October 2001 | Commentary | Viewpoint

Bringing Logistics Out of Medieval Mode

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At the end of the quarter, as salespeople demand that items move off the dock and into revenue status, logistics specialists find their faxes humming, phones ringing, and desktops overflowing with paper. The struggle to meet the transportation needs of customers and move products across international borders would be easier were it not for the archaic shipping methods that persist well into the digital age.

The trouble begins at the moment a vendor wants to sell an item to an overseas customer. The customer informs the seller that he can get the same item locally for a dollar less.

Perhaps the seller can beat a dollar, especially if he ships free on board (FOB), so the purchaser pays all shipping fees. Of course the buyer, if he's smart, knows if the seller accepts these terms the product will exceed the initial quote. The buyer wants a quote that includes all the inherent fees associated with getting the product to the chosen port.

Customers Won't Wait

Because most logistics departments have no automated, on-the-fly way to harness this information, the salesperson may not know for days if the company can indeed beat a dollar. Will the prospective buyer still be interested in the purchase a day or two later?

It is highly unlikely that a buyer will wait very long for the seller to provide the correct shipping information and costs. Buyers can and will find what they need elsewhere, should they be asked to "wait." In this day and age, they can no longer afford to be held up by red tape or possible miscalculations.

Thanks to the Internet, the flow of information has dramatically affected the business sector. Yet it has failed to be harnessed in some areas, including logistics. Indeed, automation and real-time supply and demand information have become key elements in flexible manufacturing, where a company builds products to order, sometimes daily. Immediate information allows factories to continually meet their customers' needs by making sure they are meeting demand on a timely basis.

Where the Supply Chain Clogs Up

For instance, in a flexible manufacturing environment, businesses are utilizing progressive just-in-time (JIT) inventory hubs. Supply and demand is fully automated, so purchasers can order products to be built for their own customers on a daily basis, enabling them to be extremely responsive to their needs. Information trickles down the supply chain, with automation keeping things running smoothly and efficiently.

Where the supply chain clogs up is in the last part of the process—the point where the products must be shipped to buyers around the world.

Until recently, there has been little automation in moving goods internationally. Due to entrenched governmental policies in the logistics industry, global traders are at the mercy of costs—costs that can change weekly, sometimes daily, due to fluctuations in duties and customs fees, as well as build-to-order product design.

Automating to Meet Demands

The digital age has placed new and astounding demands on businesses. Businesses today must be able to price on a global basis, and this process needs to be automated to determine landed costs within minutes rather than days. Logistics personnel can spend their time chasing after faxes, spreadsheets, and fluctuating costs at foreign ports, or they can use an automated process that provides information they need in seconds.

Whatever companies choose to do, they should pay attention to the segment of the supply chain mired in stagnation—logistics. All the flexible manufacturing tools in the world won't make a difference if the items produced are thrown into a stream that even a fish couldn't swim out of.

The Gartner Group estimates that international trade will grow five percent between 2000 and 2004, while international shipments are anticipated to grow 40 percent. It is apparent that the need for automation in logistics is great. For transportation, an industry that has grown over hundreds of years, the time is now for logistics professionals to stop operating in medieval mode and enter the 21st century.

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