The basic definition of lean logistics is that it identifies and eliminates waste of time, effort, and material from the supply chain to improve efficiency. You can accomplish this by maximizing teamwork, productive management, and cross-functional operations to make operations move faster and at a cheaper cost.
The concept of doing what you have always done is no longer acceptable in the modern-day economic environment. With the pressure to contain costs while still producing results despite challenging circumstances, it is best to transform rather than only looking to improve your operation. This can include incorporating philosophies, strategies, and processes to rank your company or organization as one of the best.
The resolution to improve your supply chain organization’s operations and put you at the top will vary from company to company. These are a few best practices that you may want to implement in your work environment.
Establishing a governing supply chain council will help provide direction and align supply chain strategy with your overall strategy. Be sure that your council members include the leader of the supply chain organization, corporate executives, business unit managers, and other influential company leaders.
Look to align and staff your supply chain organization. It is not an easy task to arrange the supply chain function to optimize its effectiveness and be beneficial to the company. Some companies embed proficient supply chain management professionals in various business units, while others opt for a more centralized operation. Progressive and competitive companies utilize a hybrid approach that combines a centralized strategy to get consensus with decentralized execution to improve service.
Technology is your supply chain’s best friend and is highly beneficial in today’s digital age. Make it work for you and not the other way around. You will want to review your processes that need improvement and only select the technology to serve that purpose.
TCO or total cost of ownership should be your focal point and not the price. Implementing strategic sourcing helps you to not only look at the purchase price but to understand the total cost of owning or consuming a product or service.
Optimize company-owned inventory. Your chief financial officers and their team have inventory on their radar and look for ways to improve the bottom line while decreasing working capital. A best practice is to consistently review inventory quantities and aim to maintain them at an optimal level. The “real” cost of sitting on inventory is more than the generally assumed 20 to 25 percent. Data shows the cost of holding inventory could reflect up to 60 percent of the price of an item stored in inventory for a year.
Logistics management is essential to your supply chain organization. Whether your operations involve domestic or international freight logistics, good logistics management will improve efficiency and lower costs. Better supply chain transparency identifies where you might need to make changes and what you are doing right.