April 10 2012 03:57 PM

Garbage in, Garbage out (GIGO) became part of our nomenclature when information technology became more and more important to running a modern business. You may remember that if the data input was poor, the output is also not useful. This applies to everything from sales forecasts to inventory counts.

GIGO easily translates to the supply chain because it is a continuum that is dependent on the right information to deliver the right product, at the right time, with competitive cost, because the customer can and will find another supplier.

Inbound logistics as part of the supply chain is definitively as critical — if not the most critical — in the process.

Fortunately, there are opportunities to improve your competitive strengths that may currently be costing profit and customer satisfaction:
1. The relationship between purchasing, logistics, sales and marketing is not always optimally aligned. 
2. The shipper (often a vendor) is in control and responsible for selecting the mode and carrier, leaving the purchaser with only product selection, leaving half of the benefit of supply chain management as an open opportunity.
3. Single sourcing and/or reduction of suppliers produce short-term cost savings but lacks emergency solutions and flexibility for problems that are not predicted.
4. Information on what and when product will be delivered is not always complete or available in real time.
5. Printed routing orders are no longer effective in an electronic environment. End box here

Elegantly performing this entire process well is what the market really demands. I spoke with Steve Leggett Jr., Senior Manager of Commodities and Logistics for Gradall, to understand how he is succeeding in this environment.

Gradall manufactures big excavators that weigh 20-40 tons. They are using high tech effectively with one of the largest robotic welders in America, lasers, 340 employees and a sophisticated supply chain management process.

Gradall’s inbound freight is from over 400 vendors in the US, includes over 3,500 SKUs and makes up 85% of their transportation cost with the remaining 15% utilized to move their final manufactured excavators. Total annual transportation spend is approaching $2,000,000, and managing the supply chain is a key to the whole company’s competitive differentiation.

Gradall is a division of Alamo Group (www.alamo-group.com), and Steve began improving the process two years ago. Banyan Technology’s solution has been instrumental and is now used by all divisions and vendors. Some of the interesting aspects of supply chain management that Alamo has in place:
• Focus on four to five carriers for each lane segment with decisions being made on order to delivery time, quality, low damage, and price. Steve negotiates with each carrier himself and is effectively saving cost on shipments.
• All vendors use the same process because it reports in real time on orders that are quoted, pending, in transit, and delivered. The data can be accessed by Steve and his team by product, purchase order, summary, lane segment, and many more variables. Viewable order information makes coordination with sales, customer service, inventory, manufacturing, and shipping a coordinated network.
• Carriers are automatically ranked first to fifth on each shipment and the vendor is instructed to pick the top carrier in the ranking when they electronically receive the purchase order. Steve has elected to shield carrier pricing from vendors and is notified if a vendor doesn’t follow the selection protocol.
• Banyan’s solution saves time and money as opposed to a standard transportation management system (TMS) that requires rekeying data when a carrier’s tariff changes. Rate changes are done automatically and in real time. 
• Steve provides the carrier reps a comparison by lane segment so they can use them with their pricing department to offer better pricing for Alamo’s carriers. Once approved by the carrier it is immediately available online to all vendors. Cost savings begin immediately.
• Alamo has a 98% fill rate, but in cases where their customer needs a part ASAP, it is shipped directly to the customer from the vendor and the freight is billed to Alamo as a third party, with their negotiated rates, providing complete control for outbound, inbound and third party shipments for pricing and visibility.

Manufacturing big equipment in the US with help from a US technology company to manage the supply chain is a double win. 

Surprisingly, I can’t find a word that is the opposite of GIGO in the overall lexicon, so we will call the more efficient supply chain system - SCIXY (Supply Chain Information Multiplies Yield). 

Rob Shirley is President of ExpresShip, Inc. a strategic partner in the global supply chain. Contact him at rsxpship@gmail.com