Industry guru reveals the secret of eternal supply chain happiness

Focus must fall on radical re-engineering rather than short term strategies ALAN PEAT EMERGING IN the 1960s like a new religion was the divine message: “Creating a New World Order for Logistics”. According to Martin Bailey, MD of Industrial Logistic Systems (ILS), the theme of that period was a whole new manufacturing world order – material requirements planning (MRP). “This,” he said, “largely sold by the missionaries who worked for the big computer companies.” This was quickly followed by the new Japanese scripture – just-in-time (JIT) inventory/distribution control. “Then came a herd of new-age missionaries,” Bailey added, “who introduced 'totally integrated supply chains', 'value chains', 'outsourcing', and dozens of other fine strategies that needed to be worshipped in order to achieve utopia.” Unfortunately, in Bailey’s books, most of these strategies focused on the one common international religion – making maximum profit in the shortest amount of time possible. “The long-term results,” he told FTW, “are thus often the opposite of that projected by short-term planning – as long-term planning is usually in total disagreement with short-term optimisation. “Real optimisation of operations, and achieving sustainable success, usually requires infrastructure, systems and people resources that take years to optimise – and most businesses are far too impatient to follow this path to enlightenment.” His own belief is that “the secret to eternal supply chain happiness” must be to understand the total operational, business and customer needs – and then change the total way of life to optimise these needs for the short-, medium- and long-term. “There certainly are huge potential 'life changing' improvements available in most industries,” he said. A first example is in the fast-moving consumer goods industry. “The annual turnover of this industry in SA is typically close to R100-billion per annum,” Bailey said, “and the average supply chain cost typically 20% plus of turnover. “Most supply chains are horribly inefficient, go through multiple systems and are certainly not customer focused. Improvements here are potentially huge – and world class operations are typically running at 30% to 40% below those typical in the industry. “To achieve this requires total supply chain reengineering – and radically different operational strategies.” The mining industry is another environment that Bailey highlighted – a sector needing radical changes to its entire business strategy if it is to realise huge potential savings. “Certainly most of the mining industry is, logistically, still operating in the 1960s,” he said, “and largely focused on short-term solutions. Once they see the light, savings of anywhere from 2 0% to 40% of their logistic costs are achievable.” To change these industries requires entirely new business philosophies, taking a longer-term view of logistics and looking at radical re-engineering changes – rather than short term strategies. “This,” said Bailey, “optimising today’s costs and the expense of tomorrow’s world class solutions?”