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All around the world: the importance of logistics
Feature: 3/1/2007

Enlarge Image click hereIf you ever think that you have a thankless job, then spare a thought for the poor logistics providers. If they do their work well, then the seamless transport of goods around the world goes almost completely unnoticed.

But if they make a mistake, there is the potential for businesses at every part of the supply chain, from the fabric providers to the manufacturers to the end sales points, to be affected.

Ian Cramb is the business director of department stores and fashion at DHL Exel Supply Chain, one of the world's largest logistics providers. He told director-e: "You have to be aware of every factor to make sure that everything is planned in advance and there are no surprises. Everyone has very high expectations and of course you have to meet them."

Forever changing
What makes this even more difficult for companies like DHL is that every job can vary in hundreds of ways according to the needs of the customer, so there is no 'magic formula' to follow.

Ian explained: "Some customers will only have us at one point in the supply chain, so we'll only be responsible for taking things from their own warehouses to their stores.

"Others will involve us at every point in the chain, taking their products from manufacturers in China, for example, packaging them, shipping them, moving them through customs to DHL warehouses and then to stores. The customer will tell us that they need this product by this date and we'll speak to the manufacturers, plan shipments and make sure it arrives on time.

"Sometimes customers will even have permanent DHL teams at their stores, moving products to drop zones on the shop floor where the staff can pick them up. We have to be completely flexible about everything we do."

The age of information
Much of that flexibility is made easier by advancements in technology that allow for instantaneous data transmission across the globe, Enlarge Image click hereopening up the supply chain to nearly full visibility.

Now, with only an internet browser, customers can ask where in the world their shipments are and be continually updated with projected arrival times. This also allows for automatic alarms to be raised if shipments do not arrive in docks when expected.

But all of these technological marvels have, in a way, made things a lot harder for logistics companies. "You're forever pushing the boundaries," said Ian, "and the exceptional becomes the norm.

"We've always had to work hard for our money, but now we have to work harder than ever before because everyone expects everything to run without any problems. Because we have all this information available now, people expect us to control everything and we have to live up to that."

The bullwhip effect
However, the increased level of awareness that data analysis affords supply chain-wide operations does help fix problems that have existed for decades.

One of these is 'the bullwhip effect', the phenomenon caused by the unpredictability of stock levels and product sales.

In order to avoid empty shelves, shops must keep their stock levels high enough to cope with sudden, unexpected demand - but they don't want to have goods sat on shelves either, so they are forever juggling the sizes of their orders according to the whims of the public.

Fewer orders one week, more the next, then less again - the unpredictability of the stores' requirements passes up the supply chain to the manufacturers, growing bigger and more unwieldy each time - like a ripple passing down a whip.

Expert timing
To solve this problem, DHL and other logistics companies can now provide a 'just in time' logistics solution.
Enlarge Image click here
Here, each store in a fully managed supply chain has a smaller stock of each item than it would usually have. If the product doesn't prove popular, then the store is fine - they don't have too much money or shelf space tied up in discounted garments.

On the other hand, if the clothing does catch the public's imagination, another order can be made from the manufacturer, which makes the garments and passes them on to DHL for quick transportation. The process can be speeded up by keeping a small amount of raw materials close to the factory.

Obviously, this method takes some planning ahead - not just for the store to put in the order while they've got enough stock on the shelves, but also for the logistics company to make sure it arrives on time.

However, as Ian explained, there are many options open to get the package from A to B: "You can transport by sea freight or air, or a combination of the two. If there isn't much time, you can split the load and send some by plane and the larger amount by ship so that the shop has some goods to work with while the rest arrive.

"They call it a 'gear box', because it's like selecting what gear you want to drive in, depending on what's required In terms of time and money. If it's not time critical, for example, you can move to a 'lower gear' by shipping the cargo because the rates are cheaper.

"Or you could plane the package to Europe, then have it taken by truck to Britain because it costs less than having it taken all the way by plane. There are dozens of combinations available depending on what works best for the customer."

Customer satisfaction
In the end, that's what DHL considers to be most important; ensuring that the customer's needs are met in the most cost-effective manner. After all, the better service they provide, the more likely their customers are to keep going back.

But in order to have a system that runs with perfect precision, logistics companies cannot work alone; they need the full co-operation of their customers and as much information as they can gather.

Ian explained: "We do a great deal of planning with the customer to make sure that we have the appropriate resources to deliver that plan - and the more information we have, the easier our life is, because that way everything is in our grasp.

"It also means that we can react quicker to any sudden changes that might occur. But it also means that the customer has to understand their own business and how external and internal factors affect them - especially in a global marketplace with quotas and tariffs.

"For example, there was a point where people were ordering huge volumes of Chinese wool products at the same time, but the quotas had been used up, so all these garments were building up in China, or held at the dockside.

"Then when the New Year started, there were masses of these products to be transported and it was very difficult to arrange. Or alternatively some companies decided they would source from other geographies, which presented its own Logistics challenges.

Saving the environment
So what lies ahead for logistics? Like many industries, there is a growing interest among some customers in making it as 'green' as Enlarge Image click herepossible - perhaps more so, given that it involves billions of pounds' worth of fuel, electricity, packaging and other environmentally unfriendly factors.

Ian said: "There is undoubtedly a drive to minimise waste and our impact on the environment and obviously that's important to our customers and to ourselves. But sometimes solutions to problems can create other environmental issues."

For example, Ian does not necessarily agree with the suggestion that companies can lower the amount of waste packaging by delivering garments on hangers.

"The thing is," he said, "you may well reduce the amount of cardboard being used, but because they're no longer flat packed they may take up more room. That means the goods that once filled one container up fully now spill into a second container.

"Obviously this means that the number of trucks it takes to transport the larger number of containers increases, which creates more pollution and may undermine the original plan to help the environment."

However, there are ways to get around these problems; one technique it employs is to deliver products in reusable packaging, which can then be sent back with the container to the manufacturer, who can use it again for the next batch.

Of course, this may be impractical for some clients so, DHL must adapt its environmentally friendly methods depending on what the job requires.

Flexible friends
Ultimately, that is what makes a successful logistics company; the ability to adapt constantly, while not losing sight of the actual goal.

That goal, of course, is to be invisible - whether by splitting orders onto different transport to meet deadlines, reacting quickly to sudden changes or even offering packaging services to stores that require it, logistics providers must work hard every hour of every day to make sure that their services aren't noticed.

But for Ian it's just part of the job. "We work hard," he said, "but I enjoy my job a lot - and there's a great sense of satisfaction when you're doing things right.

"At the end of the day, if we're doing our jobs properly, we're keeping thousands of people in business - and that makes it all worthwhile."

Author: James Wilkinson
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