by Nicoḷ Pascale Guidotti Magnani*29   Ottobre   2014

Five examples of innovative and efficient logistics

A mechanical engineering firm; a German multinational corporation in Pisa; a warehouse in the district of Mantua; a plant-engineering company; a biomedical company

Many centres of excellence would not be of such excellence if they didn’t have excellent logistics. Apple proves that logistics and transportation are key to a successful company that wants to focus on continuous innovation: a few days after the electronic order has been issued Apple can supply its customers all over the world directly from its production headquarters, in a prompt and accurate way. Customers appreciate quality, aesthetics and functionality but forget that products are available at the store thanks to an excellent logistics service which puts Apple once again at the top place of the Supply Chain Top 25 for 2013 before giants such as Mc Donald’s, Amazon, Unilever and Intel, according to a yearly Gartner ranking.
In order to be competitive companies must improve all Supply Chain processes, avoiding non sustainable prices and becoming cost-effective. Potential is high: companies have started projects on the efficiency of purchase of services in the past, overlooking the opportunities linked to the optimization of the process. Yet logistics and transportation costs can count for more than 15% of industrial companies’ turnover as it happens in the tile industry. Efficiency potentials can reach 25% of current costs, and are mostly ignored by management. A breakdown of process steps and cost components carried out through the Activity Based Costing method offers a better knowledge of processes, activities and parameters affecting productivity, making an excellent starting point for any improvement planning. Improvement projects can be carried out through Kaizen or Process Reengineering.
Logistics and transportation can be improved and redesigned following evaluation of processes, resources, and means; service requirements need be clearly stated at the beginning of the project.

Below are some improvement projects adopted in the main steps of the Supply Chain.

The first case concerns a mechanical engineering company based in Reggio Emilia (Italy): in one year the company has considerably reduced its costs through the reorganization of industrial logistics. The analysis and project planning lasted a month; then the project was split in two. The first step saw supply transportation being handed in to a single provider, with transports costs dropping by 12%. During the second step the provider got in charge also of the production warehouse transferring part of the activity to an external warehouse. The company then decided to activate consignment stock management of some thorny suppliers, reducing the working capital and further improving production’s level of service. Now that the project is finished the company boasts a 16% reduction in logistics and transportation costs, a wider productive area, greater flexibility, responsiveness and accuracy, all of which are fundamental for a comprehensive JIT transformation of the productive-logistic process.

The second case concerns the logistics reorganization of a productive unit of a German multinational group based in Pisa (Italy). The analysis carried out has pointed out to the need of a new factory layout, where production warehouses are set in a single area so as to concentrate handling operations and limit movements from one area to another, thus making inventory checking more effective. A new warehouse management system (WMS) has been introduced: it has a specialized department integrated to the management system and radio frequency terminals. The new layout has produced the expected results: reduction of inventory shrinkage (almost 90%), significant improvement of warehouse productivity (+25%), better production service.

The third case concerns the reorganization of a 22,000 sqm garden products warehouse located near Mantua (Italy) where 14 people are employed mostly in the order department. Before reorganization staff was required to do a 600 m distance before each order could be completed. Reorganization concerned warehouse layout and materials management according to ABC analysis (80% of movements corresponds to 20% of handled products) where the most handled materials are put close to the preparation desk. Now that reorganization has been carried out the average distance required is less than 300 m while warehouse productivity has risen by 26%.

The fourth case concerned the planning of a machinery production company packaging unit. Machinery is packed in wooden boxes when heading overseas. By carefully redesigning the type of material and packaging flexibility there has been a 31% reduction of the loading plan (with consequent minor transportation costs) and an 18% reduction in the costs of materials.

The last case concerns a biomedical company based in Medolla (Italy) whose automated warehouse witnessed significant improvements through the implementation of Kaizen, a program involving operational staff and measuring performance and achieved results on a daily basis. Over a six months period productivity has risen by 20% by merely involving people in a training program on process control techniques, with no need for investments. The results are a consequence of a rigorous application of the method (planning, implementation, checking), of evaluation capacity, knowledge of possible achievable business models, human resources employed, techniques deployed, parameters taken into consideration in the definition of objectives.

Tile manufacturing companies are also facing the same problem. Each firm should verify its logistics and transportation systems starting from evaluating costs and problems of existing processes. Spanning across the production chain it is possible to spot any problem or area of improvement by asking the following questions: what is the level of service at the time of delivery at the building site? Was the product in stock while on sale at the dealer’s? Was the product promptly transferred from the warehouse to the building site? Are product and packaging compatible with the needs of physical distribution? Was the order exactly carried out as the customer demanded? Did the contractor use the right equipment? Was the material placed in a way so as to reduce the distance required to carry out the order? Was it easy to spot and to pick it up? Are raw materials and semifinished products efficiently managed in the factory? Are raw materials transferred to production plants efficiently? Is information effective? Is it complete? Are the most adequate equipments and facilities being used in every step of the process?

Are productivity and service competitive with those of other companies from the sector? Starting from the evaluation of customers requirements, processes and problems, every firm should develop its own medium term logistics program, identify strategic goals and economic targets, deploy actions, investments and the resources necessary to its implementation.


[ *Direction Consultant, logistics and transportation expert ]