Improve your supply chain

Any business owner involved in sending/receiving products relies on an intricate chain of supply. The good news is, some solid programs are in place to improve efficiency and reliability.

If you’ve been shopping online lately, you may have been using a computer assembled in Taiwan with Irish-built processors and running software developed in the US, to buy a product designed in the UK and manufactured in China from materials resourced in Brazil. Your credit card would be processed in India, the product shipped from a warehouse in Singapore on a Norwegian freighter, tracked by an Australian TDL company, and delivered for collection in a van assembled by the Korean subsidiary of a German-American automotive company. 

And that’s just buying a book! The supply chains involved in more manufactured products are far more complex with masses of intersecting operations. But the ability to get to grips with these kinds of globalised supply chains and to successfully participate in them is critical for individual business, industry sector, and nationwide competitiveness. Efficient supply chains that provide a seamless, quality-controlled and integrated flow of freight and information cut costs, speed up delivery, and promote technology and knowledge transfer. And with ever-increasing globalisation, such supply chain excellence is central to breaking into international markets. Today exporting is not so much about rivalry between individual companies, it is more about whole supply chains competing against each other.

Some striking figures from the US illustrate the impact of bad and good supply chain practices on productivity at the national level. It has been estimated that in the United States some $40 billion is lost in the retail market annually because goods are sold at reduced or discounted prices—that is, because poor inventory control has allowed too much stock.

And that another $40 billion is lost in potential sale of goods that would have sold if they had been available—that is, too little stock. However, when such issues are addressed, the gains are remarkable. A good example of this is the fact that, in 1980, business logistic costs in the US equalled 16 percent of GDP but fell to 10 percent by 2000, a 37 percent reduction in only two decades. You can imagine the increase in productivity if one of your key operating costs fell by more than a third.

Perfect Example

Take this hypothetical example of what a state-of-the art supply chain can provide for a small Australian business looking to grow internationally.

When the ‘Gourmet Foodstore’ in Philadelphia buys fillet steak from Gippsland beef farmer, John Smith, it is on the end of an extraordinary supply chain. John’s cattle are all individually ear-tagged for supply chain identification. He knows exactly what treatments and drugs each have received and what fertilisers and herbicides have been used on the paddocks where the cattle graze. All this vital information is documented in an electronic system that will provide a complete profile of the progress of the meat products along the supply chain.

At the abattoir in Melbourne, supply chain systems monitor and control the treatment and condition of the products from each animal as they are processed, sorted, and packaged. New data is added to the electronic document system on the origin of the product, the manner in which animals are processed, the quality of the product, and how it is handled and refrigerated.

In the container, the fillet steak has been refrigerated at just the right temperature, continuously monitored by in-container systems. These and other systems provide important information such as the fact that the meat products have been kept in the correct environment throughout the manufacturing, transport and the logistics chain process. They are safe, secure and protected by Radio Frequency Identification (RFID) systems on the container that prevent illegal access and indicate if locks have been tampered with.

Supply chain systems also allow container conditions to be remotely monitored using satellite technology so owners can check conditions and act immediately if required. The integrated supply chain data systems also ensure that products move quickly through Customs and terminal release processes in the US because all authenticity, food standards, bio-security and regulatory steps and requirements are correctly documented and complete.

By the time the fillet steak gets to the ‘Gourmet Foodstore’ it is fresh, healthy, safe and tender and of the highest quality thanks to John Smith’s expertise and a highly sophisticated supply chain smoothing the way.

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Complex Challenge

Achieving this kind of supply chain excellence is obviously beyond the scope of any one organisation. It requires a coordinated approach by all stakeholders from business, industry, union, education bodies, and government.

That’s because there are major challenges to achieving supply chain excellence. They include key supply chain players worldwide forming new strategic alliances and the emergence of new business models. Then there are new technologies like RFID and wireless local area networks driving new production and distribution models such as online purchasing and delivery.

The overall freight task is growing itself while Transport, Distribution and Logistics (TDL) operators are also coping with increased fuel prices and the need to ensure supply chain security. It’s a rapidly evolving and increasingly complex task. But, achieving supply excellence puts you ahead in the global marketplace.

Victorian Initiative

The Victorian Government is taking on all these issues as part of its strategy to keep growing Victoria as Australia’s State of Supply Chain Excellence and Gateway of Choice. This approach is based on the recognition that a unique integration of strategic thinking, planning, and new technologies and skills to harness TDL resources and infrastructure is central to meeting the fast-growing diversity of customer needs. In short, ensuring that everything is linked.

So the Victorian Government is improving the overall supply chain environment through the framework of its TDL Industry Action Plan, and the 2006–2009 Supply Chain Excellence Action Plan. These are both government-industry partnerships focused on issues like infrastructure and technology, education and training, regulation review, and supply chain efficiencies.

This covers projects such as the Business Activity Harmonisation Study to reform operating hours at the Port of Melbourne, Australia’s largest container port, and the TDL Specialist Centre, and the National Intelligent Transport Systems Centre.

This industry–government partnership has also been active in developing the Information and Communication Technology (ICT) capabilities of supply chain companies. Over the last few years a special reference group has actively supported the development of ‘smart freight’ and completed a major Transport Company Benchmarking Study. This study benchmarked how 56 transport companies use ICT systems, within their company and with other companies along the supply chain. The reference group is now focussing on streamlining transport payments through improved ICT systems.

New Ideas

Victorian Government initiatives such as the Supply Chain Capital Program are also working to directly improve performance among separate companies linked by common supply chains.

For example, Australian Vinyls Corporation (AVC) piloted new e-commerce technologies in Victoria with supply chain partners, interstate road transporter, Fred’s Transport and plastic pipe and PVC products manufacturer, Vinidex. Through the project, they developed an integrated information flow that allowed their systems to electronically talk to each other, and achieve what is known as System Interoperability. This improved monitoring of stock levels across the supply chain and eliminated double entry of data between trading partners, delivering time and cost savings to keep AVC competitive against imports. It also cut nearly in half the time customers needed to reconcile supplies in-transit, and delivered over multiple plants, which dramatically improved the management of raw material and production scheduling.

Another example was the Mercury Communications Group trailing the innovative new print-on-demand system Booksurge, to print and distribute specialist academic monographs under commercial conditions. Mercury’s supply chain partners were the project’s print data management company, Thorpe Bowker, and academic publishing house, Melbourne University Publishing. It can take more than three weeks for books to be shipped from the United States or Europe, even when they are in stock. But advances in digital printing, managed by a system like Booksurge, means books can be printed as needed in the country where the order originates. Printing on demand cuts delivery times and inventory, and allows improved electronic ordering, as well as copyright and rights reporting management.

Mitre 10 also developed a new supply chain approach through the Supply Chain Capital Program to improve efficiency in the distribution of timber intended for house construction.

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By streamlining processes and distribution and by extending e-commerce systems, Mitre 10 trailed the delivery of finished timber in house packs from suppliers to building sites bypassing the more common system of routing the timber via a central distribution centre. Less handling of the timber this way lowers the possibility of injury while a direct-to-site distribution system also means fewer road trips for the companies involved—a saving for them and a bonus for other road users.

Another project funded by the program brought a group of small companies together with Australia’s biggest retail chains, 7-Eleven Stores. A new electronic ordering, replenishment and receiving process allowed overnight delivery of fresh food from a central distribution point into the convenience stores. This opened up new opportunities for smaller suppliers who didn’t have the distribution capabilities themselves to deliver to hundreds of stores, but could otherwise meet 7-Eleven’s requirements.

Total supply chain management could hardly be more important than in the health care industry where timely, accurate, and cost-effective service can literally be a matter of life or death. Furthermore, there is a mandatory requirement for the tracking of medical devices that are intended for implantation. With support of the program, the radiology department at Alfred Hospital moved to an electronic system for tracking medical devices to increase patient safety and enable much better management in the event of a product recall. This also meant nurses could get more time with their patients as they spent less time managing medical inventory.

Your Link?

So if you think your own operation needs to improve its supply chain practices, what should you do next? As with most other business areas driven by specialist technologies and expertise, informed and individually tailored advice is central to making the right decisions. Here you should start by finding a business adviser or consultant with experience of supply chain issues.

And be sure to check with your relevant state government department on initiatives specific to your state or industry.

By aiming for supply chain excellence, you’ll be boosting your own bottom line and becoming another productive link in Australia’s connections with the global economy.

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