Creating an efficient supply chain

Any business owner involved in sending and receiving products relies on an intricate chain of supply. The good news is; some solid programs are in place to create an efficient supply chain and improve reliability.

If you’ve been shopping online lately, you may have been using a computer assembled in Taiwan with Irish-built processors and running software developed in the US, to buy a product designed in the UK and manufactured in China from materials resourced in Brazil. Your credit card would be processed in India, the product shipped from a warehouse in Singapore on a Norwegian freighter, tracked by an Australian TDL company, and delivered for collection in a van assembled by the Korean subsidiary of a German-American automotive company.

And that’s just buying a book! The supply chains involved in more manufactured products are far more complex with masses of intersecting operations. But the ability to get to grips with these kinds of globalised supply chains and to successfully participate in them is critical for individual business, industry sector, and nationwide competitiveness. Efficient supply chains that provide a seamless, quality-controlled and integrated flow of freight and information cut costs, speed up delivery, and promote technology and knowledge transfer. And with ever-increasing globalisation, such supply chain excellence is central to breaking into international markets. Today exporting is not so much about rivalry between individual companies, it is more about whole supply chains competing against each other.

Some striking figures from the US illustrate the impact of bad and good supply chain practices on productivity at the national level. It has been estimated that in the United States some $40 billion is lost in the retail market annually because goods are sold at reduced or discounted prices—that is, because poor inventory control has allowed too much stock.

And that another $40 billion is lost in potential sale of goods that would have sold if they had been available—that is, too little stock. However, when such issues are addressed, the gains are remarkable. A good example of this is the fact that, in 1980, business logistic costs in the US equalled 16 percent of GDP but fell to 10 percent by 2000, a 37 percent reduction in only two decades. You can imagine the increase in productivity if one of your key operating costs fell by more than a third.

An Efficient Supply Chain

Take this hypothetical example of what a state-of-the art supply chain can provide for a small Australian business looking to grow internationally.

When the ‘Gourmet Foodstore’ in Philadelphia buys fillet steak from Gippsland beef farmer, John Smith, it is on the end of an extraordinary supply chain. John’s cattle are all individually ear-tagged for supply chain identification. He knows exactly what treatments and drugs each have received and what fertilisers and herbicides have been used on the paddocks where the cattle graze. All this vital information is documented in an electronic system that will provide a complete profile of the progress of the meat products along the supply chain.

At the abattoir in Melbourne, supply chain systems monitor and control the treatment and condition of the products from each animal as they are processed, sorted, and packaged. New data is added to the electronic document system on the origin of the product, the manner in which animals are processed, the quality of the product, and how it is handled and refrigerated.

In the container, the fillet steak has been refrigerated at just the right temperature, continuously monitored by in-container systems. These and other systems provide important information such as the fact that the meat products have been kept in the correct environment throughout the manufacturing, transport and the logistics chain process. They are safe, secure and protected by Radio Frequency Identification (RFID) systems on the container that prevent illegal access and indicate if locks have been tampered with.

Supply chain systems also allow container conditions to be remotely monitored using satellite technology so owners can check conditions and act immediately if required. The integrated supply chain data systems also ensure that products move quickly through Customs and terminal release processes in the US because all authenticity, food standards, bio-security and regulatory steps and requirements are correctly documented and complete.

By the time the fillet steak gets to the ‘Gourmet Foodstore’ it is fresh, healthy, safe and tender and of the highest quality thanks to John Smith’s expertise and a highly sophisticated supply chain smoothing the way.

Chain of Supply Challenge

Achieving this kind of supply chain excellence is obviously beyond the scope of any one organisation. It requires a coordinated approach by all stakeholders from business, industry, union, education bodies, and government.

That’s because there are major challenges to achieving supply chain excellence. They include key supply chain players worldwide forming new strategic alliances and the emergence of new business models. Then there are new technologies like RFID and wireless local area networks driving new production and distribution models such as online purchasing and delivery.

The overall freight task is growing itself while Transport, Distribution and Logistics (TDL) operators are also coping with increased fuel prices and the need to ensure supply chain security. It’s a rapidly evolving and increasingly complex task. But, achieving supply excellence puts you ahead in the global marketplace.

Victorian Initiative, Supply Chain Excellence Action Plan

The Victorian Government is taking on all these issues as part of its strategy to keep growing Victoria as Australia’s State of Supply Chain Excellence and Gateway of Choice. This approach is based on the recognition that a unique integration of strategic thinking, planning, and new technologies and skills to harness TDL resources and infrastructure is central to meeting the fast-growing diversity of customer needs. In short, ensuring that everything is linked.

So the Victorian Government is improving the overall supply chain environment through the framework of its TDL Industry Action Plan, and the 2006–2009 Supply Chain Excellence Action Plan. These are both government-industry partnerships focused on issues like infrastructure and technology, education and training, regulation review, and supply chain efficiencies.

This covers projects such as the Business Activity Harmonisation Study to reform operating hours at the Port of Melbourne, Australia’s largest container port, and the TDL Specialist Centre, and the National Intelligent Transport Systems Centre.

This industry–government partnership has also been active in developing the Information and Communication Technology (ICT) capabilities of supply chain companies. Over the last few years a special reference group has actively supported the development of ‘smart freight’ and completed a major Transport Company Benchmarking Study. This study benchmarked how 56 transport companies use ICT systems, within their company and with other companies along the supply chain. The reference group is now focussing on streamlining transport payments through improved ICT systems.