Current Issue
Material Handling Wholesaler Cover
September 2017
Garry Bartecki examines the industries current financial challenges and regulation changes.

Industry News

View Material Handling Wholesaler's profile on LinkedIn



Using a total system thinking approach for supply chain optimization

Every supply chain process is looking for ways to remove costs from its systems in response to recent trends like packaging changes that have resulted in SKU proliferation. Many are focusing on automation through capital investment to control costs and get leaner. But these investments will really only pay off if changes made in one part of the system do not increase costs in another. One approach being used to make sure that changes and improvements actually result in genuine process flow optimization is Total System Thinking (TST), a proven methodology that takes a holistic approach to supply chain improvements. TST uses a structured process to gain a complete understanding of the impact of any change to every segment of a supply chain before making any change.

TST was used by Swift Water Logistics, a direct store distribution (DSD) supply chain process analysis and improvement firm based in North Carolina, to optimize the delivery segment of the supply chain process. Delivery is a significant operations cost center, especially when labor and total fleet costs are factored in. The process eventually led to the development of a unique lift-pallet system technology that reduces delivery time by up to 40 percent.

Total System Thinking basics

TST is an end-to-end supply chain process improvement methodology that depends upon slowing down process improvement initiatives to get a thorough understanding of the impact of functional actions throughout the supply chain. Decisions are made based on upstream and downstream results. The ultimate goal is total system optimization, in which the whole system is greater than the sum of the individual parts. Table 1 shows the supply chain network within which TST is typically used.

Table 1 – Supply Chain Network

Procurement

Manufacturing

Transportation (from manufacturing to sales centers)

Order generation

Order assembly/warehouse operations

Route delivery

Merchandising

The TST approach calls for aligning all components of the supply chain processes to achieve optimization.

TST uses a 3-tier approach, which reflects lean principles and involves bringing representatives from each segment of the supply chain together to talk about making a particular change.

Delivery process benefits by TST approach

The delivery component is usually a supply chain process’s highest operational cost center. Delivery and warehousing (the next highest cost center), account for about 70 percent of supply chain process operating costs, when labor and fleet capital costs are factored in. Swift Water Logistics used the TST approach to implement new delivery strategies that would drive up revenue growth in the face of increased SKUs and the need to service accounts appropriately. With the complex SKU world, standard delivery methods were no longer rational. In addition, driver injuries and turnover was an issue, and increased product touches were driving costs upward. Figure 1 shows the tremendous growth in SKUs over the past few years and its effect on delivery routes.

The goal was to drive costs out of the system without jeopardizing revenue growth, and do so in a safe and sustainable manner. A different delivery model was essential, especially with the need to reduce driver injuries and job turnover. Other goals include reducing the physical stress of delivery jobs and expanding the labor pool. In addition, they wanted to reduce touches to eliminate damage from multiple handling and make check-in easier. Service improvement goals included making delivery more flexible and agile, moving away from specialty equipment, facilitating hybrid routing, and improving merchandising. Earlier attempts at improving the delivery operations without using the TST approach had included such delivery service options as customer order built Sideload (pocket-load), order fulfillment system (OFS), customer built pallets on rear load trailer, and carts. All provided delivery benefits, but resulted in issues in other parts of the supply chain. For example, the cart option solved the issue of reducing product touches, but the carts ended up requiring far too much room in the warehouse to be practical. Also, any non-pallet delivery system requires a cleaning operation before goods can be transported, adding cost to the total system.


Go to Page 1 2 Next Page


ADVERTISEMENTS