LSPs embrace lean logistics as business model

Clark says that while logistics service providers (LSPs) began to execute leaner logistics strategies during the economic downturn, that strategy is now being utilised more than ever, with LSPs looking for ways to provide more efficient supply chain solutions by capitalising on existing resources and minimising waste to reduce future expenses.

This business model is gaining momentum, and Clark points out that lean logistics practices are tightly integrated with lean manufacturing processes, incorporating the principles of storing fewer materials, which are handled less and delivered on a just-in-time basis.

This integrated supply chain practice is popular with LSPs as it provides a total view of overall waste for a company. For example, the inbound logistics process may be cost effective when serving a cost efficient manufacturing process; but if the outbound logistics process isn’t equally efficient and inventory of finished product is stored for unnecessarily long periods, the cost of this outbound delay may outweigh the benefits attained in the inbound process.

"Ultimately, while the lean operating model does provide some requirements for business monitoring such as KPIs and other significant benchmarking metrics, visibility of information through all supply chain operating functions is really the key issue for LSPs in today’s global market," says Clark.

Robust lean logistics processes require the sending, receiving and sharing of critical shipment information between business functions and trading partners throughout the supply chain, but Clark says that not all systems are completely successful.

"Some LSPs still employ older IT solutions that are unable to efficiently incorporate modern data transfer mechanisms. This lack of agile, automated systems means that when new electronic messages are required to be exchanged between the LSP and client or supplier of goods, it can be difficult to deliver data requirements, defeating good customer relations."

Increasingly, however, Clark says that leading LSPs are discovering the new generation of modern, automated technology platforms that offer not only the tools to provide deep supply chain visibility, but also a quick response and on-time deliverables in much simpler and standard ways than fifteen years ago. Many of today’s systems offer innovative data exchange options for easy messaging interfaces, structured messages and holistic tracking views that take into account freight operations, customs processing, carrier processes and destination activity, providing a comprehensive overview of the entire supply chain process.

"Importantly, this data visibility should always be timely, accurate, and to the point no matter how lean the process," says Clark. "The ability to have benchmarking metrics and dashboards providing real-time global supply chain information, with exception management and tasks allocated to staff, groups of staff, or even third parties ensures that nothing falls between the gaps."

The transition to new lean logistics processes is not a step to be taken lightly, nor does it need to be taken in a single huge leap. But with the right project approach to an automated lean logistics strategy, the change in culture will reap huge benefits, adds Clark.