Logistics module 5 case study

¶ … Improvement

How is process improvement important to achieving transportation excellence? How might process improvement be extended to other areas of logistics planning?

Process improvements are predicated on cost reduction. Costs, irrespective of company size, often hinder business progress as company profit growth is inhibited. Through the use of process improvements, company's can achieve efficiencies they otherwise may not have attained due to system optimization. Process improvements can come in a litany of different forms depending on the size of the company and the industry in which it operates. For large companies in commodity businesses, process improvements are integral in reducing overall product prices. In commodity businesses with little differentiation, cost is ultimately the determining factor in regards to consumer purchasing behavior. A consumer shopping for an apple for instance is concerned with the overall price of the apple rather than any differentiating factor. As such, the producers of this commodity must optimize its systems and processes to lower production costs, which ultimately lower consumer costs. In many instances, the cost savings incurred through process improvements can help improve gross margins for commodity type businesses as they become the low cost producer in their respective industry. The same occurs within the transportation industry which is directly impacted on commodity prices. Oil, petroleum, and natural gas prices in many respects contribute to the overall need for process improvements. Chart 1 in the appendix depicts gasoline prices over the last 36 months. Notice the extreme increase as compared to the prior year. This would be a concern in regards to transportation excellence. As the cost of gasoline raises so too do the costs of conducting business. As such, process improvements can help mitigate this concern through process improvements. For instance, companies can better align their distribution network to better coincide with impending demand for their products. Investments in technology and GPS systems allow transportation services to take the shortest route to their destinations. Investment in smaller, more fuel efficient vehicles may reduce fuel costs over the long-term. Delivery times, and delivery dates can be planned during the periods when demand is needed reducing the amount of overall trips. For example, retail stores would anticipate larger sales volumes during the holiday system. As such, shipments can be planned to minimize time and waste in regards to this expected increase in demand. Investments in just-in-time inventory platforms can also align the needs of distributors and suppliers to better improve the overall transportation process (Harrington, 1997).

All the above mentioned forms of process improvements help companies achieve transportation excellence. The common thread the many of these initiatives is proper planning and forecasting. Process improvements are important as they help companies plan more effectively in regards to their underlying business operations. This planning ultimately leads to higher productivity per worker. As a result, less workers can do the same amount of work, or more work can be done by the same amount of employers. Either way, overall costs associated with transportation are reduced. Furthermore, process improvements must be executed properly in to achieve transportation excellence. Here automated systems and technology aid in the overall process. Many of the examples mentioned above use extensive of amounts of data, technology and platforms. These processes further create value as they help deliver transportation excellence

Process improvement can also be expanded to all logistical functions within the company. Human resources for example, can better ascertain the required staffing levels needed for certain jobs. This logistic function maximizes productivity of individual workers by extended process improvements to the overall human resources function. Cost control and accounting can better aid the logistical function through process improvements. Optimization techniques such as multi-stop truckloads and LTL shipments help reduce costs within the logistical function. These costs can ultimately be transferred to other logistical areas within the overall business (Kock, 1994).