Logistics and Supply Chain Management, 4th Edition

LOGISTIC S & SUPPLY CHAIN MANAGEMENT

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and hence less inventory in total. Secondly, because the inventory is generic, its

flexibility is greater, meaning that the same components, modules or platforms

can be embodied in a variety of end products. Thirdly, forecasting is easier at the

generic level than at the level of the finished item. This last point is particularly rel-

evant in global markets where local forecasts will be less accurate than a forecast

for worldwide volume. Furthermore the ability to customise products locally means

that a higher level of variety may be offered at lower total cost – this is the principle

of ‘mass customisation’.

To take full advantage of the possibilities offered by postponement often

requires a ‘design for localisation’ philosophy. Products and processes must be

designed and engineered in such a way that semi-finished product can be assem-

bled, configured and finished to provide the highest level of variety to customers

based upon the smallest number of standard modules or components. In many

cases the final finishing will take place in the local market, perhaps at a distribution

centre, and, increasingly, the physical activity outsourced to a third-party logistics

service provider.

Gaining visibility in the global pipeline

One of the features of global pipelines is that there is often a higher level of uncer-

tainty about the status of a shipment whilst in transit. This uncertainty is made

worse by the many stages in a typical global pipeline as a product flows from fac-

tory to port, from the port to its country of destination, through customs clearance

and so on until it finally reaches the point where it is required. Not surprisingly there

is a high degree of variation in these extended pipelines.

Shipping, consolidation and customs clearance all contribute to delays and var-

iability in the end-to-end lead time of global supply chains. This is highlighted in

the example shown in Table 9.1. This can be a major issue for companies as they

increasingly go global. It has the consequence that local managers tend to com-

pensate for this unreliability by over-ordering and by building inventory buffers.

Table 9.1 End-to-end lead-time variability (days)

From

point of

origin

to port

Freight

forwarding/

consolidation

Arrive in

country of

destination

Customs

clearance

Transit to

point of

use

Total

elapsed

time

Maximum 5 7 15 5 5 37

Average 4 3 14 2 4 32

Minimum 1 1 12 1 2 17

One emerging tool that could greatly improve the visibility across complex global

supply chains is supply chain event management.