ProcurementAlert.com » logistics

Why do they want you to ‘go green’?

Charlie Walker — Wed, 03 Dec 2008 15:16:36 +0000

Are you seeing red yet over “going green?” Seems like every time you turn around, somebody or something else is going green or even yellow in certain cases — since the astronauts are now recycling urine!

What’s behind all this shifting corporate philosophy, and how does it affect Procurement and logistics?

Well, it ain’t love for Mother Nature. (Big surprise, huh?)

As is so often the case, the force behind “going green” in logistics is a different kind of green. Some folks even call it cabbage.

It’s money.

At least that’s the conclusion of the 2008 Trends in Transportation and Issues in Logistics and Transportation Report.

The top 5 drivers behind “going green,” according to the report:

Priority of CEO
Reduce costs
Pressure from customers/consumers
Improve public relations, and
(drum roll, please) Reduce or eliminate hazardous or toxic materials

Well, the good news is that direction is coming from the top. Also, the environment did manage to make the top 5 list.

Going green often can go hand-in-hand with saving money. For instance, many shipping materials — from Styrofoam peanuts to pallets — are good for more than one use, but a lot of businesses are still dumping them.

It won’t cost you a penny to brainstorm with Procurement and logistics staffers for other ways to “go green” — in both senses of the words.

7 ways inventory comes back to bite you

Charlie Walker — Tue, 19 Aug 2008 14:00:49 +0000

Sometimes it’s easy to overlook that your distribution center is called upon to operate as a two-way street: Product heads out in one direction, but it also can shift into reverse and come back to you.

One of the biggest problems with this boomerang effect is the time it takes for distribution centers to figure out what to do with returned goods. After all, the primary goal is to get goods out of the door.

Hence, reverse logistics.

As fast as you can ship out a product, it can be headed right back to you. The better prepared you are to handle such situations, the more smoothly your distribution center will function.

The fact that many businesses are willing to pay someone else to take care of this tells you it’s a valuable service. And if someone’s willing to pay an outsider to come in and do it, why not do it yourself and save the money?

Time is the single greatest enemy to handling reverse logistics. Processes grind to a halt and distribution center employees are forced to research and make decisions for each item or product that comes back in your door.

There’s a two-step solution for this:

Identify the categories/reasons for return, and
Have a plan in place for how to deal with each category.

There are seven core reasons for returns:

manufacturing problem
service problem
recalls
end-of-life
obsolete
end-of-use
problem under warranty

Once you’ve determined the core cause for return, it’s easier to drop it into one of six “asset recovery disposition” buckets:

restock to resell
refurbish
destroy
repackage to resell
sell to secondary market, and
return to manufacturer.

Once your distribution center has developed working criteria for each disposition, it’s much easier for any staffer to handle returns.

You’ll save time, decrease frustration, and get returned goods on the way to where they’re supposed to be.

Logistics overhead: Jump in the driver’s seat and take control

Charlie Walker — Wed, 02 Jul 2008 14:20:57 +0000

There’s a hidden cost that’s driving up the prices Purchasing pays for many goods — but if you know about it, you can work it to your advantage. The cost of logistics – moving goods through the U.S. supply chain — is skyrocketing, reports the Council of Supply Chain Management Professionals. This is pushing up the costs of any goods — from raw materials to finished products — moving from one location to another.

In 2007, about $1.4 trillion was spent to send goods from one place to another, more than 10% of our country’s Gross Domestic Product (GDP). Historically, logistics costs as a percentage of GDP hit a low of 8.6% in 2003. Since then, transportation and inventory costs have steadily increased.

There are several factors at work in driving up transportation costs. Of course, there’s the price of fuel. But that’s taken an even bigger toll — more 2,000 trucking companies (of five trucks or more) filed for bankruptcy last year. It’s not getting better: More than 900 trucking companies filed for bankruptcy in the first quarter of this year alone.

So how can you turn this grim assessment into an opportunity?

First, it’s a good time to re-assess some of your Purchasing decisions. Maybe there’s a vendor you use already for one product, and you go to a second vendor for another product because he under-cut the first vendor.

How much money are you saving by buying from the second vendor? Could you purchase the same goods from the first vendor, at a slightly higher price, but more than make it up by paying one shipping bill instead of two? The rules have changed, and consolidating purchases among fewer vendors might save you more money in the long run.

Second, it changes the dynamic in the bidding process. You can negotiate with vendors, promising more business for discounted shipping costs. Increasing your range of purchases with a specific vendor gives you more bargaining power — more money is on the table.

Finally, it wouldn’t hurt to check in with your shipping department to get their perspective on rising transportation costs, and what you might be able to do to help them save money. It could be yet another negotiating point with vendors.