Tai Lieu Chat Luong Lean Transportation Management Lean Transportation Management Using Logistics as a Strategic Differentiator Mohamed Achahchah A PRODUCTIVITY PRESS BOOK First published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2019 Mohamed Achahchah The right of Mohamed Achahchah to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.
British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Achahchah, Mohamed, author. Title: Lean transportation management : using logistics as a strategic differentiator / Mohamed Achahchah. Description: Boca Raton : Taylor & Francis, 2019. | Includes bibliographical references and index.
Identifiers: LCCN 2018026354 (print) | LCCN 2018028631 (ebook) | ISBN 9780429490101 (e-Book) | ISBN 9781138592278 (hardback : alk. paper) Subjects: LCSH: Business logistics--Management. | Shipment of goods--Management. Classification: LCC HD38.7/882--dc23 LC record available at https://lccn.gov/2018026354 ISBN: 978-1-138-59227-8 (hbk) ISBN: 978-0-429-49010-1 (ebk) Typeset in Minion Pro by Taylor & Francis Books To my wife Nasima, my son Ilyas and my daughters Amal and Maysa, who all have been my best supporters in this Lean journey.
Contents List of Figures. xiii List of Tables .xvii About the Author .xxi Chapter 1 Lean .1 Voice of the Customer.2 Voice of the Employee .3 Voice of the Process.4 Voice of the Business .4 Value Stream Mapping .1 Location and Flow Types .50 vii viii • Contents 2.1 Parcel and Express.6 Costs and Transit-Times .3 Supply Chain Security .5 Embargoed and Sanctioned Countries .9 Total Cost of Ownership.1 Cost and Budgetary Control .2 Freight Payment and Auditing .111 Chapter 3 Transportation Management .1 Build the Team and the Project Charter .2 Conduct Market Intelligence Research on Suppliers .5 Supplier Relationship Management .2 Carrier Selection Process .3 Carrier Review Process .4 Complaint and Claim Handling .9 Quality Management System .10 Transportation Management System .1 Master Data Management .2 Complete Transportation Order .4 Order and Capacity Planning .7 Non-Standard Order Management .8 Supply Chain Visibility .9 Proactive Shipment Monitoring .17 Managed Transportation Services .18 EDI and Interfacing.19 TMS and MTS Providers .11 Transportation Management Maturity .1 Category Strategy Development .2 Supplier Evaluation and Selection.3 Supplier Quality Management.4 Supplier Management and Development .1 Fewer Trade Barriers but More Regulations .2 Increasing Political Instability .3 Increasing Supply Chain Complexity .5 Omni-Channel Business Models .6 New Centers of Economic Activity .8 Mergers and Acquisitions .13 Big Data/Open Data .14 Uberization and Online Logistics Marketplaces.17 Internet of Things, Cloud Computing and Industry 4.18 Crypto Currencies and Payments and Block Chain Technology .20 Resource and Energy Limitations. 190 Chapter 4 Lean Transportation Management .1 Prepare for the Change .2 Lean Value Stream Manager Transportation .3 Lean Value Stream Organization Chart Transportation .3 Transportation House of Lean .4 Reduce Waste: Lean Customer .1 Develop and Deploy a Transportation Strategy and Policy .2 Collaborate with the Customer.3 Pack Properly and Prevent Damages and Losses .5 Extend Order Cut-Off Times and Customer Service Availability .6 Reduce Transit Times and Their Variances.7 Plan for Adverse Weather Conditions, Peak Seasons, and Holidays .5 Reduce Waste: Lean Finance.1 Consider Modal Shifts .3 Set Up Tender Roadmaps .4 Negotiate Fuel Surcharge Costs .5 Leverage Purchasing Volumes .6 Improve Loading Degrees .7 Apply a TCO Tool .8 Do Not Accept General Rate Increases and Price Indexations .9 Introduce Direct Deliveries .10 Check the New Silk Route.6 Reduce Waste: Lean Processes .1 Consider in- and Outsourcing .2 Implement Daily Performance Reporting and ProActive Exceptions Monitoring .3 Level Out Demand .4 Limit and Manage Returns .5 Optimize Vendor Inbounds .6 Implement Smart and Re-Useable Packing Material .7 Reduce Waste: Lean It .2 Use a Dynamic Carrier Choice System .3 Automate and Digitalize More .4 Consider a Yard Management System .5 Use Online Transportation Market Places .8 Reduce Waste: Lean Organization .1 Hire Qualified Employees .2 Develop and Co-Operate with Carriers .4 Install a Key Transportation Leadership Position .5 Plan to Map all the Value Streams and Value Stream Loops.9 Reduce Waste: Lean Compliance .1 Sign a Carrier Quality Agreement .2 Expedite Customs Clearance Processes .3 Manage Transportation Risks .4 Implement the Neutral Delivery Service .5 Reduce the Carbon Footprint .6 Reduce Duties and Prevent Delays and Penalties .7 Take Advantage of Preferential Trade Agreements .8 Act with Integrity, Honestly, Ethically, and Support Fair Trade. 261 List of Figures Figure 1.1 Value and non-value-added activities.4 Value Stream Map .5 Daily management board.6 Problem-solving cycle.7 Takt time calculation .8 Cycle time vs takt time .4 Goods within the pallet boundaries.5 Typical phases of a transportation flow .6 Parcel sorting belt .10 A truck with a standard trailer.11 Containers on a ship .12 Transportation by train .13 Costs and transit-times per modality.1 Carrier management cycle .3 Service portfolio analysis .118 xiii xiv • List of Figures Figure 3.4 Supplier’s view analysis .5 Tender document content list.6 LOI content list .7 Example SLA content list .8 Example SOP content list .9 Example transportation KPIs .10 Example Pareto root causes .11 Main and sub-processes transportation management cycle .12 Example transportation strategy summary .1 Lean value stream organization chart transportation .2 Transportation management house of Lean.
207 List of Tables Table 1.1 Transportation-related customer requirements .2 Hoshin Kanri template .3 Hoshin Kanri bowling chart.4 Hoshin Kanri action plan.7 Lean tools and their applicability.8 Basic Lean assessment tool.1 Parcel and express services .2 Parcel weight and measurement restrictions of a few carriers .3 Maximum cargo plane capacities .4 Maximum cargo-passenger combination capacities.5 Road transportation equipment characteristics .6 Container type characteristics .7 Plusses and minuses per transportation modality .8 Incoterms® rules description .9 Cost and root cause analysis .2 Carrier assessment questionnaire .3 Overall decision matrix .4 Detailed carrier quotes comparison .5 Carrier implementation plan .6 Example of a structured carrier performance analysis.142 xv xvi • List of Tables Table 3.7 Example shipment data .8 Shipment status messages .9 Example of a milestone set-up .11 Risk assessment matrix .1 Transportation management key drivers. 205 Introduction In Lean philosophy, transportation is considered to be waste. This triggers the question of how it is possible that there are so many freight movements around the world. With transportation, a company can reach its existing and potential customers around the world fast and without big invest- ments.
It is the linking pin between the supply chain processes and part- ners, who need to work in tandem to deliver the perfect order. From that point of view, transportation is not a waste but an important service dif- ferentiator to be used as part of the transportation strategy to create a strong competitive advantage as world-class service experience is becom- ing the key decision factor, in addition to world-class product capabilities, for awarding business to a world-class supplier. While governments and authorities have been developing many extensive public transportation strategies for a long time, there is still a significant number of private com- panies that do not have one or, when they have one, it is related to cost reduction. Many studies tried to define world-class and came up with various maturity grids, but there are no international standards to label a company as such.
However, these studies taught us the characteristics of world-class performance: a happy customer confirming the high quality of the products, sold against affordable prices, created by engaged employ- ees in a safe environment, delivered fast and in line with the delivery requirements. The characteristics of a world-class company that can deliver this performance include a customer-focused vision, mission, and set of goals that are shared by committed employees who act with integrity and respect laws and regulations. They are responsible for the performance of their processes, benchmarking them and empowered to continuously improve these in a sustainable way by using a structured improvement methodology, as part of the company’s operational excellence strategy, to meet their stretched targets in a flat and innovative organization. Examples of world-class companies are Adidas and Amazon, which are using smart transportation networks to increase sales by delivering purchased prod- ucts faster than their competition.
These companies do not treat transpor- tation as a cost center. They are not focusing on transportation spend reduction. They allow customers to buy any product that is available in any close-by store, warehouse, or other storage location, to be delivered at xvii xviii • Introduction home or any other address such as a store or other pick-up point. Their customers can ask for any omni-channel service they want to pay for and follow the progress of their orders from order entry to delivery on the Internet or choose to receive regular updates on their smartphones.
Amazon’s Alexa smart speaker system is able to recognize a person’s voice requesting the reschedule of a delivery and transfers this command to the shipper’s IT systems including the announcement of the new delivery date and time on the trucker’s mobile device. Deliveries can be made on the same day the order comes in, in the next hour, in the evening, on Saturday and Sunday. Some logistics service providers offer customers the possibility to change the delivery address and time until only minutes before the original delivery would take place. By being flexible in their extended customer service offer and delivering faster than others, they retain more and attract new customers to increase sales and grow at the expense of the competition.
Another way these types of companies try to retain and increase sales is to offer customers a logistics subscription, meaning that they do not have to pay for the transportation costs if they regularly place new orders. At the same time, the companies lower their total supply chain costs as faster deliveries turn out to lead to fewer returns and lower inventories. Lower inventories mean lower investments, financ- ing costs, and inventory carrying costs such as space utilization, handling, obsolescence, scrap, and theft. Reduction of returns means higher sales and lower transportation costs for reverse flows.
The result is higher prof- its while creating more value for the customers, who are happy with the shopping experience. Still, not many companies recognize that transpor- tation is moving from a cost center towards a profit center. Amazon is a good example of an innovative company that is differentiating itself from the rest by working on breakthrough transportation solutions. The tradi- tional logistics service providers are perceived to not innovate fast enough.
This is also the reason why the company is setting up its own logistics networks via Fulfillment by Amazon (FBA) to offer third parties that sell products on the Amazon website, and others too, the option to store, pick, and pack their products through the Amazon fulfillment centers and ship the orders via Shipping with Amazon (SWA). This business unit is expected to compete with the established companies like UPS and FedEx. Another Amazon innovation is the business use of drones, but they are also work- ing on a multi-level logistics center from which drones are sent out and received back, while the lowest level is used for the traditional dispatching of trucks. Other Amazon ideas are flying and small mobile truck Introduction • xix warehouses.
Another solution is the Domino’s self-driving robots to deliver pizzas. The idea is not to reduce work force, but to be faster and more on time and to prevent the pizza from shaking.