As a consumer we would get in our car and travel to the desired shop and hopefully be able to purchase the goods we needed.  As a business, it would be far more catastrophic.  Do we rely on the Internet too much in our lives to help with the everyday tasks?  The people that had been stranded around the World due to the eruption must have felt desperate.  Eventually there were measures put in place to try and get people back home by other modes of transport as quickly as possible but not everyone was that lucky.  What would plan “B” be for those who depend on the Internet?  Have we become so lazy that we have forgotten what we did pre 1995 before Larry and Sergey, Stanford computer science grad students, began collaborating on a search engine called BackRub?

The history behind Google is fascinating www.google.com/corporate/history.html but that doesn’t answer the question what would we do as business owners or managers?  How much would we rely on Plan “B”, would people still get in their cars to travel to make their purchases?  And how would we make our stock replenishment orders without the aid of the internet.  If the internet was never to recover from a technical disaster how quickly could a replacement system be put in place?  Overnight - highly unlikely.  And don’t think this is an impossibility.  Although the Internet has a highly resilient architecture (after all much of the early development work was for the military) there are those that predict that future wars could target the internet as a point of weakness for the enemy.

Everyone needs a Plan “B” - what’s yours?

In the ‘old days’, when goods went through several hands each with a stock holding before they reached the consumer, the impact of such calamities could be absorbed but with direct sourcing and minimised stock holding the effect is almost immediate.

Given how vulnerable supply chains are now and the fact some companies never recover from a major supply chain failure, you would think that businesses would protect themselves, and yet few do.  There are insurance policies you can take out to cover some eventualities but they never cover the true cost of the disruption.  Some argue that an advantage of modern supply chains is that although the impact of failure is felt quickly, recovery is equally quick.  Research though has shown that the effects of a supply chain failure can be felt up to two years after the failure has been rectified.

So how can companies manage supply chain risk in a global economy? As with all management tasks the first step is to understand and quantify the risks. Of course the simplest and often most cost effective ways of managing supply chain risks is to prevent them from happening or at the very least minimise the chance.  Those risks that cannot be eliminated at source need to be analysed to see what opportunities there are to mitigate their impact.  Again as with many other aspects of management you start with those risks that are either most likely to occur or, if they occur, will have the biggest impact.  Techniques developed for measuring health and safety risks can be helpful where risks are given a score for each of these factors so that those that get a high score for both, i.e. high likelihood of occurring and high impact when it occurs are put to the top of the list.

There are numerous and varied supply chain risks and strategies to mitigate them.  They can vary  from fire in your warehouse to the failure of a Far East supplier.  Mitigation strategies might range from installing a sprinkler system to seeking alternative sources of supply that could be activated at short notice.  You might consider having duplicate tooling available if that is relevant and you might even set up sharing agreements with partner companies where you can help each other out in times of need.  If the disaster would result in having to set up a new operation in a new site think about how you would do it and who would do it.  Do you have someone appointed to lead the disaster recovery team?

Do you know who you would turn to find new premises? Can your IT supplier provide you with, and configure, a new system at short notice?  If product comes to you by sea you might want processes in place to fly in replacement stock.  Just after a disaster has occurred is not the best time to be negotiating good deals.

These are all things that you need to plan out in advance so that should the disaster occur, your organisation is ready to respond straight away.  Again research shows that your Customers will stay with you and live with the inconvenience for a short period but will soon desert you if the outage goes on too long.

If you don’t have a comprehensive supply chain disaster recovery plan then act now before its too late.  The cost of some of these mitigating actions may seem high but they are nothing compared to the cost of a supply chain failure or ultimately of losing your business.

This demand for 24 hour service causes severe problems for the retailers such as Amazon and Tesco Direct and many other much smaller businesses.  They have little time to pick and pack the evening orders, prepare them for despatch and get them ready for the parcel carriers’ hubs where they can be sorted and sent off to customers.  The parcel carriers, who have to pick up the orders, sort them and get them to the local depot where they can be loaded for delivery, face even more difficulties than the retailers.  It is they who are responsible for getting the order to the customer and meet these ever more demanding service levels.  It doesn’t take a lot to appreciate that much of the time for delivery is taken up with transport on the road and that the 24 hour window is not what it seems.  In fact parcel carriers have only a few hours in which to sort hundreds of thousands of parcels and get them on the road to their destinations throughout the UK.  The result is that evening windows are at a premium in parcel carrier sortation hubs and as 24 hour service requirement grows, so does the need for sortation capacity.  And it’s not going to get any easier.  On-line ordering is still growing rapidly and what’s more these orders are coming just from people on their PCs at home.  Current predictions are that at sometime within the next three or four years there will be more people accessing the internet via their mobile phones than there will be using home computers - and that means that customers will be placing on-line orders from any place at any time.

What retailers want is later and later cut-off times so that they can offer customers next day service for orders placed in the evening, and what parcel carriers want is earlier cut-off or - even better - more 48 hour or 72 hour deliveries so that they can more evenly balance their sortation hubs.  There is limited capacity for the evening window and on current predictions demand is out-stripping supply.  And that can mean only one thing - when demand exceeds supply prices rise.  So, will consumers see an increase in the cost of next day delivery or will the market forces force retailers to absorb the cost?  It remains to be seen but there are certainly some interesting dynamics developing.

material-issues-volume-ii-no13.pdf

And yet it’s normal for a different team or individuals to undertake the concepts and planning from those that implement the system both for the client’s team and the supplier’s.  There are, however, many good practices that can be implemented to mitigate this problems such as:-

• Involving all key people at critical stages of the project;
• Following recognised, documented practices for project handover from one stage or person or team to another;
• Use of a steering committee to maintain the high level objectives throughout the project.

Despite all this, differences between the project objectives and what is delivered can still occur.  The following guidelines are designed to minimise these differences by putting the correct emphasis and timing on activities that are likely to be a part of all major projects:-

• Define the deliverables required to ensure the objectives of the project bring the benefits to the organisation;
• Be able to express these deliverables in measurable values that can be built into a testing process;
• Have the contract constructed around the project deliverables and testing process to align all parties’ focus and efforts.

Depending on the type of project, the deliverables could take a number of forms.  As an example, if the project is to improve the overall capacity and service levels of the site whilst the supplier’s project is to install a system that improves capacity in a specific area, then key points to consider are:-

• Are the objectives of the supplier’s project fully compliant with the main project objectives?
• Are the suppliers able to demonstrate the capabilities and capacity of their system working in isolation as well as a part of the larger system?
• Can a series of tests be developed that can demonstrate the capabilities of the supplier’s system?

Whilst many words and commitments can be made to meet the broader objectives of a project it is the testing of the system that will become the focus of the supplier’s project team.  Passing these tests triggers hand-over to the user, final payments and the opportunity to release expensive resource from site.  It is therefore surprising that exactly how these tests are undertaken or even what tests are undertaken is often not fully defined during the tender or contract phases.

A supplier’s offer will usually include descriptions of functionality, equipment and the headline measurables such as throughput and availability.  Testing is usually covered with some standard paragraphs and perhaps reference to some industry standards.  This leaves a great deal to be finalised after the contract has been placed by the respective Project Managers.  Leaving the detail of testing until the implementation of the project runs the risk of not fully satisfying the project objectives.  A great deal of cost and emphasis can go into creating a contract pack and making the clauses applicable to the project, but without a comprehensive testing document many of the contract clauses can be left open to interpretation.

The correct definition and implementation of some key points are the basis of a strong contract that aligns the objectives of users and suppliers.  These include:-

• What functions does the system need to undertake?
• What performance is required from the system?
• When does the system need to be completed?
• How will it be tested?
• What is the acceptance criteria?
• What are the consequences of not meeting the acceptance criteria?
• What are the limits of liability for not meeting the criteria?
• How is handover linked to payments?

Legal advice is often necessary to ensure that changes to the contract are implemented accurately but the key points will need to be established and developed by the project team and their project and logistics advisors before developing and checking the contract wording for accuracy.  The consistency and linkage from the user’s original requirement through testing to the contract becomes key to ensuring a project successfully meets its defined objectives.  The process sounds straightforward but to ensure all documents reflect the requirements of all parties requires a substantial effort.

The use of advisors who have experience and expertise of implementing projects as both a user and supplier is one way to ensure that the project objectives are met.  Implementing and following the correct processes and the development of the documentation that forms the contact pack are areas where advisors can be particularly effective.

Consultants within THE LOGISTICS BUSINESS have many years experience of developing project documentation and contracts as both a user and a supplier and undertake many projects every year to ensure our clients have their operational objectives fully satisfied.

Every projects has its ’snake’ moments but as long a you steer clear of these and keep climbing the ladders, success will be ensure.

During the latter half of the 20th century the make up of the economy changed dramatically with a drift from manufacturing to service industries.  In some ways this can be compared with the move from farming to industry in the 19th century; although thankfully the cost in human misery has been much less.  However, as big as the change has been, it is often forgotten that the UK is still the world’s 6th largest manufacturing economy by output, and manufacturing is still vital to UK prosperity.  But just as farming changed as a result of new methods and terminologies, so manufacturing has changed; our output is now based not on high volume, low cost products but on innovative, high value products, which require specialist engineering and scientific skills.  Other parts of the world manufacture the high volume products more cheaply, and we have to accept that in the future our consumable products will continue to be imported from all over the world using ever more effective supply chains.  The optimistic view must be that global trade will continue to grow (with the inevitable ups and downs of economic cycles) and that the UK will depend on global trade for its continued wealth, just as it always has done.

The management of supply chains has always been vital to the UK’s interests; it hasn’t always been referred to as such, but from the day men began to trade they have had to put in place the means to move the goods and the means for managing the processes - wool, spices, silk, cotton, cars, televisions, jet engines are all the same as far as a supply chain is concerned.  It’s just that the volumes have increased, the markets have become more complex and the industrialised world has realised that excellent supply chains deliver competitive advantage.

If the UK wants to maintain and grow its wealth, it has to innovate in both goods and services and it has to trade these goods and services - and implicit in this is the need for trading companies to develop the systems, processes and facilities needed to operate effective supply chains.  In the last 20 years UK companies have led the world developing excellent supply chains and THE LOGISTICS BUSINESS continues to be at the forefront of innovation and development in this area.  Our skills and experience have brought benefits to many of the UK’s leading companies and have been sought after by companies as far afield as Japan, India and Brazil.  Thus, not only are we helping other companies to trade but we are developing services that which are themselves being exported worldwide.

The Company is based in Norfolk but also has manufacturing facilities in Scotland and the North-West, as well as across Europe and North America.  Its distribution operations had grown successfully over many years but with development and change, not to mention the ever increasing demands of its major customers the Directors believed that the business would benefit from a fresh view of how the UK warehousing and distribution network operated.

THE LOGISTICS BUSINESS was appointed to undertake the review, with a wide ranging brief covering all logistics activities from the day to day warehouse processes through to warehouse locations and the distribution network.  The work undertaken included mapping warehouse processes, benchmarking operating costs against sector standards and building a detailed supply chain model covering the movement of goods from the manufacturing sites through the warehousing network to the customers.  The model was used to compare a number of operating scenarios on the basis of both cost and customer service.

The results were highly significant for Jeyes not because of the radical changes that were proposed but because, on the whole, THE LOGISTICS BUSINESS was able to confirm that the company had a sound and robust logistics operation which was well suited to its current and future needs.  Even so THE LOGISTICS BUSINESS was still able to identify a number of key areas where improvements were possible and proposed a number of recommendations for the short and medium term development.