Synchronising the supply chain

Citation

(2004), "Synchronising the supply chain", International Journal of Productivity and Performance Management, Vol. 53 No. 3. https://doi.org/10.1108/ijppm.2004.07953caf.001

Synchronising the supply chain

In an ideal world where a supply chain would work perfectly, an organisation would use only the resources required to meet existing customer demands. All the partner organisations that contribute to the supply chain would work together seamlessly to help deliver the goods in a timely and efficient manner.

The streamlined supply chain (products assembled and delivered quicker) would leads to faster cash receipts and higher profitability and the efficiency built in to the supply chain would result in lower inventory and reduced distribution costs.

Unfortunately, the real world is not often like that.

The information that surrounds business transactions is often erroneous or out-of-date. Customer demand is unpredictable. Market forces change from minute to minute. Goods can be stalled, orders can be inaccurate, accounts can go into arrears, workers can be left idle, vehicles break down.

This catalogue of unpredictably should not stop organisations searching for something closer to the ideal. Step up UPS and the concept of the synchronised supply chain

For years UPS has seen its role as managing the flow of goods, funds and commerce. Its traditional business of transporting packages has evolved into managing supply chains – using technology to oversee the goods (and the funds they represent) as they move across the world. These goods are managed by UPS in a variety of ways – as components, as inventory, as orders and as shipments to name a few. UPS manages not only its own global, ground-and-air transportation network, it also manages other carriers by land, by air and by sea to ensure that customers’ shipments arrive at the right place, at the right time, for the right price.

If the good are destined for international locations, UPS can manage the paperwork for customs, duties and taxes, and other required trade documentation.

UPS also manages goods as inventory in their own distribution centres – transforming products into orders. Specialised services might include kitting, tagging, sub-assembly, packaging, and technical configuration. And it has a special unit dedicated to post-sales services such as returns management, warranty repair, and critical parts management.

Since UPS is involved in so many links in the supply chain, it is in a position to help synchronise commerce by streamlining the flow between a buyer and a seller – resulting in a more efficient use of resources across the entire journey.

UPS Supply Chain Solutions, a business unit of UPS, provides logistics and distribution, transportation and freight, and international trade management, to enhance customers’ business performance.

Increasingly, organisations find that they can improve efficiency and contain costs by outsourcing a variety of supply chain functions, whether it requires the movement of goods, information or funds.

Hitachi’s Global Storage Technology division makes disk-drives, and, like most manufacturers of computer components, one of its biggest challenges is obsolescence: unless stock is sold and delivered quickly, technological advances can make it worthless.

However, there is another challenge because Hitachi supplies a range of companies that incorporate its disk drives in their products. If these companies do not sell their stock soon enough then it must be upgraded in order to remain saleable and compete with the latest technology. That entails Hitachi upgrading its drives (especially hard drives, for which storage capacity is constantly increasing) and sending them back to the companies they came from.

UPS Supply Chain Solutions has set up four logistics centres, in Singapore, Taiwan, The Netherlands and the USA, each located near the companies Hitachi supplies. Crucially, they are also integrated with UPS’s local delivery and global air networks (UPS is the world’s eleventh largest airline). This minimises Hitachi’s time to market, and means that drives which have been returned for checking or upgrading can be dealt with locally, rather than being sent back to Hitachi’s manufacturing plants.

UPS deals with delivery, return, checking and upgrading but Hitachi knows exactly what’s going on at every point along the supply chain, thanks to the tracking and tracing systems UPS built up in parcel delivery.

Another of UPS Supply Chain Solutions clients, Welch Allyn, is a US medical products company, and when it wanted to break into the European market it asked UPS Supply Chain Solutions to mange its inventory and order system. They first established a European distribution centre, a flexible order system and streamlined customer clearance. Now, when Welch Allyn processes an order, it can use UPS’ systems to check that the items are in inventory, and the order can then be put together at UPS Supply Chain Solutions’ distribution centre – with three quality checks along the way – before being shipped out on the same day. Once shipped, UPS’s WorldShip software notifies the customer by email, and this also gives customers details of how to track the shipment via UPS’s Web site.

Trading patterns in Europe continue to shift, with centralised warehousing and manufacturing creating more opportunities for small package growth and increased demands for supply chain services. More organisations are likely to outsource the management of such services – as long as it is clear that there are efficiency and financial benefits.