How to carry lean management in logistics and supply chain

Published: 20 Aug 2009 19:01:45 PST

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

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

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

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

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

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

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

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

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

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

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