Elements of An Effective Continuous Improvement Program For Long-Term Successful Supply Chain Operations

By Mike Challman, VP North American Operations, CLX Logistics

”Excellent firms don’t believe in excellence – only in constant improvement and constant change.”  Tom Peters

“What have you done for me lately?”  Janet Jackson

More often than not, a logistics outsourcing decision is driven by the need to correct a particular pain point or shortcoming that a shipper has recognized in its supply chain.  So,  it’s very common for the shipper and its new logistics provider (3PL) to be well-aligned and focused to address that particular issue.  Assuming a good implementation (a topic for another time), the immediate results can be significant.

While it’s no small task to achieve a good level of initial success, this is only the first step for the shipper-3PL relationship to remain relevant and valuable on a long-term basis.  A well-defined continuous improvement (CI) program will maintain the momentum beyond those early achievements.

A fundamental requirement of a sustainable CI program is strong executive-level support.  Nothing kills any corporate initiative faster than having individuals realize that senior management doesn’t value their work.  Leaders must be both vocal and visible in their support of CI efforts.  They also must ensure cross-functional support within the organization.  Multiple competing priorities invariably pull limited resources in many directions. Only top leadership within the organization can ensure CI programs remain a priority.

The 3PL must also have a ‘seat at the table’ when its client – you, the shipper – discusses upcoming plans, strategies, potential opportunities and so on.  Logistics providers must have a thorough and current understanding of its customer’s business and strategic plans to develop effective ideas and suggestions that support current and future business activities.  In addition to corporate strategic meetings, the shipper and 3PL should meet regularly to specifically review the status of CI projects.  Ideally, meetings should be held monthly to review tactical issues and progress and quarterly to review the broader, more strategic aspect of a CI project as well as to discuss the next round of CI initiatives.

An effective CI program must also have well-defined goals.  Both the shipper and 3PL must understand and agree upon key program outcomes.  Comprehensive goals should include both near-term and longer-term objectives that take into account both quantitative and qualitative improvements.  A 3PL with experience in managing CI programs on behalf of other clients can bring forward best practices from those experiences. But, of course, the aim of the CI program must align with the overall strategic goals of the shipper.

From a commercial perspective, the services agreement between shipper and 3PL should include a description of how the CI program is managed, including guidelines to govern any gain share provisions.  The relationship can be largely self-funding if it delivers measurable economic value over the life of the agreement.  Equally important is for the shipper to reward the value of the 3PLs’ expertise and contributions with a portion of actual savings.  The best 3PLs will be willing to tie a portion of compensation to improvement efforts; the savvy shipper will be willing to share some of the gains in exchange for those improvements.

Throughout the CI process, an essential ingredient is reliable metrics.  Accurate data, including establishing a meaningful baseline, is essential to tracking the progress and results of any specific CI project. Equally important is the need for dependable data to help identify new areas where a CI focus would be valuable.  The old adage that you can’t manage what you can’t measure may not be entirely true, but good data is in enabler that it’s almost impossible to do without.

Finally, it is important to feed an appetite for improvement within both organizations.  Everyone involved in the logistics activity within the shipper and 3PL organization must be dedicated to the pursuit of better results.  Establishing individual, departmental and organizational objectives and incentives that relate explicitly to improvement will assist with this focus, as will frequent and specific recognition of CI successes.  As time goes by, improvements will become increasingly harder to achieve so it is important to establish a culture of seeking and securing on-going gains, both big and small.

Continuous improvement is a journey, not a destination.  And every shipper can rest assured that its toughest competitors are undertaking the same journey.  If the shipper and its 3PL are not actively trying to move forward, it’s the same as deciding to move backward.  A shipper who is committed to constantly improving will be rewarded for those efforts, and will foster a well-deserved reputation for excellence.  A first-rate 3PL is a valuable traveling partner who can help navigate the best path to success.

For more information on how to get started in establishing or refining a continuous improvement program  for your supply chain operations that reaps long-term benefits, contact Mike Challman at mchallman@chemlogix.com or email http://www.chemlogix.com/solutions/managed-services.

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