Third Party Logistics

What Makes a Provider Truly Lean?

By: Michael Burchett

Many organizations have utilized lean to improve manufacturing processes, and have now realized it’s time to extend these programs and start connecting lean principles to partners within the supply chain. The impact of lean on the supply chain is significant, as the goal ofThird Party Logistics lean is to eliminate waste (overproduction and inventory), which will decrease work in process inventories. This, in turn, will decrease process and manufacturing lead times and, ultimately, increase supply chain velocity and flow.

Logistics can be quite complicated and there are many potential failure modes between the order and delivery. Without an effective third party logistics provider in place, the system can break down and the inbound part or outbound final product won’t arrive in time. Many third party logistics providers claim to be lean through their marketing messaging and sales proposals. However, many of them fall short of practicing inherently lean logistics processes and having lean principles drive decision making.

When looking for a third party logistics provider, there are a few key lean logistics performance areas to keep in mind that will ensure your provider truly “walks the walk.”

1. They spend a significant amount of time at the Gemba.

Gemba is a Japanese word that simply means “workshop,” and in a Lean environment it means the place where the work is done and the value is added. At LeanCor, we almost insist that when a customer asks us to be their third party logistics provider of choice we hire at least one employee to do all of their daily work at the worksites. When we want to improve our performance we can walk up to our customer’s VP of logistics and say, “hey, what do you value out of us?” Then we investigate for ourselves. For example one of our customers asked that we improve trailer utilization; that was what they valued. Our on-site managers have the ability to go to the receiving dock and say, “you know what, he is right. A lot of these trailers are coming in about 80% full when we need to shoot for closer to 90-95%.” Going even further, they can get their hands dirty and help the receiving team unpack the skid and look at some of the parts to help us find the root cause. Maybe we thought one of our parts was packed 10 per skid but it is actually packed 15 per skid. We can fix that right then and there. If we didn’t have an on-site manager we would be blind to the problem and would need to launch a much broader investigation. Some third party logistics providers would have just launched into an investigation using data and reports.

2. They value transparency and communication.

G.K Chesterton once wrote, “But man is a magician, and his whole magic is in this, that he does say [a train will arrive in] Victoria, and lo! it is Victoria.” Of course we all know that magicians are really just illusionists; they have a team of people that work hard behind the scenes both before and after the show, using mirrors and billowing smoke to make it seem as if the elephant just disappeared before the audience’s very eyes. The difference between providers who only claim to be lean and those that truly are is transparency. Our customers trust that they can put a delivery date and location on a PO and it will arrive in a “JIT” manner. But we like to educate our customers on how lean logistics processes work rather than hide them. We strive to improve visibility throughout the value stream. We strive to error-proof our network, but sometimes machines break down or second-tier suppliers fail to deliver on time and our customer’s suppliers can’t fulfill their commitments. In such cases, our customers want to know as soon as possible. At LeanCor we create communication processes so that our customers are always in the loop. Additionally, if at any time our customer wants to know where a part is, they can check our web-based software that provides all the visibility they need.

3. They constantly seek continuous improvement

The third party logistics provider should demonstrate an aggressive continuous improvement mindset with solutions that are both measurable and actionable. It should deliver new and proactive ideas on a frequent basis, and thought leadership in the form of supply chain vision and innovation to help the customer turn its supply chain into a competitive advantage. A great third party logistics provider will provide the services, people, processes, and technology to achieve the customer’s goals. There should be a collaborative attitude between the customer and the provider, as well as an established global understanding for any future expansion opportunities.

As lean practitioners, we like to look for problems and are willing to fight to eliminate them. While reflecting upon a particular third party logistics customer of mine, I was reminded of the new role of the third party logistics provider. It’s not just to transport and store, but rather to serve as a trusted partner in the lean journey by identifying problems, implementing solutions, and adding value in global and complex supply chains.

Because of the gains we have made as a company at LeanCor through our continuous improvement efforts, we have been able to better serve our customers, and are still fighting to improve every day. This is a part of our DNA. As a lean third party logistics company, we know that mutual improvement and long term partnership is of utmost value to our customers.

4. They know the value of just in time (JIT) delivery.

Part of our “waste is bad” mantra is reflected in our commitment to reduce inventory for our customers. Excess inventory can lead to many other wastes in the warehouse and overall supply chain. Let’s think about how often you pick something from your warehouse. Assume you pick something 100 times a day, and due to excess inventory it takes 20 seconds longer per pick. That is about 30 minutes longer per day, which equates to about eight days per year of wasted motion and time caused by excess inventory!

It’s easy for suppliers to deliver whenever they want to deliver, as long as it is at some point before the due date. However, a lean third party logistics company recognizes the need to deliver in time for production, yet not too long before so as to increase inventory.

5. They thrive through education and advancing the industry.

What differentiates LeanCor is the offering of three service categories: training, consulting, and third party logistics. This strategy enables us to remain grounded in operational reality while continually refining lean theory. It also allows us to support customers in all phases of their lean journey in a cohesive, progressive manner – focusing on the people and process aspects in addition to the logistics operations. We believe in advancing global SCM education relative to best practices in order to eliminate waste and make the world a better place to live. A third party logistics provider dedicated to research and education is essential to helping its customer achieve competitive advantage.

Logistics networks are complicated. Having a sustainable third party logistics partnership is crucial so you can focus on your core competencies. Be sure that if your chosen provider claims to be lean, they truly “walk the walk.”

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