The Intelligent Guide of Cost Reduction - Tips for being efficient
There isn't any company that doesn't have problems with the stocks, with reception, with the merchandise in the truck, with the moments when the trucks aren't on time, with vehicles waiting too long at the retailers and not being unloaded, with pallets that get lost on the way, packs that are damaged during transports etc. In all situations, being efficient is one of the main goals. There isn't any person who knows everything. But there are methods that, personalized, give good results. These methods were the object of the second seminary within the frame of the "Intelligent Guide of Cost Redustion", which took place at Turda, in Cluj District.
The second stage of "The Intelligent Guide of Cost Reduction" took place on the 18th of May and brought together 50 specialists in logistics - customers and service providers. The seminary, organized by Supply Chain Management and Ziua Cargo, was hosted by Aquila, who proved once more that it is a valuable player on the Romanian logistics market, also thanks to its warehouse the company has at Tureni (near Cluj), which was one of the interest points for the participants.
"We are acting in an environment characterized by globalization and hyper-competition. We have to take into account the requests of the customers, the tension generated by the shareholders, the new markets and distributions channels, the mergers and acquisitions, the laws regarding the environment, the rapid change of the technologies and, last but not least, the fact that the lifespan of the products is shortening", underlined Adriana Palasan, managing partner of Supply Chain Management Center and vice-president of the Romanian Logistics Association (ARILOG). She declared that the supply chains are becoming more complex, longer and more dynamic. In her opinion, the literal translation into Romanian of the term "supply-chain" is only partially correct, the translation not being able to reflect clearly all the aspects implied by this concept. According to the 2004 definition by the Council of Supply Chain Management Professionals, "supply chain management" (SCM) does the planning and management of all the activities: supplying, production and all the activities included in the logistics management. Of great importance is the fact that SCM includes the cooperation and coordination between the partners within the channel, who can be suppliers, logistic services providers and customers. We could say that SCM integrates the management of demand and offer within and between companies. In this context, understanding the value of the partnership between companies is essential.
An important field for costs
At company level, the importance of logistics is calculated in costs, between 20 and 40 percent of the total manufacturing costs being accounted by the logistics. Furthermore, the services - the performance factors like stock availability and speed of delivery - are critical in ensuring customers' satisfaction.
The logistics influence the process optimization: acquisition discounts versus resources stocks; production efficiency versus final product stocks; discounts in transports versus final product stocks; lower costs versus more stable costs.
So, placing the right people in the right companies and positions is essential. "Last year, I've seen a lot of people within Romanian companies who were trying to solve their problems taking over people from multinational companies. They only succeed in the cases where those people had enterprising abilities and they were able to manage the companies like they would have been their own. And the other way around: someone from a national company who wants to do things quickly, when he joins a multinational company and has to comply with rules, procedures, responsibility limits etc, he won't be efficient. The right people have to have first a strong connection with the organizational culture and after that to have the expertise to continue to do his job well", said Adriana Palasan. In addition, she underlined the importance of simple operations, which should replace the complicated procedures. "This is the moment when you have to reorganize your companies so that things would be simple, go easily and smoothly, flexible, with fewer people who would do the right things, so that the situation could be kept under control and the company could go further. This is the only way to know what cost increase you will have if you do a certain move, or what decrease of income - if you do something else. Don't lose the opportunity. Once this crisis will pass, the market will be very well organized, with good players who know their game, not speculators. It will be an unitary market, already covered, entering on the market will be very difficult and will require great efforts, in all the fields", added the managing partner of Supply Chain Management Center.
The crisis chooses the values
Augustin Hagiu, the president of the Romanian Transport Operators Federation (FORT), underlined the importance of quality in the cooperation with the transport company.
"I don't believe that everything starts with the times of driving and rest. But the haste of some people to gain a transport contract, forgetting in the same time that they have certain legal provisions to comply with, leads to negative effects on customers. The way they hurry to take in an order at any price, even under their costs, with the risk of sacrificing a driver or a transport license, makes me think that this crisis has its role, even though it's a bit too acid, and we have to take advantage of it as much as we can. Of course, there will be people who will be sacrificed, but also people who will manage the crisis well and will get over it successfully. I am trying to represent everybody", underlined Augustin Hagiu. In his opinion, a lot of the small and medium transport companies don't know how to manage their costs and they are destroying themselves because they don't understand what the real costs mean. "There are also customers who are taking advantage of this situation", he added, saying that he would like that, until the end of the year, the customers would see FORT as a serious partner in ensuring the connection with the transport companies. "I will develop a department that will manage the relationship with several trustful transport companies", promised the president of FORT.
Demonstration of quality
In the same context of quality, the conference in Turda represented the right opportunity for Aquila to make a true demonstration of healthy partnerships in transports and logistics. "A quality service is in fact an effective, efficient and flexible service. The effectiveness is covering all activities that the customer need, efficiency means doing it with the lowest amount of resources, while the flexibility is the capacity to adapt in real time", explained Bujor Stanescu, logistics manager of Aquila. He underlined the fact that being efficient doesn't mean necessary to be cheap. "We are talking of something cheap or of a good service for a reasonable price".
On the other hand, the logistics services provider should be proactive and suggest solutions for cost reduction. "I can tell you what I did lately for 2 of my customers. I showed to one of them that moving part of the stocks from the warehouse in Ploiesti to Tureni could obtain important savings for a year, having at least the same level of quality, if not higher. It surprised me to find out that I had to fight long time to convince him. He resisted a lot but, after the first 2 months of operation in the new location, the total costs for the same merchandise volume decreased. To another customer, I showed that he loses important amounts of money the way he does the delivery to a customer", said Bujor Stanescu. Aquila currently operates 2 logistic platforms, in Ploiesti and Tureni, also having one of the biggest fleets of commercial vehicles in Romania.
The criteria of measuring the quality are different, each company focusing on its own set of parameters. In the relation with its partners, Aquila uses only one indicator - Warehouse Casefill. It is calculated by means of the proportion between the number of delivered units and the number of ordered units. If this indicator goes under 99.5%, this could be a reason for contract cancellation.
Even though it seems a simple calculation, keeping such a high quota if very difficult and implies a lot of professionalism. An indicator like Warehouse Casefill can "hide" a lot of things: missing products or damaged products in the warehouse, delivery with short BBD, damages of the wooden pallets, delays caused by lack of resources, wrong data in WMS, wrong labeling, errors in picking (quantity or product), BBD that doesn't respect the requests of the customers, errors/delays generated by malfunctions of equipments or WMS. A lot of "traps" that could be translated in a lot of mistakes. But Aquila isn't allowed to do more mistakes than 0.5%. We have to mention the fact that, in most cases, this Warehouse Casefill had a value over 99.9%, an impressive value.
The company has to take into account strict demands on the sector of transports. For instance, within the contract with DHL, for which Aquila has around 60 trucks, any delay over 15 minutes at loading or unloading is considered incident, in certain cases the tolerance being of 5 minutes. In the first months of the year, only one truck was late over these limits.
"The partnership is like a marriage. Each party offers something to the other. If a customers demands something, we don't study if we can do it or not with the current level of operation, but we try to identify if we can do it even if we need to change totally our operation. So far we made it", concluded the logistics manager of Aquila.
The confereces series continue
The series of conferences under the generic title of "The Intelligent Guide of Cost Reduction" will include, this year, events in Ploiesti and Sibiu. The events aim to present the most modern organization models in logistics, adapted to the specific of the Romanian market. During a time when the resources have to be spent efficiently, Supply Chain Management and Ziua Cargo try to offer examples of successful practices that could transform into important elements that would help the national industry in the field to become competitive, like the one in the Western Europe.
Meda BORCESCU
meda.borcescu@ziuacargo.ro
Publicat in revista Ziua Cargo din June 2010
