The modern customer has become more demanding than ever – they expect not only the ever-increasing quality of products but also excellent levels of service to match. This puts significant pressure on organisations, as they must adjust their processes accordingly and employ various process improvement techniques to match their customers’ expectations while keeping costs down.
Many people in their professional lives have experienced situations when tried and tested ways of working slowly become formalized into actual company processes. In many cases these are a result of spontaneous, uncoordinated actions performed by workers simply carrying out their duties.
However, even the smallest inefficiencies can add up quickly over time. Considering the pace at which businesses must expand, formerly small process inefficiencies can translate into huge losses.
At the same time, when viewed from a proper distance, these changes can offer a great perspective of a company’s potential, resulting in necessary process improvements and changes that can lead to considerable cost savings.
How can we identify inefficiencies and offer better solutions for process improvement?
Read on to learn about common logistics areas that should always be given scrupulous attention.
Organisation of work
It is advisable to start the job with a detailed analysis of the process. For complex operations it may be beneficial to perform process mapping. You can start with defining the current state (AS IS) and finish by establishing the desired outcome (TO BE). Such an approach, however, is not always necessary. In many cases, understanding of an existing process can be achieved simply by following it step by step from beginning to end. This often means having detailed conversations with a number of people directly involved in the process at various stages.
The aim of these staff conversations is to establish:
How employees access the information relating to their job
How their exact job responsibilities are defined
How employees pass job-related information on to others
This stage is also a good chance to get to know the opinions of other people directly involved in the process. You can find out the kinds of problems they identified and what could help them carry out work in a more effective manner.
Knowing this information allows organisations to identify work inefficiencies related to, for example, document journeys, flow of information, communication, insufficient IT support and so on. Here we can also learn about information gathered by the company and can analyse available quantitative data.
Logistics minimum levels
While the quantity, frequency and complexity of customer orders is directly connected to the number and intricacy of logistic operations, and their generated costs, it is necessary to look closely at the structure of customers and their orders. Such analysis can provide valuable information about profitability and unprofitability of shipments. This should lead to communication with vendors that are aimed at establishing the logistics minimum levels (for example the MOQ – minimum order quantity).
Activities directed towards securing new agreements with vendors will require involvement of marketing and sales departments representatives. A thorough report on the analysis of existing inefficiencies should be used to describe any issues, such as shipping costs being higher than the revenue generated from the sale.
Transportation forms a fundamental part of the overall cost of logistics, and should therefore be thoroughly analysed. It is necessary to establish correct and optimal logistics activities and to ensure 3PL costs do not exceed market rates. It is also advisable to compare the expenses of your own transport with external 3PL providers. It is always advisable to use shipment consolidation as much as possible.
Companies which rely on logistics transportation for their business, need to consider few important aspects to cut down their expenses. There are many reasons which cause huge costs of logistics transportation to companies.
Labour is a significant part of warehousing costs for the vast majority of companies. It is therefore necessary to properly analyse the effectiveness of each particular warehouse worker, and their motivational systems. Detailed analysis should also be conducted regarding existing warehousing processes in order to identify bottlenecks and unnecessary tasks.
There can be many reasons for these, but it may also turn out that some inefficiencies (bottlenecks, delays) are caused by the warehouse unit layout or internal setup. In such cases it may be necessary to rearrange the warehouse area. Some avoidable, repetitive processes (such as excessive paperwork, manual recording) can also be easily eliminated by implementing a suitable IT solution.
In essence, process improvement in logistics does not necessarily have to involve extensive projects, nor does it always require advanced specialised knowledge. It does, however, require sensible, clear thinking and persistence in order to identify the real issues.
The identification and elimination of even the smallest ineffective tasks or parts of processes can benefit an organisation by providing a much-improved overall workflow.
Process improvement is an ongoing strategy! Remember that finding inefficiencies, eliminating them, and implementing new improved processes are all necessary elements.