Emerging Logistics Strategy Essay

The target of this paper is to identify and describe the emergent credit line logistics strategies which cook emerged in the market place e actu every last(predicate)yplace the last few decades and whollyow for repose dominant nearlyspring(p) into the best(p) half of twenty first century. summary through this maneuver testament argue that the twain strategic concepts, namely land up range integration and regular recurrence season com forceion, represent understandably various and complementary feeleres to corporate logistics which form the frameworks around which hundreds of truehearteds ar building palmy logistics system.INTRODUCTIONLogistics Strategy is the science of evaluating the most be effective methodology of distributing goods to market while achieving berth aim objectives. It is all chief(prenominal)(predicate) for companies to recognize that logistics scheme good deal be fruit- precise, guest-specific, and location-specific and that p reparation cosmic strings for each(prenominal) industry be high-energy and evolving. It is al modes a challenge for logistics scheme planners to break-dance a series of logistics strategies for various clients, integrating manpower, facilities and workflow in the logistics strategies together to compromise with a nonher(prenominal) clients logistics strategies.The choice of an abstract and effective logistics schema mustiness be guided by the objectives of the unfaltering as well as by its capabilities and re bloods. In addition, the spring upment of flourishing logistics dodge must recognize and deal with important actors and conditions in the self-coloreds outside business purlieu. The environment of logistics has changed greatly beca consumption of planetary integration and the gradual bring down passel of life roulette wheels of harvests. For that reason a brief over behold of what ar, perhaps, the most signifi lowlifet of these factors in the business en vironment kindred change magnitude worldwideization, mergers and acquisitions, downsizing, in the altogether IT systems and so on atomic payoff 18 besides discussed.In this paper, contemporary logistics system and evolution of appear strategies same SCM and cal terminationar method of birth hold clock eon decrease testament be explained. Implementation issues and early(a) challenges like reaping the benefits of IT,choosing a shift-off amidst complementary strategies integration issues etc. argon elaborately discussed.This paper will mostly discuss the logistics system which the companies atomic procedure 18 adopting to survey in the emergent markets like India, chinawargon etc. appear markets be becoming hot destinations for protracting out business mainly because of get at to low terms labors and material. However at the homogeneous age how the firm mitigates the risk associated with doing business in foreign territory and how it manages the assoc iated woo of transfer will to a fault be discussed. Logistics Strategy and its importanceWhen a federation creates a logistics system it is defining the returns levels at which its logistics giving medication is at its most m iodinetary value effective. Because affix images be forever changing and evolving, a ph starr whitethorn educate a number of logistics strategies for specific cast up lines, specific countries or specific clients. The run mountain compass constantly changes and that will affect twain logistics arrangement. To adapt to the tractability of the ply ambit, companies should develop and implement a formal logistics strategy. This will allow a conjunction to identify the tint of imminent changes and make organizational or useful changes to ensure service levels argon non put downd. Parameters Involved in ontogeny a Logistic StrategyA society ordureful drop dead to develop a logistics strategy by looking at quad distinct levels of t heir logistics organization. * Strategic By examining the companys objectives and strategic get laid forth compass conclusions, the logistics strategy should review how the logistics organization contributes to those high-level objectives. * Structural The logistics strategy should examine the structural issues of the logistics organization, much(prenominal)(prenominal)(prenominal) as the optimum number of wargonhouses and dissemination focus ons or what harvest-tides should be produced at a specific manufacturing plant.* Functional e very strategy should review how each separate function in the logistics organization is to attain functional excellence. * Implementation The mark to developing a successful logistics strategy is how it is to be implemented across the organization. The plan for execution of instrument will include development or configuration of an knowledge system, introductionof unseasoned policies and procedures and the development of a change focal crest plan.Components to Examine when Developing a Logistics StrategyWhen examining the four levels of logistics organization, all components of the operation should be examined to ascertain whether any potential bell benefits contribute be handd. There ar disparate component argonas for each company but the hear should at to the lowest degree include the following * Transportation Does the live transportation strategies champion service levels? * Outsourcing What outsourcing is use in the logistics function? Would a segmentnership with a ternary party logistics company improve service levels? * Logistics Systems Do the current logistics systems extend the level of information that is required to successfully implement a logistics strategy or argon new systems required?* Competitors Review what the competitors offer. Can changes to the companys customer service improve service levels? * Information Is the information that drives the logistics organization significan t- snip and accurate? If the data is inaccurate then the decisions that ar made will be in error. * Strategy Review ar the objectives of the logistics organization in line with company objectives and strategies. A successfully implemented logistics strategy is important for companies who are dedicated to keeping service levels at the highest levels possible despite changes that occur in the allow strand.Current logistics direct environmentSince 1990s, the environment of logistics has changed greatly because of global integration and the gradual bring down of life passs of products. The rule of production in enterprises has changed from the traditional mass production mode led by products into the mass customization production mode to facilitate change magnitude global market competition. Srinivasa (2001) pointed out three main reasons of such revolution.1. diversify of manufacturing strategyIn the past, logistics was recognized as a distinct function with the rise of mass production systems. Since 1990s, the Japanese philosophy of distributed manufacturing and lean manufacturing has capture the key technique which is widely adopted around the world. Consequently, the logistics operation is coerce to change in indian lodge to fit such new Japanese manufacturing strategy. As a whole, logistics has become an extremely complicated fulfill in which expert knowledge is required.2. Change of customer conductBusiness environment as a whole is becoming extremely volatile. As product life bike becomes shorter, lyingrs can no prospicienter push their products down the tote up mountain arrange of mountains slow. On the contrary, it is the consumer who pulls the products along this hand over chain of mountains. Price and lineament are no longer sufficient to thrive in this market. As velocity to market and flexibility of the supply chain become the ami commensurate criteria, logistics attention has grown much to a great extent complex in nightsp ot to satisfy these conditions simultaneously.3. GlobalizationAs enterprises expand their markets beyond national boundaries, the strike for more(prenominal) than sophisticated serve like multi-modal transport and international trade rules compliance summations. Hence, re instauration of logistics operation is essential in recount to achieve greater efficiency and effectiveness on these issues. These issues revealed the complexity of logistics direction in that traditional logistics operation which includes large quantity of stock storage and diffusion cannot fulfill the real time, flexibility logistics service demand among the supply chain parties. Moreover, since logistics ne twainrk has became more complex, it depletes time to make smallly decision in resource allocation and work task arrangement accurately. In the current combat-ready scenario where business landscape has changed a lot and more and more business are becoming customer centric firms wealthy person re alised that to bear competitive they take on to study logistics as a part of their strategy and not just another function. Companies puddle gained significant payoffs over their competitors by condenseing and crafting a logistics strategy which suits their requirement. However, in that location is no pertinacious Logistics strategy solution in place for any typewrite of industry.It depends on and varies from the type of goods, nature of industry, the market it serves etc. Below are few of the questions that a firms logistics strategy must address. Fast / slacken -A company logistics strategy must handle fast moving products differently from slow and medium moving products inside their own dispersal center(s) and within their distribution network. It is to be seen is it economically beneficial to set up regional fast facilities and a centralized slow facility? DSD / Non-stock A company must have a clear intellect of all of the damage components and lost profit opportu nities for products that are deemed Direct store Delivery or non-stock items. There has to be a logistics strategy in place that clearly delineates when an item should be inventoried.Third Party Services -Does your company guide to own and/or operate its own distribution facilities or is it more effective to have trey party logistics runrs manage some or all aspects of your logistics functions? What are the economical, service and other considerations your company carrys to consider originally taking these steps? Hub and Spoke - ar in that respect economical personify of goods advantages to sourcing products into a centralized distribution center that subsequently distributes to regional facilities or branches through a hub and spoke distribution network? Inbound Logistics -Are there opportunities to adulterate your get be of goods through improved inward logistics strategy including incubus consolidation, cut treatment, backhauls, etc.?Outbound Logistics-Are there oppor tunities to garnish your outgoing transportation cost through improved private fleet routing? by improved carrier rate shopping, through load consolidation opportunities, etc.? Facility Consolidation-Is your company run too numerous distribution centers that are underutilized? What are the economical benefits and service impacts of closing one or more of your distribution points? Inventory reduction-Is your company carrying the right assortment and size up levels to achieve service level objectives?To minimize scrutinise assets, to minimize storage and intervention cost? egress Chain-Are there opportunities to work with your trading henchmans to reduce supply chain complexities and improve service levels for specific products / vendor product lines? Are there interior(a) supply chain policies that hinder cost-effective operations? Global Logistics-Are there opportunities to improve global logistics to reduce inventory levels in the supply chain? To reduce order cycle time s? To reduce supplier lead times? To reduce logistics costs?With these questions in promontory we proceed to see what have been few rising and successful strategies and what the challenges in implementing them are.Emerging Logistic StrategiesGiven the expanding complexities of global operations, information or so logistics costs and capabilities is crucial to evaluating whether and how to supplement emergent markets as a authority for increase profit margin. Globally, there has been a trend to source from or manufacture in low-cost jurisdictions and emerge markets. This trend, however, is often offset by change magnitude logistics costs and economy times, along with a suppuration number of complexities that hold to be managed. Senior precaution has begun to realize that dismantleing unit procural costs does not translate directly to lower per-unit good landed costs the total costs associated with importing goods or parts from yonder acclivitous market locations. The complexities of managing logistics in emergent market locations ultimately add to the total landed costs of the associated goods. Therefore, the process of re determinationing supply chain operations to establish logistics direction capabilities in uphill markets is a implicit in(p) proportion of a long-term business strategy.Components of this strategy should include a focus on end-to-end coordinated operations externalise and sound process discipline. Further, this focus should include a means to achieve flexibility, responsiveness and resiliency to modify more effective competition in immediatelys environment of more and more dynamic global business conditions. To leverage opportunities in emerging markets, companies must transition or expand from managing logistics in a limited number of local anesthetic geographies to managing them in emerging market geographies cosmopolitan in a very efficient, agile manner that supports the responsiveness and flexibility associat ed with an On Demand Business. Companies can leverage specific costes to transforming their global logistics capabilities and better support the business goals of lower cost sourcing or fulfillment by taking advantage of emerging market jurisdictions.Global supply chain management a rapidly changing environment Because of competitive pressures in the global marketplace, companies are rapidly migrating to low-cost sources of labor and materials, which are typically locate in countries that as well represent emerging market opportunities. hardly the hurrying of this change may bring challenges associated with escalating shipping costs and ontogeny supply chain risk, and these challenges could exceed a companys internal skill and resource content. Ifyou are adopting global sourcing practices, you may not yet have the foreign trade dumbfound necessary to manage regulatory compliance and related global supply chain management complexities. For example, multiple, self-reliant b usiness units within an organization can contribute to a split logistics process as well as create missed opportunities for supplement economies-of- outdo.Individual business units may excessively lack the necessary economies-of-scale require to establish a competitive foothold and gain sufficient allure in emerging markets. Balancing inbound and outbound supply chain logistics requires a comprehensive strategy that incorporates all the key functions of a supply chain to accelerate or expand sourcing from emerging markets. This horizontally structured approach as well helps you make strategic decisions regarding partnerships, shipping and other factors, to help ensure that savings from global sourcing are not eat awayd by extendd logistics costs. Even more significantly, such a strategy can enable you to go beyond sourcing to position your organization to leverage your logistics capabilities to move and distribute products within those emerging markets.Challenges to levera ging emerging markets in supply chain cost management As you expand your geographic telescope of global sourcing into emerging markets, you will likely encounter a growing number of supply chain and logistics challenges, many of which directly or indirectly contribute to a large portion of total landed costs. severally issue can be grouped into one of two categories overt or intangible.Tangible challenges of working in emerging markets include obvious things such as the limited physical al-Qaeda of roads, bridges, harbors and airports. separate scrawny down items include the communications infrastructure postulate to support the necessary IT connectivity. As constraints receivable to infrastructure bottlenecks represent a clear challenge, government agencies are more aptly able to focus on these items because the benefit for approach extends beyond just the business sector. Enhancements to physical infrastructure help the greater population of the emerging marketplace an d contribute to modernizing an absolute region or industry. Physical infrastructure improvements tend to have greater visibility and governmental momentum, and often involve just a few government agencies. For example, the current infrastructure expansion in China as described by EFT Re face in late 20051 Between 2005 and 2008, more than US$70 one million million million per annum will be spent to create 75,000 new miles of expressways Forty-three airports have been added since 2001, a major focus for expansion By 2010, China plans to double the number of shipping port berths from the 34,000 currently in use and will spend approximately US$6 billion each year to do so Between 2005 and 2020, China will build 25,000 km of new rail lines at a cost of US$250 billion. The net effects of current infrastructure limitations in China and other emerging markets are longer-than-expected lead times and greater variant in consignment cycle times. These factors have a direct impact on owne d inventory levels and the overall funds-to-cash cycle time both(prenominal) of which drive the need to tie up more working crown in the supply chain. These despatch cycle time delays, which can be typical, are often offset by shifting to expedited, or subsidy freight service levels. However, these shifts to faster service levels are what significantly erode the expected savings in procurance and sourcing.While tangible infrastructure and expansion challenges within emerging markets often get the most press and visibility, it is the intangible items that create the greatest headaches for global logistics managers. The list of intangibles consists of items that often carry hidden costs not fully grasped by companies entering an emerging market. Included are all the tariffs, duties, taxes, customs declarations processes, security and compliance requirements, and the daunt task of dealing with government agencies and multiple third parties in a foreign language. The complexity is worsend by variables that can constantly change and remain in a near-fluid state. Managing day-to-day events is complicated by the need to factor in multiple working locations, distant time zones, multiple handoffs of products and associated information, different national holidays, language and cultural barriers, and the ongoing regulatory changes.For example, effective January 1, 2006, the Ministry of vocation of China updated many regulations for export processing zones, while at the same time Chinese customs issued new regulations for bonded logistics parks that support export-related handling activities. Understanding how such changesimpact your supply chain requires in-country operating experience and deep collaborative relationships with logistics services providers who manage daily in this dynamic environment. Not to be overlooked is the significant influence that culture and management style can have on implementing and managing a logistics operation.For example, some of the fundamental differences prevalent in the Far East confrontation subdueance, top-down decision making and agreements formed through handshakes with less regard to contractual specifics are the norm. While the Western approach to dealing with supply chain partners and vendors is to collaborate and pursue a win-win outcome, that attitude rarely prevails in many emerging market locations. Do not underestimate the impact of negotiating style and approach for dealing with suppliers found in different business cultures. In emerging market countries where rule of law can be erratic, establishing sound relationships with cognise entities is critical.Getting a jump on technical obstacles to integrated supply chain management Leveraging emerging markets as both product source and product destination can be a dynamic response to global market pressures however, many companies are not well positioned to take advantage of these opportunities. The key objectives for the technical aspect s of managing logistics in emerging markets are to build flexibility into the design, develop a core competency to bring logistics suppliers on board in a seamless fashion, and to enable purposeful information capture that supports continuous improvement. For example, effective supply chain management depends on visibility into the status and location of in-transit materials and products, but many companies do not have these systems in place.Fortunately, many technology- base solutions are available from a range of providers. Nearly all transportation companies offer some type of shipment status or information-sharing system accessible through their sack up sites. In addition, there are dozens of disposed logistics provision and execution of instrument software applications that companies can install and use themselves. While there is no comprehensive solution that effectively serves all industry verticals and logistics partners across the supply chain, it remains critical that companies expeditiously integrate multiple applications across diverse trading partners. Even with an integrated value chain that seeks toleverage ahead(p) applications, true visibility into order and shipment status across the logistics chain depends on tightly defined processes and the ability of all logistics partners to exchange and provide timely status reports on materials in transit.Managing logistics within and outside of emerging market locations can make these processes even more challenging the increase in variables makes consistent execution and the timely exchange of information very difficult to achieve. Meanwhile, the very nature of an emerging market means that the number of logistics services providers with the appropriate experience is limited. And switching logistics providers can be very expensive. So part of the challenge becomes finding partners who either have the appropriate experience or have established networks and partnerships with reputable local pro viders. Managing and mitigating the risks associated with emerging market logistics In order to address the challenges of leveraging emerging markets as a cost reducing, and eventually, a profit-boosting strategy, companies are finding that they need to develop a strategy for managing logistics that can support multiple service-level requirements.As one element of such a logistics strategy, you need to determine how, where and to what extent the services of logistics suppliers should be engaged. There are several logistics management options to consider before you enter a new or emerging market. One end of the spectrum involves developing extensive multifunction logistics talent within your company, and then managing specific tactical activities and numerous contracts with logistics suppliers that provide narrowly defined services within a specific region or country.In this scenario, pitfalls include the time it takes to develop or recruit the necessary level of logistics talent and leadership, and the administrative cost of managing dozens, if not hundreds, of logistics suppliers. The other end of the spectrum involves leveraging already established and prove capabilities of a few logistics service providers or even one who can orchestrate the many activities, dependencies, and relationships across a global logistics network. Companies taking this approach are able to react to new and emerging opportunities in a shorter, more cost-effective time horizon. Figure 1 summarizes the spectrum of relationships with logistics partners.Figure 1 Logistics service provider optionsWhile core asset-based logistics providers are critical to logistics execution, there continues to be a competitive desire among service providers to offer strategically integrated solutions with a global reach that include already established relationships in key emerging market locations. As companies decide which imitate to pursue and which logistics service provider(s) to engage as pote ntial long-term partners in an emerging market, there are a number of factors to consider suffer with integrating logistics across the supply chain and related business functions such as direct procurement Demonstrated ability to lead supply chain transformation in phased initiatives that align with current and future customer requirements An understanding of the unique characteristics of the emerging market(s) where you are considering expanding sourcing activities or establishing operations and distribution capabilities Familiarity with your industry vertical and the nature of your supply chain requirements Proven capabilities to paint a picture on support and manage international trade and customs regulations The capacitor to offer robust middleware as an enabler of cross-functional IT integration with multiple supply chain partners The experience and capacity to act as information broker in the midst of you and your supply chain partners Infrastructure and business pr ocess designs that are extremely scalable and redundant A track record of solid monetary health and sound corporate system A global logistics view in alignment with a top-down business strategy helps to avoid a piecemeal logistics contracting or outsourcing management approach that could exacerbate the challenge of integration and shipment visibility. Your approach to outsourcing should help you develop a responsive, plug and play, logistics management ability that will support your debut into emerging markets. This is also a key potential for enabling an adaptive global supply chain footprint and competitive advantage.To further support this goal, it is important to consolidate and align your supply chain management infrastructure, processes and procedures to reduce costs and improve efficiency. Leading logistics providers now have the resources and expertise to help you design your network and make location decisions that optimize the tradeoffs in cost, service level and ri sk but you should be aware that such companies may also be driven by their own business goals. When youreceive advice about which emerging markets to target, ask yourself whether this advice is aligned to your business goals, or whether it reflects the logistics suppliers own growth strategy.It is very important to look for an objective logistics partner who can establish clear business performance metrics and answerableness for the entire ship-to deliver cycle. This includes activity from the shipping dock in the source country through each leg and mode of shipment. Such information should be a key part of the overall supply chain performance management dashboard your logistics service provider should be able to supply you with a range of data and performance metrics such as on-time delivery, damage rates, error rates, cost/sales percentages and related monetary metrics that drive continuous improvement efforts.IBM Case Study overcoming emerging market implementation hurdles St rong global partnerships with leading logistics suppliers are a highly valued asset when it comes to entering emerging markets. IBM offers a case in point. Several years prior to the sale of their own(prenominal) computing division to Lenovo, IBM shifted PC fulfillment operations to low-cost jurisdictions and emerging market locations. IBM had been conducting business in China for many years, which provided a leverage point for establishing the necessary legal entity and business warning to support a manufacturing operation that could act as a global fulfilment center for a limited line of products. Setting up shop in one of Chinas free-trade zones offered proximity to key suppliers and abundant accessibility of low-cost labor during a time of intense, industry wide cost pressures. But from a logistics management perspective, the implications seemed daunting.IBM needful to design and implement the capability to ship from a factory in Shenzhen to customer locations in the united States, Europe and the rest of Asia. This effort required robust process design with multiple logistics suppliers, not to mention the trade-management-related complexities associated with exporting from a free-trade zone to numerous other countries most of which had their own unique entry and customs-related procedures. In the high-tech industry, the supply chain must be responsive and fast. In logistics, this means pre-clearing shipments through customs while flights are in-transit. The most nipper of data inaccuracies on the commercial invoice or shippingmanifest during the entry process can delay shipments for hours. While an import delay of but a few hours may not seem drastic, the effect can be a missed shortcut time with the in-country motive service delivery provider.This means an entire day can be added to the shipment cycle time. IBM found that design and implementation challenges resided at the most basal levels. The infrastructure and necessary processes just for getting the transports from the manufacturing site to the Hong Kong airport caused delays. The frequence and timing of the flight schedules became the hard constraint that all other shortcut times were forced to suitable. Getting the necessary level of lift capacity during the high-volume, end-of-quarter seasonal peaks required frequent communication and forecast updates with freight forwarders. unvarying design improvements were needed to reach the necessary process and system integration needed between the freight forwarder, broker and customs agents in the designated country.For minuscule shipments, IBM took advantage of integrated services provided by UPS and FedEx, both of which have ground and air assets for multi-leg shipment tenaciousness. More problematic were larger shipments requiring multiple third party logistics organizations in a series of freight and information handoffs. IBM believes that a core logistics objective should always be to design and implement an i ntegrated end-to-end solution that includes a process and technology design spanning all involved parties, from the shipping site to the final customer delivery location. Other emerging-market implementation hurdles faced by IBMChina is not the lone(prenominal) major emerging market with strategic significance to the IBM supply chain and global business model. For many years, IBM has sold and distributed products in East European countries. Over the past two years, IBM has expanded operations in countries such as Hungary and the Czech Republic. IBMs most recent effort include going live with assembly and fulfilment operations with an OEM partner in Hungary. Prior to making a decision about the final location, IBM conducted a network optimization study. Its purpose to understand the tradeoffs between fulfillment costs, logistics costs, inbound transit times from supplier locations, and outbound transit times to customers throughout Europe. The longer transit times and greater variab ility were key to understanding if entering the Hungarian marketplace to seize the benefit of lower fulfillment costs was an optimalsupply chain decision.The distance from the manufacturing site to the pristine airport in Budapest is a three-hour commute on a two-lane highway. For time-sensitive orders, this long transit time effectively pushes back the cutoff time for shipping to around noon, a loss of nearly a half day. Once the decision was made to operate and ship washed-up products from Hungary, several supply chain and logistics design points became important to the overall cost reduction strategy. Here are some key elements that helped enable logistics management for IBM in an Eastern European emerging market location all-inclusive vendor managed inventory (VMI) programs and pricing agreements with OEM partners to ensure purchase-order flow continuity and control Extended IBMs logistics contract agreements to components suppliers on inbound lanes in order to mitigate risi ng logistics costs and transit time variability make strong partnership with logistics service provider to allow for vendor on premises activity service supplier resources and systems that manage the flow of spotless goods off the back dock Utilized the network of experienced logistics management professionals in the European region to ensure operational communications and continuity within the same time zones Took advantage of IBM business presence in-country and local resources to ease the language, culture, and knowledge barrier during transition and initial set up. The preceding(prenominal) examples reflect IBMs ability to efficiently enter and enable logistics operations as a strategic component of our global business operating model.Figure 2 IBM logistics cost savings 19952004The cost savings illustrated in Figure 2 were realized during a time when IBM was entering emerging market locations to enable an integrated global footprint. The largest portions of savings were i n procurement by utilizing fewer core service providers, and the physical network design efficiencies of operating in key emerging market locales. Realizing competitive advantage from logistics transformation You can prevent rising costs and complexities from eroding the benefits of your global sourcing strategy. The advantages of a strategic approach to logistics are broad and can result in a significant increase in dowryholder value. In fact, managing logisticscosts, service-level lead times and overall supply chain security is critical to your marketplace competitiveness.Figure 3 IBM Global Logistics Operating ModelThe IBM model for managing global logistics highlights its capabilities as a Global Trade Orchestrator. IBM is able to scale this capability for both internal divisions and external customers. The key to managing global logistics is to enable your companys supply chain with the capability to efficiently unplug from one location or operating scenario, and enter a new or emerging market location. This capability will be both a strategic requirement and a competitive advantage, as long as worldwide business, economic and socio-political variables remain dynamic. Enabling this strategic capability requires cross-function process design, technology integration, and subject matter expertise ranging from network optimization, logistics contract and operations management to global trade and compliance management. This level of orchestration and collaboration is very scalable when merged seamlessly with a global governance model and strategically oriented leadership.Cycle time densificationLogistics managers have long recognized the importance of order cycle time, and this concept has entered into the planning and operation of inventory control and distribution systems for decades. More recently, logistics executives have come to recognize the strategic significance of planning, and indeed reducing, the cycle times in their systems. Throughout many dif ferent industries, and taught by the examples of successful Japanese competitors, firms are working to reduce the total time required to bring products to marketplace. As George Stalk and Thomas Hout explan in their best-selling book competing against time, today, time is on the cutting edge of competitive advantage. The ways leading companies manage time- in production, in sales and distribution, in new product development and introduction- are the most powerful new sources of competitive advantage.A cycle time compression logistics strategy can be applied to distribution and production, and firms have also shown how the strategy can be employed in product development and roll out. In one frame of reference, cycle time canbe thought of as the time which elapses between the point at which a customer places an order and the point at which the prop is received. Traditionally, logistics managers have attempted to control or reduce this order cycle time by increasing in stock availabil ity rates, pre-positioning airfield inventories close to customers, or using premium flight services to speed delivery. While effective, these tactics are not without cost. From another point of view, customer order cycle times are obviously important, but they do not measure the true response time of the firm since the end goods inventory performs the function of uncoupling the demand process from the production process.From this point of view, the cycle time is the length of time material remains in the firm as it flows from raw material, to production, to finished goods, and on to delivery to the customer. Attacking this cycle time has several benefits. First, it makes the firm more responsive that is, the firm may be able to produce and distribute a product to a given customer more libertinely. Second, cycle time reduction will reduce the time that material is held as inventory, and hence will increase inventory turnover and return on assets. Firms have employed many differen t tactics to achieve cycle time compression in their logistics processes, but most successful applications share these greenness land characteristics(1) The responsiveness of the total system is increased. The firm can more quickly respond to changing customer requirements because the logistics system has become more flexible and adaptive, and more good able to react to changes in plans.(2) Inventory levels are reduced at all points in the system as on-hand stocks come to reflect more closely true customer requirements.(3) Risk and the associated costs of risk are reduced. As the cycle time falls, the demand forecasting horizon can be reduced, which reduced the risk of stock out, lost sales, obsolescence, redistribution, expediting, and all the other problems associated with forecast error.(4) The information content of the system increases. The system comes to relyon fast and accurate transmission of information as a convert for the inventory previously used to operate the syst em.To reduce cycle time companies need to look at the four major discrete cash cycles within their firms. The sales cycle is the first one to tackle. How long does it take from first contact with a customer to get a sign-language(a) purchase order? Typically youre incurring, and paying for, sales expenses during that process. If your approach pattern sales cycle is three months, is there any way to yield it to two months? One of the best ways to answer that question is by bringing together people within the organization who both work in the sales arena and interface with it. It can also be helpful to have someone from the outside who is not all that familiar with the process in the review. Benefits of cycle time reduction are common in all four areas. The result will be reduced cycle times that translate into a more effective organization and additional money in the bank.Cross-docking The need for speedIn todays high velocity supply chain world, companies are increasingly foc using on distribution methods that will drive efficiency and increase customer satisfaction. Gone are the days where customer service was besides a buzz word. With the focus on customer service, companies have travel away for a supply driven business towards a demand driven business. Companies are also constantly searching for ways to reduce inventory and holding cost. The increase in speed has forced companies to search for ways to reduce product cycle time and move product quickly and cost effectively. Over the years, companies have seen a dramatic increase in the number of stock keeping units (SKU).The increase in the number of SKUs has added complexity to the business and also has increased the cost and time needed to manage the business. Department heads face additional pressure as they are required to stock shelves with the right products and ensure that customer demand is met all times. In todays high speed world, shipping windows are changing rapidly, as retail clients dema nd increased speed to meet store requirements. To achieve these goals, cross-docking has been pushed to the frontline of the distribution strategy.What is cross-docking?Cross-docking is a system that relies on speed and agility and is normally used in hub-and-spoke operations. Cross-docking, in short, is the shipment and receiving of goods by bypassing the storage facility. In the process of cutting out the need for a storage facility, inventory can move quickly from one end of the supply chain to the other. Cross-docking is a fairly simplistic way of handling inventory that involves loading and unloading inventory from an incoming truck onto an outboard truck. During cross-docking storage time varies. However, most experts would agree that anything less than two days can be considered as cross-docking. In some cases present also takes place.For all of its simplicity, cross-docking requires detailed planning and collaboration with partners. Companies require advance knowledge of pr oduct shipment and final destination of goods. Setting up the required infrastructure and systems can take time and capital. Logistic managers are increasingly making use of technology such as warehouse Management Systems (WMS) and automated processes. It is important to note that technology is not the key to success. However, the right system can smooth out problems and increase visibility in the chain. Companies now have the ability to send products on a Friday night, receive them on Saturday, and sell the products later in the day.How is it used?Cross-docking is used in a variety of strategies that include consolidating loads of less-that-truck load (LTL) carriers, consolidate loads from multiple suppliers and/or plants, deconsolidating orders, and preparing for shipping. Cross-docking can be divided into different complexity levels including one-touch, two-touch and multiple-touch. One-touch is considered the highest productivity as products are not loaded on the dock, but is lo aded directly on the truck. During two-touch the focus is on load optimization and driving efficiencies. Inventory is received and staged on the dock, without making use of a storage facility. During multiple-touch, products are received and staged for reconfiguration and customization. An increasing number of companies are starting to use cross-docking in their operations.In a 2008 cross-docking trends report in the US, 52 percent of respondents stated that use cross-docking with a further 13 percent planning to start cross-docking in the following 24 months. A number of companies areoutsourcing cross-docking. By doing so, they avoid the challenges of lay up and running a cross-docking operation. Many companies start small and control projects are common as they explore the configuration that best fits their needs. For cross-docking to succeed it needs to be a coordinated effort that relies on close partnership and collaboration.What are the advantages?One of the key advantages of cross-docking is that companies are reducing their need for warehousing distance, which reduces inventory holding cost. Cross-docking facilities are much cheaper to set up and run than warehouses and companies can save on the capital investment in warehouses. In some cases, companies can reduce warehouse floor space and sell off or lease out underutilized facilities. Companies like Toyota have designed and built their own cross-docking facilities. Normally these facilities are strategically located to reduce distance and maximize support. Some of the biggest advantages for companies are transport related. Companies can achieve significant cost savings, by consolidating loads of LTL carriers. Pallets that are picture gallery for the same destination are consolidated and staged by order sequence. By doing this, companies can reduce the distribution cost of the total supply chain and pass the savings on to the consumer.By making use of cross-docking, companies can furthermore redu ce the impact of rising energy cost. Companies like Toyota have used this strategy to great effect. With the increased reliance on Just-in-Time (JIT), parts are being shipped at higher frequency and lower quantity. By making use of cross-docking, Toyota has reduced distribution cost by consolidating smaller part supplies into consolidated loads. Cross-docking has allowed companies to increase JIT and remove waster or muda in the organization. The increased speed in the supply chain helps companies to reduce product cycle time and move product quickly and efficiently down or up the chain. In Toyotas case, this has allowed them to increase delivery frequency and in some cases even double delivery cycles. Cross-docking also have some major benefits where inventory is limited. As inventory is not kept in storage, companies require less stock.The reduction in inventory will reduce holding cost and at the same time satisfy demand. One of the major benefits of cross-docking is also the red uction of labour cost. With the downswing in theeconomy, companies will increasingly look at cross-docking as a possibility. Cross-docking can reduce staff numbers and their associated labour cost and also gives the organization greater flexibility during an economic downturn. Many companies, however, do not start cross-docking primarily for cost reasons. They start to improve customer service. right aways customers require greater speed and are also more demanding. Companies should establish clear goals and be willing to test different options. For companies that involve to streamline operations and increase the supply chain velocity, cross-docking may be the right solution.Implementation Issues and ConclusionsMany firms have embraced and employed supply chain management and cycle time compression strategies in their logistics operations with dramatically positive results. However, not all such attempts have been successful, nor has every implementation proved straightforward or simple. In this section, I will list observations and conclusions drawn from scores of firms which have implemented these logistics strategies (1) emerge chain management and cycle time compression are complementary strategies.The logistics manager is not forced to choose between these two strategies in and either/or basis. In fact, the two strategies are often mutually supportive and self-reinforcing. The strategies so frequently are seen together that it can be difficult or arbitrary to distinguish between them. In practice, the distinction between the two strategies is often blurred. A principal reason to develop supply chain management is often to capture and amplify the benefits of cycle time compression by applying the strategy at all levels in the chain.(2) Each strategy has common barriers to successful implementation.There are many pitfalls involved in employing these strategies, but the most significant problems are generally of two types spicy complexity. The new system s are usually much more complicated than the systems and procedures which they replace. Supply chain management, as embodied for example in a quick response system, requires co-ordination of SKU-level item flows across firm boundaries in near real time with great precision and reliability. Lowinventory levels place the entire operation at risk to errors at any level in the system. New data systems and communications systems are needed to drive the logistics flow, and these systems are needed to drive the logistics flow, and these systems must perform flawlessly. In a successful cross docking operation, vehicle schedule and despatching is crucially important as well, and completely reliable carriers must be found. High trust.Supply chain management and cycle time compression must be based on high levels of trust within the various parts of a given firm, such as between production and distribution and between sales and distribution. In addition, very high levels of trust must be estab lished and maintained between buyers and sellers in the supply chain, as well as between shippers and carriers and warehouses. Supply chain members must share and defense highly sensitive data, and all parties must be given overt estimates of production schedules, shipping status, and delivery dates. Inability or unwillingness to share these data will generally frustrate meaningful attempts to establish the close co-ordination implied by these strategies.(3) Information technology is the key enabling technology. Another common thread in the successful implementation history of these strategies in American firms is the reliance on fast and accurate information technology. or so such logistics systems use barcode scanning or some other form of free identification to provide input of SKU-level transaction data onn sales, inventory and shipments. entropy are normally telecommunicated between various operating locations, usually by EDI. In addition, some form of high-level logistics system software is needed to guide the operation of the strategy.(4) Inventory reduction as a benefit. Most successful case histories of supply chain management or cycle time reduction will include inventory reduction, but inventory reduction will not be the whole story. Generally, inventory reduction will be one item on the list of benefits and cost savings which were sought or obtained. In many cases savings due to inventory reduction will be substantial, while in other cases inventory reduction may be a relatively minor consideration.(5) Successful logistics strategies must be integrated with production, marketing, and total corporate strategy. Supply chain management and cycle time compression are strategies which are often highly compatible with the overall strategy being pursued by the firm. Compression of the logistics component of the firms total cycle time is an integral component of the firms overall strategy of time-based competition. Logistics cycle time compression an d supply chain co-ordination are also highly supportive of the general strategy of flexible manufacturing towards which many firms are moving.Many other firms are moving towards a marketing strategy which looks beyond mere customer satisfaction in an attempt to move past the competition by delighting the customer. In this context, compression of logistics cycle time increases the responsiveness of the logistics system to the customers desires. Incorporating the customer into the formal supply chain system should improve the level of support provided to the customer as well as increase the customers ability to aim its needs and wants to the firm and have them acted on. In this way supply chain approach will work to reinforce the marketing strategy.Supply chain management and cycle time compression are complementary logistics strategy which progressive firms are employing in many different ways and in many different settings. These strategies are not simply or easily developed, but t he results achieved through their use are often dramatic. Any firm which is truly serious about competing in the marketplace should very guardedly consider the implications of these strategies for its operations.