Going For Olympic Gold
Written by Caroline Dowling, Flextronics, Group President of Enterprise Solutions and NOVO
The Olympics, currently being staged in London, this summer, inspire us all to strive to increase our performance levels, both as individuals and as companies.
In 2012, three decades of supply chain management have passed. Seven Olympics events had come and gone in that span. It is time for us all to learn from history and look forward.
As we head towards 2013, the headwinds are strong, commodity volatility is the highest in 100 years, materials are scarce, and the standards of social responsibility programs are rising. Product life cycles are shorter and customers have higher expectations. Global market opportunities are high, but require micro segmentation and customization. As a result, supply chain complexity is increasing.
It is exactly these escalating financial and competitive pressures that make supply chain network planning more critical than ever today.
Too often, however, the costs for pursuing an optimal supply chain network outweigh any savings that are created. This is because the network is not being viewed in a “transformational” way that aligns business strategy, customer satisfaction, profit goals, and value creation.
A quality Electronic Manufacturing Services (EMS) partner will work with their customers to fully understand their business objectives, taking a holistic approach that encompasses business and supply chain strategy, real estate, sustainability, and taxes and incentives.
Strategic and operational value chain planning toolsmust enable companies to:
- Analyzecurrent and projected performance from a holistic perspective using business Intelligence
- Identify critical trade-offs and obtain actionable results to realize cost savings, efficient asset utilization and improved service levels
- Solve a wide range of business challenges using advanced simulation and optimization technologies
- Gain cross-functional visibility and consensus for repeatable execution of business decisions
Figure 1. Suite of Strategic and Tactical Supply Chain Planning Tools
The most successful networks consider the entire global supply chain. By going beyond an analysis of the typical costs – transportation, distribution, inventory – and including taxes, customs tariffs and duties, and security compliance, your company moves to the highest phase of network planning.
World-Class Transformational Supply Chain Network Planning ensures that all of the factors impacting network planning are integrated and based on overall organization strategy.
Most network studies are conducted by the supply chain group, which typically has little to do with setting business, marketing or sales strategy. However, if these teams were part of the network planning group along with supply chain, then the focus could be changed from, “How do we cut costs and deliver product?” to “How do we grow our business profitably?” Then the answers may be totally different – and this is powerful and transformational.
A superior EMS partner will provide strategic and operational value chain planning tools offering their customers an in-depth and unique set of capabilities to support all types of business decisions, from strategic challenges to weekly-level reviews of key processes and operations, incorporating end-to-end value chain structure and metrics, Figure 2.
Figure 2. Channel spanning performance measurement areas
If your prime motivation is to use your network to drive business, then you may get very different answers than if your main objective is to “optimize” the network. If you are introducing a new product, then determining the network structure is not the desired outcome – because that is strategic. You are trying to answer the question, “How do I use my current network more effectively to achieve the best flow through for my new product?”
As network modeling packages become easier to use and company systems are more frequently linked together, it becomes increasingly viable to utilize these tools to answer tactical questions. Combining superior modeling packages with the best practice of involving the whole company in supply chain network decisions, and you haveworld-class Transformational Supply Chain Network Planning.
True supply chain network optimization utilizes a clearly defined business strategy and takes a holistic approach. Direct-to-customer and e-fulfillment are now at least 10 percent of all sales volume and are expected to expand to 20 percent in the next few years.World-class Transformational Supply Chain Network Planning will allow companies to transform their networks to accommodate new patterns of customer ordering, fulfillment and service through the multi-channels of e-commerce.
Leveraging expertise across the company – not just supply chain – leads to solutions that promote robust growth potential and address all business strategy requirements. And since the supply chain is viewed as a tool for maximizing profitability and return on capital, network planning is never a one-time project; it is an ongoing process that evolves as a company evolves.
A comprehensive suite of tools will provide for Supply Chain Planning at both a tactical and Strategic level, Figure 3. At one level your company may need to analyze your network’s carbon footprint, and at another level your company may need to assess the suitability of your network to fulfill multi-channel order fulfillment.
Figure 3. Aspects of Supply Chain from Strategic to Tactical
Because the volatile forces at play in the market today can cause a company's momentum to vanish in to thin air, you must design into your distribution network the flexibility to adjust to changing market conditions, including:
- Geographic shifts in production and consumption
- Market segmentation, new markets and new customer service requirements
- Cost increases in energy, plant and equipment, labor and transport
- Government regulation or deregulation
- Product proliferation and product life cycle
- Competitor adjustments
- Events in the economy
As a quality EMS partner the initiatives we find which contribute to profitable growth share several themes. They are typically broad efforts, combining both strategic and tactical change. They also reflect a holistic approach, viewing supply chain from end to end and orchestrating efforts so that the whole improvement achieved, in revenue, costs, and asset utilization is greater than the sum of the parts. It is like a relay team in the Olympics, going for gold. Individually each member of the team or component of the supply chain on their own will not be successful, however combining their individual strengths they are world class.
In selecting a gold standard EMS partnerit is critical to select a company that provides rigorous assessment of the entire supply chain, from supplier relationship to internal operations to the marketplace, including customers, competitors, and the industry as a whole. Current practices must be ruthlessly weighted against best practices to determine the size of the gap to close. Thorough cost-benefit analysis lays the essential foundation for prioritizing abs sequencing initiatives, establishing capital and people requirements, and getting a complete financial picture of the company’s supply chain, before, during and after implementation.
Finally, view your successful EMS partner as a coach. The EMS partner you select must have the breadth of vision to understand and manage activities from receipt of order through delivery; the flexibility required to help your company experiment and make necessary corrections, coupled with patience demanded by an inherently long-term effort; superior communication and leadership skills essential to winning and sustaining effort at every level of the organization.
UPS Posts Record Second Quarter with Revenues of $23.4bn
Growth across each of its core segments resulted in record results for UPS in the second quarter, with group revenues climbing 14.5% year on year to $23.4bn.
The global logistics outfit achieved consolidated operating profit of $3.3bn, up 47.3% compared to the same period in 2020. It is the second consecutive quarter of record profit, and a significant rise on Q1’s $2.9bn.
UPS Q2 Revenues in Brief
- Consolidated revenues: $23.4bn (+14.5% yoy)
- Domestic: $14.4bn (+10.2%)
- International: $4.82bn (+30%)
- Supply Chain Solutions: $4.2bn (+14.3%)
The US company’s domestic segment performed steadily with 10.2% revenue growth to $14.4bn. But it was its international and supply chain solutions segments where UPS saw the biggest gains. Strong demand in Europe led an increase in international revenues of 30% to $4.82bn. UPS’ supply chain solutions division saw revenue growth of 14.3% to $4.2bn, driven, the company said, “by strong demand in nearly all businesses”.
UPS’ steady growth throughout the pandemic has been led by the overarching vision of its chief executive Carol Tomé to do “better not bigger”, focussing on efficiency and high margin deliveries through its network over pure scale and volume.
“I want to thank all UPSers for executing our strategy and delivering high service levels, which fuelled record financial results in the second quarter,” she said. “Through our better not bigger framework, we are moving our world forward by delivering what matters.”
UPS Completes Sales of UPS Freight
The second quarter also saw UPS complete the divestiture of UPS Freight in a deal worth $800m - with a surprise result for the division, now called TForce Freight, under new owner TFI International.
“The second quarter was historically significant for TFI International, with the closing of our UPS Freight acquisition and record performance across the board,” said Alain Bédard, chairman, President and Chief Executive Officer, TFI International. “Particularly gratifying is the performance of TForce Freight, which has exceeded our operating ratio targets far ahead of schedule, and we have only just begun our work.”
In it first two months of ownership TFI reported that adjusted operating ratio (OR) was 90.1% for TForce Freight, far outperforming its forecasted OR of 96-97%.
“I wish to thank our entire team for their hard work and remarkable efforts, and officially welcome aboard our new TForce Freight colleagues who have seamlessly come under the TFI umbrella and are already making stronger than expected contributions,” Bédard added.