, we set an assignment every
year requiring students to analyse their companies’
supply chains and provide practical recommendations
for improvement. This is an opportunity for me to
visit (or at least read about) the latest state of affairs
in both the manufacturing and service sectors of our
economy. Students (mostly very senior managers)
challenge the way their supply chains operate in
the light of lean thinking and the principles of flow
economy. Analysis is quick (a few weeks), yet the
gains are often enormous.
When it comes to managing the end-to-end supply
chain, the situation in both the manufacturing
and service industries is bleak. We have introduced
many internal lean initiatives and many firms have
matured in TPS ways of thinking internally. But
“
The reality is that many supply chains
are desolately fixated in paradigms and
practices of the mass production era.
We have fallen desperately short of the
TPS standards, let alone getting ahead of
Toyota to cope with the current climate
this has hardly been the case in the extended value
stream. One of our MSc students, a lean leader at an
international medical device manufacturer, achieved
80% inventory reduction during only five weeks
of supply chain analysis. This was in addition to
3 2
elimination of quality and delivery problems with
the supplier (quality problems were running at 40%
and delivery problems at about 30%). Consider how
much cash you could release and how much value
you could add to your manufacturing in only five
weeks! The root cause of the problem in this medical
device supply chain was erratic ordering from the
customer placed on the supplier, which put sudden
strain on the manufacturing at the supplier plant.
Orders were accelerated through production to meet
erratic orders followed by long periods of lull leading
to many quality and delivery issues. The medical
device manufacturer collaborated with its supplier on
a simple redesign of the manufacturing sequence to
postpone the last production sequence until parts were
actually called in. This allowed the supplier to produce
blank parts and finish them only when ordered by the
manufacturer, reducing inventory by about 80%.
Another example, from one of the largest wine and
spirits distributors in the world, concerns inventories
along the chain for a popular wine category supplied
to multiple supermarkets. Wine is often supplied
in bulk into the UK and bottled and
labeled prior to shipment to customers.
This company has recently invested in
multiplying its warehousing capacity of
bottled wine based on increasing demand
during the past few years. Unfortunately,
this is a position you don’t want to be in
“ when a recession hits. It’s always cheaper
to keep wine in bulk and postpone the
bottling until actual orders are received
from customers. This will also ensure
much higher product availability against
customer orders and reduces the need for large amounts
of inventory in the chain by keeping the right type of
finished goods stock. Supply chain mapping revealed
a 170-day lead time for a bottle of wine from winery
to sales. There is a considerable amount of inventory
 s u p p l y
within the wine supply network while there are
relatively low levels of inventory held by the retailers.
Huge savings are possible by simply postponing
the bottling until customer orders are received and
constantly revisiting the safety stock levels only to
keep enough bottled wine to meet small fluctuations
in the retail orders. It is sensible to position the
inventory just before the point where the product
becomes highly varied.
In managing supply chains, we know
about the demand amplification effect
since the 1950s. Demand amplification
“ One of our MSc students, a lean leader
at an international medical device
manufacturer, achieved 80% inventory
exists in nearly all supply chains. Yet I
haven’t come across a single one that
uses demand amplification as a KPI
reduction during only five weeks of supply
or one that consistently monitors it
with all suppliers. It occurs when small
fluctuations in the end user demand become amplified
as they are passed upstream, leading to considerable
ebbs and flows along the supply chain. Ohno would
have called this mura5; indeed recession occurs when
we encounter mega mura. When an international
pharmaceutical firm mapped its largest value streams
by volume, it found demand amplification resulting
from batching and inventory control policies. Whereas
customer demand for the selected product was fairly
stable (averaging around 800kg per month), demand
amplification occurred because of a fixed manufacturing
lot size of 2250kg in production, consisting of three
containers of 750Kg. The supply chain analysis suggested
reducing the lot size to one container and shipping it
immediately to the next process without entering the
current stages of warehousing. A safety stock could
be kept to make up for the difference with customer
orders. This removes the wastes of transportation and
over-production; but more importantly, producing more
closely to the customer demand means exposing quality
problems and the opportunity to tackle the root causes
much more quickly.
L o g i s t i c s
c h a i n effe c t i vene s s
I have seen many examples in service supply chains
where the situation is very similar. For example, in
the insurance industry, insurers maintain an arm’s
length and price-driven relationship with suppliers.
Individual insurance firms are encouraged to provide
lower-cost solutions leading to supply chain members
looking inward to pursue a strategy of optimising
own-service delivery. However, optimising costs at
“
chain analysis
a local level can compromise the end-to-end value
stream as a whole. Negotiations are considered in
isolation with little concern by procurement teams on
the impact of decisions by one chain member upon
others and to the value chain overall. end
1
See Schonberger, R. (2008) Best Practice – Lean Six
Sigma Process Improvement. Schonberger reports that
Toyota’s inventory turns have been worsening four per
cent year-on-year for the past 13 years in an apparent
attempt to become the world’s largest auto-maker.
2
Times Online, 22nd December 2008
3
See Ohno T. (1988), Toyota Production System: Beyond
Large-Scale Production, Productivity Press.
4
Autonomation (Jidoka in Japanese) is automation with
a human touch. It’s about allowing the human interface
with work to absorb variation in work and to ensure
‘first time right’ quality.
Japanese for unevenness, which is a root cause of muda,
5
or waste.
A N D s u p p l y c h a i n R E P O R T 2 0 0 9 3 3
 Increasing supply
chain efficiency
The Carmeuse Group is an international organisation generating nearly $1bn
in annual revenue. Founded in 1860 and operating in 22 countries with over
100 production plants worldwide, Carmeuse manufactures and ships more
than 58 million tonnes of lime and limestone products per year

Saas and supply chain efficiency Difficulties to get accurate delivery

information leads to delays in invoicing
Initial situation Limited shipment information visibility
Transportation is an essential part of Carmeuse’s day- for the customer service team impacts
to-day business. customer satisfaction and service levels
This is an intricate situation with some Lack of visibility on transportation
customers managing the transportation efficiency impacts the ability to monitor
versus others requiring Carmeuse to manage it key performance indicators (KPIs)
There is multimodal transportation via lake
vessel, barge, train and truck Additional business process requirements
Management of the truck transportation Shift plant site coordinators function from
is very complex and time consuming, due a truck scheduling to a production planning
to manual processes leading to increasing cost All shipments need to be scheduled 24
hours in advance
Identified business process concerns Carriers and/or customers schedule their
Manual load tendering leads to cost own pick-up times via a web based system
inefficiency and errors Improve customer service with shipment
No visibility on truck arrival at plant leads information visibility allowing advanced
to inefficiencies such as bottlenecks and/or schedule planning, track arrival and
ineffective resource planning departure times and check delivery status

3 4
 Ca s e s t u d y tran s wide

The selection of the ideal partner – Transwide Each region followed the same operational schedule;
Based on this analysis and following an in-depth the rollout process lasted two to four weeks, depending
market review, Carmeuse selected the following on the site’s specific needs. (see fig 1 overleaf)
modular solutions from Transwide:

“ Thanks to the immediate

availability of POD information
on the Transwide website, we
were able to verify that the
specific load had been accepted
“
Project implementation and shipped
The full implementation was accomplished in less
than eight months.
Initially, Carmeuse’s central ERP (SAP) Results of a successful implementation
system was connected to Transwide, Based on Transwide’s customers’ performance in the
allowing automatic supply chain large manufacturing sector, the following significant
data exchange results were realised:
The project was rolled out in six Better planning and managing of resources
concurrent steps with one to four - increased quantities loaded with the same
Carmeuse production sites in each region: workforce and equipment by approx 10%

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 3 5
 fig 1.
Increased on-time deliveries by 20%
Reduction in freight claims by 12%
Carmeuse expects to meet or exceed the above
results through the following performance areas:
Increased supply chain efficiency
Standardisation of North American seat location
transportation processes
Carmeuse Lime & Stone is the
largest producer of lime and
limestone products in North America
with 39 facilities, manufacturing and
distributing approximately 34 million
tonnes yearly.
3 6
Increased visibility of
transportation information
Less manual communication required
between site coordinators and carriers
Ease of use for carrier scheduling – similar
to an airplane flight and selecting your
Improved customer satisfaction through higher
level of service
Electronic archiving of PODs leading to
POD available less than 48 hours
after delivery
Proactive customer service approach
as a result of access to real-time shipment
status information
The financial impact of these performance
improvements is significant:
Shortened invoicing cycle through
POD information being directly accessible
on the Transwide website
 Ca s e s t u d y tran s wide

Improvement in debt collection through
reduction of loads written off
“Transwide helped our
Customer Service and
Immediate reduction of demurrage cost
(especially from delays due to Collections department
internal organisation issues)
with a concerned customer
“Our customers, carriers notifying us about a short
and internal stakeholders shipment. Thanks to the
have been very impressed immediate availability of
with the quality of the POD information on the
Transwide system, the ease Transwide website, we were
of its implementation and able to verify that the specific
the immediate impact it is load had been accepted
having on customer service.” and shipped. As a result
– Jack Fahler, VP Supply Chain Carmeuse saved several
thousand USD in sales and a
“Transwide has provided the customer relationship.”
foundation on which the – Stephanie Pilarski, Traffic Analyst

continuing evolution of our

supply chain stands. Through
Transwide we will have the
real time visibility needed to
make quick, smart decisions
to enable us to exceed our EMEA : Tel +44 (0)20 8247 1178
EMEA : Tel +32 (0)2 722 99 20
customers’ expectations.” NAFTA : Tel +1 877 763 3240
info@transwide.com
– Eric J. Segal, Manager, Production Planning www.transwide.com
and Transportation

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 3 7
 innocent and the
connectivity journey
Embracing expansion into new countries represents
a serious business challenge for any organisation, and
turning to managed services where organisations outsource
critical business processes to external experts is becoming
increasingly popular

G
lobalisation and the emergence
of the internet has opened up a
whole catalogue of new business
opportunities, not only for the
sourcing of raw materials and products more
efficiently and cost effectively, but also for building
trading relationships and developing new sales
channels. As technology effectively transforms
the world into one global village, there is added
pressure on manufacturers to adopt smarter
business processes, including increasing supply
chain efficiency and the way in which they
communicate with suppliers and customers on a
global scale.
innocent, the UK’s number one smoothie maker,
grew from humble beginnings to a market-leading
brand with global requirements and has found that
sometimes, handing over the reins can make the most
business sense.

3 8
 C A S E STU D Y I N N O C E N T

It’s hard to believe that just nine years since the
company began, innocent has become one of the
most recognisable retail brands in the UK. It began
life as a company of just three people with £500
worth of fresh fruit and a bundle of ambition.
Selling fruit smoothies at a minor music festival in
London, the company’s founders asked customers
the simple question, “Do you think we should give
up our jobs to make these smoothies?” They asked
for the answer by the way of empty
chain is a crucial part of most businesses – innocent
being no exception – yet assigning dedicated IT staff
to manually process orders and update back-end
systems is resource-intensive, and few organisations,
especially in the current economic climate, can afford
to do so. Managing legacy connectivity systems can
prove to be cumbersome, with system downtime
and unreliable internet connections causing IT
administrators numerous headaches, as well as

“
bottles in ‘Yes’ or ‘No’ bins. The
resounding ‘Yes’ vote started the dream As we outsource much of our operation
and innocent took its first steps on the
way to becoming a leading player in the
and don’t have 24/7 head office support,
soft drinks market. After building up a we also needed a partner who could
solid network of local retail customers,
innocent began taking orders via
manage this environment for us 24/7,
fax, phone and email – all perfectly serving all the countries we were
acceptable methods for a start-up
operating in. Our solution needed to
looking for a quick and easy conduit
through which it could communicate
with its customers. For the first couple
operate round the clock, just like the rest “
of years of innocent’s life, the business of our supply chain
was able to grow with traditional
communication, developing an excellent customer impacting the business’ capability to process orders
base on a regional and national level. and invoices. Expertise is also another key area of
concern within the supply chain. With many new
As the innocent brand grew in popularity and IT graduates leaving university with skill sets that
attracted major retailers, the demands on its supply often do not include connectivity, the availability of
chain increased significantly. Contracts with these workers skilled in this area is diminishing quickly –
retailers required a system more complex than yet leading retailers across Europe still demand that
the previous way of sending and receiving orders, suppliers communicate through connectivity and via
invoices and other data with customers. In 2002, pre-defined data standards and protocols. This creates
a solution based on connectivity was implemented a skills vacuum that organisations are increasingly
– connecting the head office to the UK warehouse turning to technology to fill.
and providing some automation of ordering and
invoicing. As the business moved forward, both in With these factors in mind, and with the business
terms of internal growth and the calibre of customer planning to expand into Europe, innocent needed to
it was dealing with, the need for a system with address these challenges quickly and effectively. As
additional functionality was apparent. The supply the organisation began trading in the Benelux region,

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 3 9
 France, Ireland, Germany, Austria and Scandinavia, it
became clear that improving the technology that was
developing the supply chain was critical to expansion.
In order to supply its European customers with the
same level of service as those in the UK, innocent
needed to ensure that the new solution could address
cultural complexities, such as language, but also that
orders and invoices could be sent and received in
international data standards or protocols without any
negative impact on the time taken to process data.
“ We were confident that managed
services would provide us with the full
support needed not just to deliver the
technology but to guide our team as we
worked with our customers and suppliers “ technology but to guide our team as
in this complex area
innocent’s supply chain manager Ben Tuppen was
tasked with the job of finding the right solution and
it quickly became apparent that Software-as-a-Service
(SaaS), via an external supplier, could offer real
benefits to the business.
“As we outsource much of our operation and don’t
have 24/7 head office support, we also needed a
partner who could manage this environment for us
24/7, serving all the countries we were operating in.
Our solution needed to operate round the clock, just
like the rest of our supply chain,” said Tuppen.
Historically, businesses have been reluctant to
outsource key business functions to SaaS suppliers;
however, the benefits of doing so were immediately
apparent. SaaS providers often offer high
4 0
availability services, ensuring the supply chain will
run round the clock, even in the event of a disaster.
Tuppen also needed to ensure that new customers
could be added onto the supplier network with
the minimum of fuss –something that running the
operation internally would not deliver. Because
customer reputation is vitally important, innocent
had to ensure that any transition onto a new system
was as seamless as possible, to prevent disruption
to its operation. After weighing up the challenges
and issues facing the business, Tuppen
decided that a managed service was
the best fit for the organisation’s
expansion plans.
“We were confident that managed
services would provide us with the full
support needed not just to deliver the
we worked with our customers and
suppliers in this complex area.”
The implementation of the managed
service has allowed innocent to streamline business
operations, better comply with SLA mandates and
successfully expand in Europe, bringing on key new
customers as a result of the roll out. Automation
of order and invoice processing can also improve
resource efficiency – innocent is already saving 20
hours a week previously spent on processing orders
and invoices by hand.
Additionally, handing responsibility to a managed
provider enabled innocent to connect a key customer
within one month of starting the implementation,
critical to winning the customer contract. Since then,
the scalable solution and support means innocent is
on track to triple their number of connected partners
within their first year, without worrying about
complex European connectivity standards.
 C A S E STU D Y I N N O C E N T

With an ‘always online’ service via an easy-to-use web
portal, innocent avoids having to create a separate
and disparate connectivity team by allowing all
relevant personnel in logistics, finance and IT web-
access to the solution when they want it, wherever
they are in Europe.
control and availability – yet the case for bringing
in the experts stands up for itself. After all, getting
things right first time, every time has to be the key
goal with such stiff market competition, and if
that means enlisting the trust of those that live and
breathe connectivity, then that is surely a sacrifice
worth making. end

As with most businesses, budgeting is crucial, and

selecting a managed service with a clear pricing
structure was attractive for innocent, as it provided
a flat-rate subscription fee rather than volume of
traffic. This has allowed innocent to maximise the
use of connectivity to integrate systems with those
partners they are connected to, whilst keeping costs
predictable and low.

There are still businesses that prefer to maintain

complete control of their supply chain environment,
and arguably always will. However, with cloud
computing becoming ever-popular, services
becoming increasingly reliable and cost-effective
solutions helping drive down costs and achieve a
healthy ROI, the business case for managed services
is hard to resist.

For innocent, bringing in an external provider to

give support and assistance worked extremely well.
And for smaller organisations for whom IT and
supply chain technology in general may be stepping
into the unknown, turning to a managed service can
make real sense.

Growing a business during such tough economic

times is a real challenge, however, as innocent has
experienced, technology can be a great enabler,
driving mass growth, improving efficiency both now
and for the future, whilst remaining cost-effective
and predictable in terms of pricing. Managed service
offerings have their critics – those who believe only
100% ownership of business functions can guarantee

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 4 1
 The quality keynote
The concept of quality as a working principle should be more than
familiar to manufacturers – we pioneered the concept, after all –
but the definition has changed over time and Mike Debenham,
executive director of policy and professional affairs at the Chartered
Quality Institute, is keen to present an updated view of the modern
quality profession

O
f all the developments in industry
over the last 50 years, the most
dramatic is surely the speed with
which things change. Technical
advances, immediate communication and global
markets operating around the clock all contribute
to an environment in which organisations must
constantly evolve to keep pace. In this fast-moving
market, there is no room for the development of
weighty documented systems or the imposition of
rigid working practices – instead, the emphasis must
be on encouraging and implementing innovation.
Quality professionals are trained to look at the world
with a particular vision – to understand a range of
processes and techniques that can be applied to any
specialisation to maximise customer satisfaction –
however, the unifying principle is (or should be) that
their application allows every individual to contribute
to innovation at every level.
This may sound like a contradiction in terms to
those familiar with a clipboard, tick-box approach to
quality assessment, but I would argue that sometimes,
organisations that appear to be the most rigidly
controlled are actually the most innovative.
The classic example of this would have to be the
Toyota manufacturing plant in Japan. At first sight,
it is difficult to imagine a more tightly controlled

4 2
 Ca s e S t u d y C Q I

environment. Over 3,000 people work at the
high-tech facility, which is run with precision and
consistency. However, all staff are actively encouraged
to volunteer suggestions on how the production
processes could be improved. The company estimates
that each worker contributes, on average,
10 suggestions a year and the management implements
over 90% of these suggestions. The result is a unit
that is constantly developing itself, embracing the
innovative input of all of its staff and remaining one of
the most effective and efficient facilities in the world.
This collaborative environment did not happen by
accident. Giving people a structure in which their
ideas are recognised and acted upon is a basic strategy,
and one that needs top-level management support to
implement it. Once in place, however, the results can
be startling.
example involved measuring the time and effort
required to make a single wire basket. At the start,
this process took nine operatives, a production time
of 28 minutes (11 of these in movement alone)
and a lead time of 117 hours. As result of the re-
organisation, the same end result is achieved with six
operatives, in a production time of 12.5 minutes with
movement time down to just 30 seconds. A basket
can now be assembled every four minutes and lead
times have been reduced by 97%.
The cumulative results of these incremental
improvements have allowed the company to
introduce a more diverse range of products, a
lead time that cannot be matched by any of its
competitors and an extra 200 production hours of
capacity every month.

Closer to home is the example

of Yorkshire-based wire products
manufacturer Vanguard which needed
“ From the purchaser’s point of view,
the single most important
consideration is the impact that
to improve its production processes and
elected to exploit lean manufacturing failure of a supplier would have on
principles. For MD Paul Howcroft,
this was not about a simple focus their own customers. Only when
on reducing costs: “Lean is not an
accounting principle; it is about looking
this is evaluated can the appropriate
“
at all your processes in a completely response be designed
new light – being open to radical
suggestion and brave enough to try it.” The single most significant contribution to
the success of the programme, however, was
The first stage is accurately to measure the processes acknowledged to be the level of engagement
already in place so that improvement can be evaluated across the company. Quite simply, the collective
in terms that are most appropriate to that process. knowledge, commitment and enthusiasm of the
Responsibility for identifying areas for improvement staff is the key to implementing radical innovation.
is devolved down to cells of workers who are also
tasked with suggesting innovations. The improvement process does not stop with these
results: a genuine quality process will put a system
Results across the business have been startling. One in place, but recognise that the situation is fluid and

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 4 3
 that every element needs constant scrutiny to exploit
any area where there is room for improvement. It
is for this reason, perhaps, that organisations are
moving away from documenting their processes
in minute detail and instead are using ‘specified
competencies’ and job-specific training as the
means for ensuring that work is accurate. This
enables them to own an agile management system
that is less dependent on documented procedures
and significantly reduces the burden of updating
documents every time some minor changes are
made to the system.
No organisation exists in isolation, however, and just
as important as the perfection of its own systems is an
ability to evaluate and plan for the
commitment to the supplier and, in return, the
supplier will take on some or all of the risks associated
with late or non-compliant delivery.
In addition, the purchaser may employ a range
of risk management approaches dependent on
the severity of the risks involved, for example,
to develop risk tolerant work packages. The use
of suppliers’ standard items that have already
been extensively tested in previous use rather
than custom-built untried items of equipment is
an example of this type of package. Boeing, for
example, has a policy that each new design of
aircraft must contain at least 70% of components
used in earlier models.

“
unexpected – which is why risk
assessment is as much a part of The prudent manufacturer will also
the quality professional’s toolkit as
process innovation. carry out risk analysis of components,
involving life testing, accelerated life
There are many aspects of risk, but
for the purposes of this article we testing, environmental testing, weibull
“
can focus on the risk associated
with buying in components
and other forms of failure analysis
from outside suppliers, with the
consequent quality and delivery risks that process The prudent manufacturer will also carry out risk
brings to the purchaser. analysis of components, involving life testing,
accelerated life testing, environmental testing,
From the purchaser’s point of view, the single most weibull and other forms of failure analysis, ensuring
important consideration is the impact that failure a thorough evaluation of components and enabling
of a supplier would have on their own customers. the manufacturer to develop preventive strategies.
Only when this is evaluated can the appropriate For example, it is known from the results of
response be designed. For many manufacturers, risk extensive product testing that sodium street lights
reduction involves using tried and trusted suppliers run for a fairly predictable 8,000 hours. Rather
whose own quality processes are clear and robust. than replace each one individually on failure, it
In some cases a relationship may be extended is more economical to replace all of the lights in
beyond that of a commercial purchasing transaction the area whether they have actually failed or not.
and into a partnering arrangement where risk is This is known as a block replacement policy and is
simply contracted out. The customer will make a extremely economical.

4 4
 Ca s e S t u d y C Q I

Under different circumstances or

where the purchaser is not in a
long-term supplier relationship,
risk-based decision making is likely
“ The most dynamic results come from
environments where the possibility of
radical thinking is completely embraced
to be employed. For relatively minor
purchasing decisions, a simplified by senior management and quality
system of identifying and analysing
professionals can use their training and
risk can be applied – and is a standard
tool of the quality professional. experience to exploit the creative thinking “
The simplified process of risk-based of the entire workforce
decision-making can be conducted in
under two hours, involving probably two or three profit organisations. The significance of their
people. The result is that, for the investment of particular area of expertise has now been publicly
approximately four hours of time spent on analysis, acknowledged by the awarding of chartered status
a decision can be taken having considered and to individuals, allowing quality to rank alongside
budgeted all risk involved and the related outcomes. finance, law or engineering as a distinct area of
specialist expertise, critical to providing the flexible,
These are just a few examples of where a particular dynamic structure required for organisations to
style of analytical approach can help to define succeed in a fast-changing environment. end

a problem and suggest a logical and effective

solution. There is no single template that could fit
all of these situations and the quality professional
must be adaptable and creative to propose processes
that suit each individual situation and the culture
of each organisation. The most dynamic results
come from environments where the possibility of
radical thinking is completely embraced by senior
management and quality professionals can use
their training and experience to exploit the creative
thinking of the entire workforce.

The importance of quality has never been

underestimated by manufacturers, but recent
decades have seen a greater understanding of
the scope of the quality professional. Their skills
are not restricted to production processes but
can be equally applied to management systems
and to other sectors of the economy such as
service industries, the public sector and not-for-

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 4 5
 Steeling the show
A major overhaul of supply chain processes has seen
Tata Steel go from strength to strength
T
he steel manufacturing industry has
never been known for being particularly
responsive to market needs. In fact, until
recently, the industry has been plagued
by extremely long lead-times, poor customer service
and high levels of manufacturing inefficiencies.
But there’s a quiet revolution going on, serving up
more change in the last decade than in the 150 years
preceding it. The use of leading-edge technology
has driven business efficiencies, and continued
globalisation has created further economies of scale,
with both fuelling rapid industry consolidation.
Tata Steel, the flagship of India’s $22 billion Tata
Group, is Asia’s first and India’s largest private-sector
steel company. One of the lowest cost producers of
steel in the world, it was ranked fifth in the Asian
BusinessWeek 50 performers in 2005, and has twice
topped the “World-Class Steelmakers” list issued by
World Steel Dynamics, a leading steel information
4 6
service. Tata recently purchased Thailand’s
Millennium Steel and Singapore’s NatSteel Asia, and
in January 2007 announced the acquisition of Anglo-
Dutch Corus Group in a $12 billion transaction.
“Before we started looking at supply chain
optimisation, we suffered from all of the typical
problems manufacturers face: non-optimised asset
utilization, long cycle times, disparate IT systems and
lack of visibility into demand, orders and shipments,”
says Anand Sen, vice president of Tata’s Flat Product
Division. “We knew that we simply couldn’t meet our
strategic objectives by maintaining the status quo.”
Customer satisfaction
Customer satisfaction was a real issue at Tata Steel.
When orders were placed, customers were promised
a due date that was not based on hard data, plant
capacity or raw-material availability. Orders were
delivered when promised only about 50 per cent of
 Ca s e S t u d y T ata Steel

the time. To make matters worse, customers would
generally not receive advance notice if their order
would not be ready as promised, and this lack of
communication burdened customer resources down
the line, in the finishing and distribution channels.
The plant would often scramble to address the needs of
high-priority customers, further alienating customers
whose orders may have been just as important but
less urgent. Without any method to analyse forecast
versus actual performance, it was impossible to design
improvements in the overall delivery system.
Realizing that its industry-leading position was
hanging in the balance, Tata started the improvement
process by articulating its strategic drivers: improved
customer satisfaction and higher asset utilisation.
To address customer needs, the company conducted
an exhaustive survey to
establish detailed customer
The business issues Tata wanted its process reengineering
and IT implementation to address included:
Optimising inventory investment,
including raw materials, work-in-process
and finished inventories
Maximising the value of supplier relationships
Improving the accuracy of price and
volume forecasts
Determining the best product mix
Making reliable customer delivery promises
Utilising key assets optimally
Prioritising orders for key customers
Improving quality and product yields
through better scheduling decisions
Improving transportation efficiency

“ Improving our ability to forecast allows

requirements. The survey
yielded three imperatives.
First, provide an accurate us to use due-date-based planning, which
promise as to when the order
would be delivered. Second,
helps us to meet demand with higher “
in the event that the order due utilisation of assets
date would be missed, notify
the customer early in the
process—not at the point of the missed delivery. And Tata Steel completed its technology implementation
third, accurately project a revised delivery date so that earlier this year and has seen significant
the customer could modify its schedules accordingly. improvements already in critical areas. Most
importantly, 85 per cent of orders are promised
Business process reengineering within the desired delivery week and do not require
After mapping the entire supply chain process in great any manual intervention or adjustment—up from 50
detail, Tata engaged in an extensive business process per cent. “Sometimes it’s even as high as 92 per cent,”
reengineering effort. The objectives were to evaluate asserts Roychowdhury. “Now, when we understand
the gaps in current supply chain processes with respect that an order is in jeopardy, we have the tools in
to industry demands, to redesign the processes to place to troubleshoot the order and can often take
achieve a dominant service position and to identify corrective action to fix the problem before we even
the IT enablers that could make this happen. have to notify the customer.” In addition, late orders

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 4 7
 running in the production line have been reduced to
less than 10 per cent, and order booking efficiency
has risen to above 80 per cent.
Forecasting capability
Tata’s forecasting ability has also improved
dramatically. Prior to implementing supply chain
software, the company had no systematic insight
into how to evaluate the accuracy of its forecasts
New-generation software from i2 has given Tata
planners several capabilities they lacked prior to
implementation. Planners can now project business
over a year’s time and monitor performance against
those projections. They can also make product-mix
decisions based on profit optimisation goals and
take orders as late as possible with postponement
strategies. Tata’s planners can also refresh the expected
time of arrival with up-to-the-minute information.

Prognosis

“
The rapid pace of change in the steel
We’re shifting from being order- industry—and, for that matter, in heavy

takers in a relatively controlled pricing industrial manufacturing in general—is

environment 20 years ago to being
sophisticated marketers adroitly
negotiating the profitable space between “ order-takers in a relatively controlled
supply and demand
for demand as well as for raw materials. Now, it
has the tools to analyse its forecast predictions
against actual results, enabling root-cause analysis
capabilities to identify what has caused the
not expected to slow down. Stoked
by these results, Tata executives are
optimistic. “We’re shifting from being
pricing environment 20 years ago to
being sophisticated marketers adroitly
negotiating the profitable space between
supply and demand across multiple
markets on an almost daily basis,” says
Sen. “Someday, we’ll be able to predict not just the
delivery date, but the actual hour that our truck will
be pulling up to a customer’s warehouse. It opens up
a whole world of possibilities.” end

differences. “Improving our ability to forecast

allows us to use due-date-based planning, which
helps us to meet demand with higher utilisation
of assets,” says Roychowdhury. “Also, instead of
manually balancing resources as before, we can
now automatically identify bottlenecks deep in our
processes, and take corrective action to increase
our overall production efficiency, thus realizing the
benefits of continuous improvement. In support
of our strategic objectives, our supply chain data
are fully integrated with the rest of Tata Steel’s
business infrastructure, so we’re able to scale
effectively as we grow.”

4 8
 Ca s e s t u d y P alletwa y s

Economical pallet
networks in an
economic downturn
Pallet networks have been the logistics success story
of the last ten years and have changed the way
manufacturers and suppliers distribute small
consignments of freight across the UK and mainland
Europe. Craig Hibbert, managing director of
Palletways UK Member Network, explains how pallet
networks are facing up to their biggest challenge yet
with the economic slowdown

T
oday, pallet networks have become a
critical component of a business’ overall
transport strategy as they can deliver
more quickly and at a lower cost than
the traditional alternatives. Long gone are the days
when the only cost-effective distribution option
available for small consignments of palletised freight
was to place an order with a transport company
and wait until they had enough freight to make
fulfilment of the delivery orders profitable.
Pallet networks exploited this gap in the marketplace
in the mid-90s and the rest, as they say, is history.
They provide users with a fast, easy, reliable and

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 4 9
 MME Engineering
With customers all over the UK, a requirement
to make deliveries each day and supplies coming
in from its parent company in the Netherlands,
MME Engineering recognised a need for a highly
reliable and cost-effective distribution solution.
MME Engineering wanted to use a local
distribution company that would be flexible to
its needs and close enough for a fast, reliable and
efficient service. It selected Kent-based Palletways
member, Shakespeare Transport.
MME Engineering is one of the UK’s leading
manufacturers and suppliers of aluminium, zinc and
magnesium sacrificial anodes to the marine industry. Its
products help reduce the problem of accelerated low-
water corrosion (ALWC) and are used in a wide range
of applications from leisure boats right through to the
marine and offshore industries.
Shakespeare Transport collects consignments from MME
Engineering’s engineering plant in Faversham and then
transports them to Palletways’ hub facilities. The goods are
then sorted according to their final delivery points and the
freight is distributed to MME Engineering’s end customers
by those Palletways members who cover these areas.
Tony Newman, foundry manager at MME Engineering,
says: “The majority of our consignments are now being
distributed to our customers through the Palletways
network. Having a reliable pallet network delivering our
goods to customers is vital to the success of our business,
and we chose Shakespeare Transport and Palletways
because they had the edge on their competitors. Not only
do they offer us the most cost-effective solution for our
distribution needs, but they are flexible enough to deliver
to our customers’ warehouses as well as to docksides and
quaysides, which can often be difficult to negotiate.”
5 0
cost-effective logistics solution for one-to-six pallet
consignments, thereby enabling them to enhance
their service to customers.
Customers’ goods are collected by local network
members, who are independent transport companies
with local expertise and knowledge, and distributed
to a hub operation. At the hub, the freight is
processed and sorted into designated delivery areas
according to their final destination. The goods for
delivery are then assigned to network members who
cover the locations of the end customers. As goods
are consolidated with other customers’ freight along
the pallet network supply chain, not only do users
benefit from highly competitive distribution rates, the
process also has a positive impact on the environment
by increasing vehicle utilisation and thereby reducing
‘empty’ miles.
Not only does the network model offer an
environmentally-friendly solution by maximising
transport productivity; but trunking vehicles travel
to and from the hubs mainly during off-peak hours.
They leave their local depots out of business hours
(after 5pm) and travel back in the early hours of
morning. This reduces time spent in heavy, slow-
moving traffic, making for quicker journeys and
thereby helping to lower carbon emissions.
How to choose the best pallet network:
There are now nine pallet network operators in the
UK – so what should a manufacturer be looking for
to get the best possible service for their business and
their customers?
Ensure that the network has the
highest levels of quality control.
The pallet network model relies on all its
member companies subscribing to the
highest standards of service. Therefore, make
 Ca s e s t u d y P alletwa y s

sure that there are processes and initiatives
in place whereby the performance levels of
member companies is constantly monitored
by the pallet network provider, and that
there is a support structure in place to
enable the members to achieve
Customers are in good position to demand all of the
qualities highlighted above as pallet networks are
facing up to their biggest challenge to date as a result
of manufacturing output being severely affected by
the current economic slow down. Going forwards,

“
the required performance levels.
The pallet network model relies on all
Size does matter.
A network which has significant its member companies subscribing to “
capacity will mean that it can the highest standards of service
maintain customer service levels
at peak periods and allow for
sustained growth, thereby ensuring stability we see three trends happening – firstly, instead of
of the network, which is important in running their own transport, manufacturers will look
today’s economic climate. The more depots to outsource to logistics providers who can provide
a network has, the more personal service major cost efficiency gains without affecting quality
it can offer and better knowledge of the of service. Secondly, manufacturers who do not
local area(s) in which your business and run their own fleets will be reviewing their existing
customers are located. outsourced logistics arrangements to ensure they are
maximising cost efficiencies in their supply chains.
Look at significant investment Lastly, the fall in orders will force lower inventories
and innovation in technology, but suppliers will still be required to provide fast and
particularly in the area of track-and-trace, reliable deliveries.
which provides transparency. Continuous
development is essential to a pallet network. Whilst there is no doubt that these are challenging
times, we very much believe the current economic
Choose a provider that is an conditions will lead to more manufacturers
established brand and is constantly choosing high-quality pallet networks against other
looking to add value through the logistics alternatives. end

development of new services.

Choose a pallet network that offers

services beyond the UK, particularly
as the weak pound is currently providing
significant export opportunities.

Look for a simple, set pricing structure

which applies across quarter, half and
full pallets.

L o g i s t i c s A N D s u p p l y c h a i n R E P O R T 2 0 0 9 5 1
 The importance of
being smart with your
supply chain
Ronald Teijken,
industry executive for
manufacturing operations
EMEA at Sterling
Commerce explains why
it’s necessary to connect to
your business partners

I
n today’s economic climate, pressure to reduce
costs outweighs all other business drivers and
refocusing on the internal and external supply
chain operations is a necessary requirement.
For many it can seem an overwhelming prospect;
most complex manufacturers receive more than
50% of their business, both demand and supply,
from international markets, and with a significant
portion of outsourcing production going to China
for example, there is an added risk of driving cost
innovation to the Far East, enabling those markets to
increasingly compete on multiple fronts.
A consistent measurement that has persisted for more
than a decade is the one between industry leaders
and laggards. There remains, on average, a gap of
50% in terms of cost advantage. This would indicate
significant opportunity for cost reduction and
process streamlining across manufacturers globally;
supply chain transformation and alignment strategies
can help remove the reality of being in constant
firefighting mode with exceptions driving the rules.
Traditionally, manufacturers make decisions based on
costs but to remain competitive in this environment,
manufacturers need to focus on innovation, design
and production; not just with products, but especially
across the supply chain.
Although many are now accepting that visibility is
key there is still a lack of integration with partners
across the supply chain. Recent studies in the UK,
France and Germany have indicated that a number

5 2
 c a s e s t u d y
of manufacturers, including large and global
companies, lack integration with their business
partners and those that do have seen an increase in
costs to correct errors, which can take up to three
hours per day, per employee.
Without this integration there is no information.
Without information it is impossible to achieve
visibility. IT departments might struggle to provide
support but it actually costs more not to know what
is happening across the supply chain; not only due
to charges of non-compliance but in some cases
inefficient supply chains can easily lose revenue.
So, who determines what makes a successful supply
chain? More importantly, what are the critical
success factors and are they achievable or merely
theoretical perfections?
Inventory levels
A key element of any supply chain cost reduction
strategy is looking at inventory levels and understanding
where efficiencies can be gained. Using visibility to
improve inventory management should be a critical
success factor for any manufacturer operating over
multiple geographies and channel partners. Traditional
inventory optimisation strategies tend to approach it
singularly, examining various inventory locations in
isolation and perhaps not considering how they relate
to the wider inventory network across multiple trading
partners and multiple geographical locations. In a lot
of cases manufacturers have outsourced warehousing
operations to logistics service providers but in the
context of the complete supply chain, it is important to
integrate all information about inventory for the right
decisions. Unfortunately, many manufacturers still lack
the right systems to be able to achieve this visibility.
Supplier visibility and communication
Extending visibility to the often complex fulfilment
aspect of any supply chain is a challenge; understanding
L o g i s t i c s
s terlin g commerce
the relationships with what can amount to thousands
of suppliers with differing process models, relationships
and technology levels can look insurmountable,
and that is before you even think about process and
technology integration across multiple systems and
architectures. Despite this however, many industry
leaders are investing significant time and resources into
extending visibility globally. We already know that
for most complex manufacturers more than 50% of
their business is global and to remain competitive all
elements need to have a global approach, including
visibility improvements. In addition, improving
communications through order visibility between the
manufacturers’ demand and the fulfilment side
can support:
Real time availability over a
global network
As orders are placed into suppliers, a
manufacturer typically no longer has the
ability to retain a linked view, especially over
a global network. Linking the original order
(the demand) to the purchase order (supply)
can open up the supplier’s ability to share
stock allocations and availability to enable
the manufacturer to be more responsive and
perhaps re-distribute fulfilment in the event of
availability issues.
Co-ordinated single orders across multiple
suppliers, systems and the internal supply
chain (distributed order management)
With many manufacturers continuing to
work across different systems, it is hardly
surprising that quite often there is a lack of
co-ordinated single orders across multiple
suppliers. Linking orders across a global supply
chain can in turn unlock other cost savings and
efficiencies for the manufacturer. Beginning
with the original sales order for a complex
item which can be communicated from the
distributor down to the manufacturer, the
manufacturer then breaks the order down into
A N D s u p p l y c h a i n R E P O R T 2 0 0 9 5 3
 its related components which may in turn be
fulfilled from multiple suppliers in multiple
geographies. With a global visibility system
in place, the manufacturer can consistently
monitor progress of these component orders,
regardless of the fulfilment route, in relation
to the original order. This means scheduling
and production can be carefully timed and
exceptions can be responded to in a measured
way with reduced impact or delay on the
original order.
Order tracking and management
As demand is often driven through multiple
channels it is necessary to consolidate all
channels into one picture. Unfortunately in a
lot of cases, demand is still received and tracked
as separate information. With the right orders,
information and visibility, you can make the
right decisions for fulfilling the demand from
your customers across the whole supply chain.
Investment in integration and cross-enterprise
order management solutions for demand and
fulfilment will deliver multiple opportunities
for cost reduction in traditional supply chains,
which cannot be achieved by traditional ERP
and/or MES systems.
Responsiveness through diversion
As all industries know, supply chains are
run by exception. No matter how efficient
or effective your planning, there are always
unexpected scenarios and while planning
is necessary, a flexible fulfilment strategy is
critical to enabling a responsive supply chain
in the event of disaster or change. In addition
to the usual factors driving change within a
distribution network, the current economic
climate is seeing companies going out of
business or being acquired. This requires your
fulfilment network to have the ability to divert
order fulfilment to new facilities, geographies
and trading partners as needed, without the
need for completely re-writing your order
management systems and processes. As some
5 4
glitches may also be only temporary the
requirement to get them back in the network
requires a fair degree of flexibility
and responsiveness.
Coping with single source products in a
global distribution network
The headache of single source products and
distributing fulfilment efficiently can be
solved by improving visibility and inventory
management. Understanding how the inventory
is distributed across the network, by country,
business unit and trading partner, can make it
simpler and more cost-effective to fulfil orders
from existing supplies in a neighbouring region
or facility as opposed to ordering more from the
single source. As single source products tend to
be expensive, this can represent significant cost
savings and process efficiencies.
To effectively achieve the benefits of comprehensive
visibility you need a technology system that enables
visibility, multi-enterprise order management and
inventory management tools to create a stable,
scalable platform that can integrate with, and
leverage, existing IT investments. In a scenario where
there are multiple ERP installations across multiple
countries and business units, a distributed order
management system that can extend the information
and processes within these ERP instances to link
trading partners can bring extensive benefits.
What underlies all of the above strategies is the ability
to link supply and demand outside the four walls
of the enterprise as well as implementing processes,
integrating systems and maintaining collaborative
relationships to leverage that visibility. Ultimately,
integration with your B2B community is the smart
way to do business. It can support the achievement
of full visibility of your supply chain and provide the
opportunity to calculate where financial savings can
be made and where efficiency can be increased. end
 MEET THE EXPERTS
IN LOGISTICS
COLLABORATION

In a world where supply chain’s efficiency is a critical component of both

commercial success and cost control, Transwide allows its customers to Join the leaders that shape
increase their transport execution performance by extracting value tied in the future of logistics,
such as P&G, Catepillar,
miscommunication, stuck information, lack of visibility and low agility.
Rio Tinto, Sara Lee, Total,
Transwide offers process optimization and alignment, real time visibility
Invista, Georgia Pacific,
and collaboration between all actors of the logistics process such as Danone, DHL, Mars, FedEx,
shippers, carriers, 3PL, 4PL, shipping lines, freight forwarders, receivers… and many others…

Transwide’s modular Solutions include:

• Transport Order communication according to pre-established criteria with full
Groupage and Ex-Works functionalities to maximize automation.
• Appointment scheduling plan with Carriers the truck arrivals at your
sites, both in Inbound and Outbound mode.
• Maritime booking requests and shipping instructions to accelerate and
simplify your relationship with shipping lines when creating B/Ls.
• Full Track and Trace feature to make sure you can be proactive with your
own customers and assess your fulfillment performance.
• e-CMR enabling automatic reconciliation with the matching Transport
Order for faster invoicing cycle and claim management.
• Event Management System allowing you to manage by exception,
focusing only when things are not going according to plan and
alerting you when critical incidents happen. You can then address
the issue, avoid escalation or spillage on other processes.
• A KPI extracting system to monitor your logistic
performance and develop a strong and factual
collaboration with your logistics
partners

All these features

can be accessed
through a simple
web access but of
More than 55,000 users within more than 6,000 companies worldwide are using course can also be
Transwide daily. Transwide’s wide network covers all activity sectors in Europe and North completely integra-
America.Our aim is to provide a simple solution to help increase transport execution’s ted with your ERP or
efficiency and performance that will lead to hard savings. Our SaaS (Software-as-a-Service) TMS system and
model allows us to offer implementation in just weeks and Return-On-Investment that can work seamlessly in
be as fast as 2 months. the background.

Transwide
EMEA: Tel +32 (0)2 722 99 20 - NAFTA : Tel +1 (877) 763-3240
info@transwide.com - www.transwide.com
Lean Thinking
Courses
Events, Training & Networking 2009

COURSES

MSc in Lean Operations

Exclusive 2 year part time executive
Masters Degree
‘Excellent delivery and style. Extremely
Short Courses
useful and thought provoking’
t
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1 day Layout & Ergonomics survey. The quality of teaching is very
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The Lean Enterprise Research Centre (LERC)

LERC is the leading centre for lean thinking in Europe. Founded by Prof Peter Hines and Dan Jones in 1994, it set up
the first ever Masters programme in lean operations in 1999. LERC specialises in applied research, teaching, knowledge
transfer and mentoring. For more information, visit www.leanenterprise.org.uk or call 029 2064 7028.

Lean Enterprise Research Centre