The role of information flows in supply chain management
How often are employees of the supply chain management department asked about the movement of information flows and the importance of communication processes in the organization? As a director of logistics, I am more concerned about specific, urgent issues: inventory planning, timely shipments from suppliers, relations with customs, warehouse capacity and throughput, distribution of goods to regions, transport logistics, etc.
I am lucky to have a great manager. He often sets interesting tasks for me. Once he called me and informed me that he was not satisfied with the activities of the department. To my question, what’s wrong? He answered: there are no complaints about the results of the work — there is development, optimization, effective solutions in logistics and procurement, but the adjacent departments are not satisfied with … communications ….
Of course, I was indignant: my employees are not polite? Has anyone’s request not been answered? Is there any action broken? I was hooked! But I had to take the bitter pill, as it is, and go home with it.
Having a tendency to do professional research (I love my job), I resolutely began to study the communication problem voiced by the director.
Turning to the definition of ULP, we note that supply chain management is a systematic approach to planning and flow management.
- information (!!!)
- materials
- services
at all stages of the movement of goods from the producer to the final consumer.
We know well how to systematically manage services in the supply chain:
These are partnerships with shipping lines, freight forwarders, transport companies, customs-licensed warehouses, brokers, customs, state authorities for issuing permit documentation for the import and trade of goods, partners for storing goods, forming promo sets, providing transport logistics on the territory of Ukraine and others organizations Effectiveness to measure?
Not a problem: timeliness of services, price/quality ratio, work within the logistics budget.
All these processes are subject to planning, for example, by calculating the annual cargo flow on a monthly basis, we can calculate the need for containers, trucks, warehouse load, budget for brokerage, transport services, terms, control points, KPI, etc.
Product flow management is my favorite topic. I can talk about the movement of goods around the clock… The entire activity of a trading company depends, I am not afraid of this word, on the effective management of commodity stocks and flows! We begin by planning demand and inventory levels to ensure sales. We create procurement planning algorithms for each SKU depending on the logistics arm. We calculate insurance stocks that will protect us from fluctuations in demand and from disruptions in the delivery period and, of course, will ensure the level of availability of 100% for new products and group A (according to ABC analysis). We will also calculate the planned turnover and monitor deviations (either excess inventory or sales have fallen). The level of service will be calculated for each client. turnover in all warehouses, etc. Any indicator can be translated into the language of numbers and deviations can be monitored.
But how to manage information flows? How to track them? Plan?
Let’s first understand the concept of what are information flows in supply chain management?
Work with information accompanies all processes of movement of goods from the manufacturer to the final consumer:
First of all, it is software (EDI, accounting database of the company, programs for planning demand and purchases, WMS or other information systems of accounting and data planning). Setting up software and meeting the needs of modern realities is not an easy task for the director of logistics. Competent IT support is important here, which ensures the introduction of new software, integration of databases, accounting programs, refinement of existing software, etc.
Ensuring effective communications with external partners is also a task of coordinating information flows. The director of logistics must master this art perfectly! Honest, open, trusting relations with partners saved me more than once in difficult situations: to prepare the goods for the promotion in a magically short period of time, and to knock down the penalty and demurrage amount for the above-standard simple one at the port, and not to raise transport rates until the end of the year, because the budget is already over the limit, there are many such examples in the arsenal!
The simplest and at the same time complicated in communications, surprisingly, is interaction with internal customers: our colleagues from adjacent departments and departments.
Who among us works well on communications with colleagues? Logistics processes flow through the activities of the entire company, meeting the needs of marketing, sales, and the finance department. What is the quality of these information flows? Is the interaction effective? Does logistics boil in its own cauldron, live its own life?
How often it happens that even within the same department of supply chain management, procurement managers do not know what customer service does, although, in principle, they work, in fact, on the same process – ensuring the flow of goods.
And what happens to communications with adjacent departments? How often do you hear from your employees: “marketing and sales are burning again… how are we going to ensure that the promotion item ships tomorrow if it takes a week to prepare it… what do they not understand?…” or “why do a promotion on a product that and so the current execution of the plan is 130%? … why not pay attention to a product with low turnover..?
Under the hood of such an information vacuum, the eternal conflict of interests is particularly acute: for logisticians, it is optimization and reduction of transport and storage costs, for sales and marketing, the availability of goods in unlimited quantities here and now!
A swan, a crayfish and a pike are similar, aren’t they?
How much time, energy, emotions (a non-renewable resource) is spent on conflict resolution?
Let’s calculate that if the employees of your department spend up to 20% on clarifying relationships, writing off claims and heroically overcoming difficulties, then you lose on one employee: 1.6 hours per day * 22 jobs. days = 35.2 hours per month * UAH 28 (Average salary of a logistics manager per hour) = UAH 985.60 per month
If you have ten employees under your command, this is UAH 9,856/month and UAH 118,272 per year! And colleagues from adjacent departments lose just as much, not finding a common language with logistics! The total amount of losses (about 60 people) can reach 500,000 UAH per year! Quite a sum, isn’t it?
And if you do not start managing information flows within the department and with related departments, your personal effectiveness as a manager and the effectiveness of the entire company will steadily decrease, … after all, who needs a manager who creates not a profit, but a loss?
- Instant feedback on any request from related departments. Due to the fact that DULP managers are overwhelmed with current cases, they often do not pay due attention to timely feedback, believing that responding to a request 3-5 days after receiving it is enough. But the sender of the request often does not need the answer this second, but information about when he will receive it and in what form. Dissatisfaction of employees of related departments caused by the lack of feedback can be the lion’s share of the entire communication problem
- The lack of written and clear instructions creates conflicts associated with an ambiguous interpretation of the business process. I am not a supporter of bureaucracy, but the main processes in logistics require their presentation on paper.
- Internal and external service level monitoring. In fact, this can be done with the help of a questionnaire that will reveal the zone of development.
- Broadcasting company goals and logistics goals to all department employees. Setting tasks and describing the importance of each employee’s work within the company.
- Seminars, trainings on logistics, which we conducted for employees of the internal logistics department and logistics partners – distributors. A seminar on logistics was held for everyone within the company. A separate logistics training was conducted only for the sales department. These activities require many hours of preparation (we used an in-house resource), but only training programs are able to familiarize employees of related departments and partners with the goals, objectives, methods and role of logistics. After such activities, Partners and internal customers will have a greater understanding of processes and issues that previously caused resistance.
And what’s next?
We follow the development of production and logistics concepts, and we note that today information has a key role. Whoever owns information owns the world. But the question of not just possessing information, but effective interaction with the environment is becoming acute. As early as tomorrow, interaction comes to the fore. The availability of competencies and the quality of interaction will determine the effectiveness of the system and will determine the successful operation of the company.
By working efficiently on communications today, you not only improve the performance of the department, but also receive bonuses in the form of:
- new ideas from employees;
- the effect of synergy, when everyone, understanding their personal contribution, works for a common result;
- new opportunities for development.
In the end, I want to emphasize once again that the planning and management of information flows is an equally serious part of the daily activities of the logistics director.
