by Franco Boccia17   Settembre   2014

Rethink the 'Supply Chain' to create value

Logistics 2.0 (Logistics Intelligence) can greatly contribute to SMEs’ new competitiveness. Also following European objectives towards smart specialization of industries.

Italian recovery: what would the companies need?
As IBM recently declared, “We are witnessing an era where intelligent systems are creating new value for businesses, agencies, and institutions all over the world. While it first happened in industrialized countries it is now taking place in developping countries too. Intelligence is infused within the systems and processes that make the world function. Everything today can basically incorporate new technology, be interconnected and have operational intelligence. Billions of digital devices, connected via internet, are producing an ocean of data. All this information can be transformed into operational intelligence thanks to computing power and analitical instruments that can give it new meanings. Today sophisticated mathematical models can predict changes within our systems. Public administrations, institutions and large companies all over the world have already taken up this challenge, which is very good news. We can’t miss the moment. The bulding of a smarter planet has already begun”.
Today, after the crisis, industrial companies have a great urgency to refocus on complex value-added products and services to be able to get a foothold in newly structured international markets as well as domestic ones, with stronger competitive weapons.
Taking into consideration the above mentioned, the following remarks can be made on Logistics:
In brief we suggest that institutions favour the sharing and adoption of the best know-how
and practices/experiences on logistics for an innovative and optimized management of logistics procedures and Supply Chain; so as to facilitate communication, training, updates on logistics and on the use of methods and instruments for an optimized management; so as to favour/support possible consequent management audit; so as to promote/implement possible common basic ICT platforms for the use of tools “economic/suitable” for SMEs.

Logistics 2.0 – Logistics Intelligence.
Today Logistics and Supply Chain cover a reality of  company-supplier-client relations developped through systems of co-development of products, co-prediction, co-buying, production and delivery; from raw materials to finished products. Integrated logistics is the best tool to reach marketing objectives. It can involve companies of product concept/development, final producers, suppliers, subsuppliers, distributors, stores, intermediate customers, final consumers and so on. It can also imply other supplying or delivering countries, and it can work during a ‘crisis’ and when there’s a great need for networking/pooling in view of a possible ‘recovery’.
Extended Supply Chain = Chains/networks of integrated companies
Supply Chain Management = with extended and integrated logistics (integrated intra-company functions/processes, flows of materials, products, data). 
But we need to take into consideration the followings: the unfortunately ’slow’ evolution of structures, means and systems for logistics management (it takes a long time and a lot of money to innovate or enhance logistics: motorways, ports, railways..).
 
Methodologies and ICT/Web already supporting logistics today.
The concomitant evolution at the ICT/KM/Web 2.0. The concomitant evolution of the company at ‘enterprise 2.0’.
One is naturally led to wonder the followings: can innovative methodologies and ICT/KM/Web 2.0 support logistics optimization from now on? can they contribute to boost our competitiveness?
Since logistics structures, means and systems are renowned for being ‘slow’ in evolving, while we wait for new investments in infrastructure we could make an investment in “intelligence” for logistics. Far less investments are needed compared to those needed for infrastructures. Less time is needed to get the first tangible results. And you get suggestions to develop infrastructure too.
Considering the main potential macro processes for each one of the actos/companies of the specific chains, we may appeal to the followings: knowledge and its ìintelligent’ use; optimizations; ICT 2.0 and evolution of the main computing systems; virtual testing, which favours innovation of methodologies. Real examples of supercomputing systems and ITC innovative applications can be observed at the Cineca centre of Bologna.

Within the Supply Chain optimization the following logistics objectives are to be considered:
• Optimize/innovate logistics according to the level of service (type; date; quantity delivered/required), Lead Time of the service (from order to delivery), costs of service (the whole logistics chain), quality of service (conformity to what was ordered), and other KPI (Key Performance Indicators) (also see standard model SCOR, Supply Chain Reference Model, of Supply Chain Council).
• Boost ‘total’ effectiveness of logistics/Supply Chain. An increasingly globalised market and the constant urgency for innovation in order to maintain competitiveness and ensure rising profits push companies to consider costs reduction a priority; at the same time encouraging them to act while keeping positive cash flows.
The measurement of service quality in logistics has traditionally been based on the reduction of logistics costs (particularly so when they are heavy and concern for example product development and manufacturing): general efficiency along the whole productive chain, minimization of stock weight, saturation of machinery, and so on.
Nowadays since credits are difficult to obtain, companies try to get liquidity through a more effective management of financial resources. Possible sources of internal investments become therefore important to reduce costs and find financial resources. It is therefore a matter of considering logistics in its own total value: that is a complete contribution to creating value as meant by the company’s investors. The aim is to keep working capital as low as possible which means a cash flow enabling to manage the company. To have low stock-in-trade; to hasten payment collection from customers; to delay payments to suppliers. This is linked to the way logistics processes are managed (SCM).
 

The concept of Working Capital brings us to reason in terms of time units as well as currency units. Logistics concerns a series of processes and methodologies also designed for perfect time management. “Cash flows cycle” also deserves attention. In a logistics management of a company it is advisable to consider, apart from material flows, the time of payment and collection, as well as indirect benefits coming from a better management of fixed assets and lower tax burdens, and from increased sales thanks to a better service.
This will lead to more suitable decisions in case of strategic choices such as decisions on logistics outsourcing.

(ndr. Franco Boccia is Direction consultant, organizational expert)