Based on his experience with companies
participating in MIT’s Integrated Supply Chain
Management Program, Prof. Metz has identified
certain commonly reported bottom-line benefits.
These center on cost reductions in such areas
as inventory management, transportation and
warehousing, and packaging; improved service
through techniques like time-based delivery and
make-to-order; and enhanced revenues, which
result from higher product availability and greater
product customization.
There are other payoffs as well. For example,
the supply chain technique of optimizing the
distribution network—that is, determining the
best location for each facility, setting the proper
system configuration, and selecting the right
carriers—can bring immediate cost advantages
of 20 to 30%. That’s the number determined by
IBM’s Wholesale Distribution Industry Segment,
based on consulting engagements in a wide range
of industries. “This typically breaks down into
transportation savings of 15 to 25 percent and
improvements in inventory-carrying costs of 10
to 15 percent,” says Mark Wheeler, national solutions
manager for the IBM consulting unit. (www.
ascet.com/ascet/wp/ wpQuinn.html )
Another supply chain technique with proven
payback potential is cross-docking—the practice
of receiving and processing goods for reshipment
in the shortest time possible and with minimum
handling. According to Maurice A. Trebuchon,
a partner with PricewaterhouseCoopers, cross
docking can produce savings of 25% or more over
conventional warehousing. In a presentation made
at the annual Council of Logistics Management
meeting, Trebuchon cited one manufacturer that
used cross docking to realize a net savings of
$0.84 per ton of freight processed. The savings
resulted from the elimination of putaway, picking,
and storage costs.