Aceona supply chain management

A very interesting supply chain and logistics supplement in the Daily Telegraph yesterday.  The immediate eye-catching statistic according to a report produced by the Management Consultancies Association is that, so far, “40 per cent of companies have failed to adapt their supply chains in response to changing economic conditions”.  This is a staggering figure considering what’s at stake.

As a company we are not insensible to the huge resistance to change that permeates British management and it is almost depressing to see it on such a scale.  Fortunately there are companies who can see through the current fog and are positioning themselves ready for the upturn; how? Well, they’ve realised that on the other side of this economic malaise lies a new commercial world where risks will need to be better understood, quantified and carefully managed given the dearth of easy money, and to ride this roller coaster they’ll need to be lean and flexible and much better able to adapt to a rapidly changing environment.  These people readily understand that “big” does not necessarily equate to “better” and new supply chain models that offer a high degree of flexibility, better risk quantification/control and business support within dynamic and aggressive markets is the route to take.  It is gratifying to watch their growing success as they scoop market share away from those who will not change the way they do things.

Aceona celebrated its third birthday last month and we could not have asked for a better birthday present than to read the outright vindication of the 4PL model in the DT supplement.  For three years it seems we have been doing exactly the right thing!

4PL of course means many things to many people but whichever definition you prefer the bottom line is that the 4PL operator retains independence of assets and therefore the ability to be far more creative.  The 4PL feature was interesting in that the commentators invariably applied the model only to road transport and the savings (vehicles, fuel and carbon) that can be achieved if an independent approach is taken to the loading and controlling of such.  We believe however that true 4PL goes way beyond this and should be looking more at elements such as centres of manufacturing, modal choice, port choice, equipment choice etc. and our experience suggests that previous savings can be magnified when this, more holistic, approach is adopted.

Only by taking this holistic approach can true creativity and risk quantification/qualification/management occur on a scale that will support businesses in the post-credit crunch world.  It is a fact of life that oil prices will inexorably rise; with every Dollar on a barrel comes a need to review supply chain strategy (unless of course you’re one of the 40% with a death wish!) and this means high flexibility - the ability to switch manufacturing locations, change stock locations/levels, switch modes, change port of import/export etc. etc. and whilst 3PL goes a long way to supporting this it cannot divorce itself from the fact that asset ownership requires a return on such; road miles/shed fill = revenue, simple fact.

Environmental pressures will likewise ratchet upwards; whether scientists are right or wrong about global warming or whether warming is indeed down to human activity the (cynical) fact remains that it is a convenient bandwagon for people to jump onto whether it be from a marketing perspective or a simple excuse to pump up taxation.  Either way the pressure is on to look at more carbon friendly way of moving materials through supply chains and whilst gains have been made in terms of engine technology, trailer design and 4PL fleet management, people are still struggling to understand how best to make use of the alternatives i.e. short sea shipping, rail, inland waterways etc.

Also of interest in the supplement was the mention of an “online platform” to enable the exchange of information between retailer and supplier linked in to the carrier.  Is this 4PL or does this stretch across its boundary into another dimension - 5PL, the ultimate in strategic supply chain planning and control? Take a look at www.5pl-uk.com and decide for yourself.

If you’d like to know more about the advantages of 4PL then please give us a call; alternatively you are cordially invited to an inspiring event organised by the Chartered Institute of Logistics & Transport and hosted by Nene Storage Ltd. at their Watford Village (Northants.) site on 23rd April.  For more details visit our events page or call 07799 410050.

Looking ahead, and returning to the 4PL debate, Aceona are currently working on a number of rail based solutions for UK domestic distribution; it does not surprise us that the demand is as high as it is but nonetheless concerns us that so many companies have no idea how to make this work.  Watch this space for an update on this and other examples of true 4PL at work!

We recently attended a workshop whose purpose was to understand key distribution issues and challenges within a sector of the UK manufacturing industry and to perhaps suggest new models that would improve cost effectiveness, efficiency and market opportunities.

As international supply chain managers what struck us was the pain being felt by the small producers who were suffering extremely poor service levels and consequent financial losses as a result.  These people clearly felt they didn’t have a champion and I would suggest there is a very pertinent message that all of us who manage supply chains and have a vested interest in the prosperity of UK manufacturing ignore at our peril.

Small producers are incredibly nimble and innovative: they respond quickly to the challenges set by their customers and they constantly seek new opportunities for market and product development.  In a good number of cases companies are run by a very small number of people but this flat structure enables them to retain flexibility and responsiveness.  However, what they lack in a high proportion of cases is any understanding of supply chain management and the in-house skills to ensure that inbound raw materials and outbound finished goods are handled efficiently.  Evidence would suggest that a high number retain the in-house transport model for the simple reason that they consider this to be the best (possibly only) way of controlling their own destinies and maintaining the standards of service that their customers demand.  If a new/small food producer secures a contract with a large supermarket chain then those of us with long experience in this industry readily recognise the pressures to deliver and it is understandable that companies would rather take transport costs on the chin and shave margins than lose such contracts.

But is there a better way of doing things?

Professor Martin Christopher of Cranfield Institute has been arguing for some time that not only is the supply chain THE competitive element for many businesses but that the most effective model for the post-credit crunch world will have to be strategic collaboration in some form or another.  This resonated very well with those assembled at the workshop as securing greater transport efficiency and lower cost (whilst retaining customer service levels) is the new Holy Grail, but the question on everyone’s lips was how to achieve the different scales to cater for both large and small businesses alike.  If you refer to our publications section you will find the answer - recently published by the Chartered Institute of Logistics and Transport.

Amidst the daily gloom we have unearthed something very positive: our sources suggest that formal consent will soon be given to the clearance of the Ipswich to Peterborough railway line for the running of high cube (9′6″) containers on standard wagons.  Whilst this is long overdue it is nonetheless very welcome as the alternative for a lot of traffic on the Felixstowe to North East corridor has been either specialist railway wagons or road haulage.

Given that, in our experience, the use of rail on this corridor can be in the region of 20% cheaper than road haulage - cost differentials which inevitably find their way into consumers’ shopping trollies - it tends to highlight the necessity for taking a longer term and more holistic view of transport infrastructure investment.  Whilst the effects of Dr Beeching’s axe have been reversed on a very small scale the simple fact is that the UK railway has a finite capacity and squeezing additional capacity from the network, especially for freight - even higher speed freight such as 75mph container services - is a dark art.

Despite ever increasing fares, volatile fuel costs and the grind through the congestion on most roads, rail travel has seen a remarkable renaissance in recent years; operators have, understandably, sought to fulfil their franchise obligations and lay on more and faster services all of course placing pressure on capacity and ensuring that freight paths are harder to find.  The debate about the economic value of a track path has been ongoing for some years but whether this will manifest itself in a more balanced approach to freight pathing remains to be seen.  Perhaps it all boils down to robbing Peter to pay Paul, but in the meantime both we, and our customers, are delighted with the latest news.

Firstly, on behalf of all at Aceona Management we wish all our website visitors a very happy and prosperous 2009.

To be fair the year hasn’t exactly got off to a cheery start with newspapers seemingly jammed with tales of woe, business failures and umpteen thousand heading for the dole queue. It’s difficult for most of us to comprehend exactly what has happened to bring us to this particular juncture; once proud companies, household names for many years, brought crashing down whilst others hang in there by the skin of their teeth. The scale and speed of this economic downturn has indeed caught many on the hop and struggling to understand how to extricate themselves or where to go next: the banks have put up their shutters and the ready and easy credit of only a few months ago has dried up with disastrous consequences for many businesses; sales have crashed and costs continue in an upward direction.

But is it all gloom and doom or has somebody fired the starting pistol on what is undoubtedly a challenging but exciting race? Personally I would suggest the latter; UK plc is placed smack bang in a window of opportunity the likes of which we may not see for a long time – if ever again. It’s not just the UK that’s nursing severe economic bruises or feeling the chill winds of recession, so doesn’t that suggest an opportunity for the economy that looks beyond the here and now and positions itself to reap the rewards of the future?

The simple fact is that British businesses DO have an opportunity. Being supply chain managers we readily subscribe to the view that the supply chain is THE competitive element for the vast majority of manufacturing and retail businesses: the revenue from of a tin of beans may be reasonably fixed in terms of what shoppers are willing to pay, but the cost of getting that tin onto the shelf in the first place is another world for those willing to look carefully and be prepared to do things differently in order to maximise returns and/or reduce dependency on the banks.

The snag really lies in the high proportion of British managers who are unwilling to contemplate change: far too many sit back in their comfort zones or bury their heads in a bucket of sand and pray that when they emerge the sun will be shining and everything will be fine and dandy, just as it was before the storm clouds appeared. I think they need to wake up; it really is change or die.

Could we be heading for an era where the small business is king – flexible, lean, cost and service focussed and able to take on the big boys in key market areas? In some respects it’s very much like comparing a small speedboat with a supertanker, one turning on a sixpence and the other lumbering on for miles before anything happens. I remember the tale of the “Turbinia” – the small craft wrapped around Charles Parsons’ steam turbine engine which ran rings around the British fleet at Spithead just before the First World War much to the chagrin of empurpled admirals ….. but the turbine won the day and it wasn’t long before that method of marine propulsion was the norm.

There is a significant overlap between this tale and the modern supply chain.

Over the coming months we’d like to open our website to debate and to offer advice and suggestions as to how companies can replicate the good old “Turbinia” and become much more agile to face the challenges ahead of us. We’ll be talking about how the 4PL offer can reduce costs (and our customers will readily testify to the savings and efficiency improvements they enjoy) and how the 5PL offer will usher in even greater economic advantage for UK industry. So please send in your comments and questions and we’ll do our best to answer them as quickly as possible.

In January 2009 we will be lanching the new Aceona supply chain discussion forum.
This will be a medium for the exchange of news, views and questions on all things related to the effective and efficient movement of materials around the globe.

If you have a burning issue then please post it and we’ll do our best to address this for you.

In the meantime we would like to wish everyone a happy Christmas and a prosperous new year!