managemenl
Page 72
Page 73
If you've noticed an error in this article please click here to report it so we can fix it.
matters by John Darker AMBI
Major changes coming in distribution
AN ARTICLE called "Sweeping changes in distribution" by Professor James L. Heskett in the Harvard Business Review argues that we are at the end of a significant era of technological change in transportation, warehousing stock control and order processing. The new era, fast approaching, will be marked by what is described as "institutional" change. Greater gains are now possible through such change than by improvements in transport "hardware".
If the professor is right, as there are persuasive grounds for thinking, transport and distribution managers must keep a lively eye on the possibilities.
Transport costs have not — so far as I am aware — been publicly stated as the primary ground for a company merger within the UK or, indeed, in Europe, but it is not hard to make a strong case for certain mergers on this ground. If the premise be accepted, it is good news for those managers in transport and distribution who have for long argued that their function should be recognized as at least as important as the production function.
New forms
New institutional forms for the co-operation of small and medium-sized firms have been devised in the Common Market. They make British thinking seem very backward; in road transport the slow growth of tipper co-operative groups in Britain has been a disappointment to many; in the farming and hotel industries, a pooling of resources has been proved to pay off.
Heskett says at the outset that the past 15 years have seen enormous improvements in transport techniques by virtue of advances in containerization, inter-modal working, information processing and materials handling. (Some of these have yet to work-through the European transport scene.) Is it not equally likely that improved transport equipment will come along which is capable of solving present and future problems?
There are good reasons for doubting whether new equipment and methods alone will solve the problems facing distribution executives. The resistance of the politically powerful environmental lobby to an expanding road network, particularly one adequate for urban mobility, must be recognized. In America it appears that truckers are talking in terms of an extra 6in. vehicle width rather than a 10ft' increase in length — and they will be lucky if they succeed.
To increase bridge and tunnel clearances on road or rail networks is prohibitively expensive. Today, it is easier to win support for an expanded system of bicycle paths for urban commuters than for a supersonic transport development.
Airfreight
The hoped for expansion of air freight in the capacious holds of Boeing 747 Jumbos has misfired, says Heskett, because few anticipated the problems of assembling a sufficient volume of freight in one place at one time, or the problems involved in handling air freight on the ground. In shipping, despite talk of million-ton tankers, significant dis-economies in scale are fast approaching.
In warehousing, though there have been designs for vast computerized warehouses for years, few have been successful. Their possible gains are small compared with operational improvements achievable with currently available machines and methods.
Containership operators, says the professor, lamentably failed to see that their main problem would be to control container usage in the hinterlands surrounding the ports they served. "They paid dearly for their traditional lack of interest in, and institutional separation from, freight before it arrived and after it left the docks." Hence the extensive efforts of container service operators to acquire freight forwarding, trucking and other organizations controlling freight and to promote joint ownership plans Tor containers, with more effective monitoring schemes. Heskett suggests that self-organiz groups of shippers (ie consignors of goo( with common origins and destinations m offer the best potential for providi adequate volume for air freight — and implieaton for many other forms transport. Already, vastly improved din lines of communication between customi and suppliers effectively integrate soi manufacturing industries.
On inter-city transport bulked tral flows may soon require "subterrane freight-access routes" for urban deliveries institutional co-operation to create mc efficient freight distribution.
Integrated deliveries
A recent study of freight movements Utrecht disclosed that the consolidation a systematic delivery of certain types freight moving in small lots could reduce t number of delivery vehicles in the c centre from over 600 to 6. The Superman' Institute in America has considered t feasibility of consolidated distributii facilities operated as a joint venture competing grocery product manufactur( and chain-store organizations utilizing t same regional distribution centres. Th( may be scope for integrating the Ii delivery road transport services competing petroleum companies — already share pipeline use.
Because of competition between proth lines, increasing numbers of Americ manufacturers have responded by holdi quantities of semi-finished stocks close markets, typically in distribution centn There they can be cut, assembled packaged to order, "thus postponing t company's commitment to specii stock-keeping units locations until the 11 possible moment while reducing speculati (measured in terms of elapsed time betwe customer order and delivery) for t customer".
Alternative work?
This is more likely to happen in a tar market such as Europe. Shall we soon s
ight manufacturing combined with listribution, providing alternative work for ransport staffs at quiet period There are instances Of palle't sizes being ;o-ordinated by buyers and sellers to nomote mutual economies. Wholesalers may bring their handling systems to conform with those of a dominant supplier. A large listributor of housewares "offered truckers
guaranteed high profit on their investment n return for the full authority ,to schedule Ind control their trucks, reduction of up to 10 per cent in existing charges, ad access to the truckers' books to verify pr fit levels" — which suggests the hug potential benefits made possible by shift of runctions between organizations.
In the United States, the regulatory powers of the Interestate Commerce Commission have slowed down the developments Heskett has yet managed to identify.
He thinks joint ventures, or third parties — such as transport organizations — can often provide the objectivity and "arms length" management needed "when large, proud organizations wish to create a product or. service requiring inputs from several participating companies. They are particularly attractive in a field that has been typified by fragmented, duplicated services — logistics".
Loading bays
Some of the problems discussed by Prof Heskett are all too familiar in Britain — such is the matter of inadequate loading bays with consequential delays to visiting hauliers' vehicles.
If the factory or warehouse owner pays for more loading bays the hauliers get the benefit, but this solution might be viable if one or more of the hauliers reduced rates selectively to encourage the necessary investment.
It might be thought that trade union attitudes — let alone conservative business thinking would prevent the kind of co-operation suggested by Prof Heskett, but he points to an example of an agreement between the Pacific Maritime Association and the International Longshoremen's and Warehousemen's Union, which provided for a trust fund to protect until retirement the salaries of ILWU members expected to be displaced by the introduction of technological improvements. "The volume increases made possible by operating economies actually created jobs, leaving the union with a trust fund that it had limited immediate need for. Thus both parties found this transaction beneficial."
Co -operation
The road haulage industry has been strengthened in the past year or two by many graduates with minds trained to think in broad — even abstract — terms.
The developments which Prof Heskett has outlined in America can be fostered in Europe, and nearer home, if transport firms, and especially those in road haulage, weigh up the possible benefits of cooperation. This approach offers the attraction, in many instances, of support from the potent environmental lobby.