Logistics Management

Evaluate the logistics operations carried out within the company highlighting the problems encountered.

Cartes Sans Frontières (CSF) is a multi-million organisation that produces maps for the European traveller. Based at Lyons in France, they produce maps, atlases and travel guides. The production is all done in house, saving on external costs. CSF has its own Surveying and Designs Division licensing out their designs to other external organisations, earning substantial royalties for the company.

Reading through the case study I have found that CSF is a very active company in terms of the movement of goods within the business. Their demand fulfilment system hosts most of the logistical activities. Looking over figure 1 you can see 2 definite independent logistical channels. The Channel on the right shows how the Map stocks move from the print planning to the Printing lines, the printed maps move to the Bulk store. Broken down orders are then taken to the Picking area. The channel on the left displays how the customers’ orders and trade orders meet up with the Moulin inventory control system. The system is in constant communication with the right hand side channel making sure there is enough stock in place. Through a bar coding system, using hand held scanners, Moulin automatically finds the requested orders in the Bulk store, a picker then brings it down to the picking line. The goods are then packed and dispatched using a contracted logistics service provider.

The movement of goods within CSF have both a manual and an automated system working together to produce maximum output. The printing department has the most activity, as much as 4 hours can be spent on setting up just one machine with the majority of time spent on configuring the plates and adjusting the colours. Once set up, the printing machines work two seven-hour shifts, each producing as much as 8000 maps per hour. The company has four printers with two different printing machines, Alpha and Beta. The Alpha machines are older and less efficient, with almost twice as much time needed for set up whilst, only producing half as much output compared with the Beta machine. (Johnston et al, 2003:170).

CSF has two fairly distinctive levels of demand. The first is a lower level, where monthly sales volume accounts for only 5% and 7% of the annual total and a second, higher level of demand shows monthly sales of 9% and 11% of the annual total. The planning procedures department use as much as 12 months lead time in preparation for new maps and stock replenishment. The team determine the need for placing a map (stock) on the printing schedule as much as 6 months in advance. They aim to deliver a batch of printed maps to the Bulk store 3 months before stock is projected to run out.

Holding 12 months of inventory can be expensive. Warehousing for storage including rent and utilities, Insurance and taxes on inventory finance for the stock, and stock lossage due to shrinkage/deterioration are just a few costs for holding inventory over a long period. Inventory optimization www.sap.com Accessed 2.1.2007

Moving over to the left channel of figure 1 we see more activity coming in from customers and trade orders. CSF aim to have dispatched the customers order within three to four days of receipt, with an 88% performance target regularly being exceeded. Only over the busy Easter months have CSF had problems with delivery times, this was mainly due to their contract logistics service provider. CSF should have forecasted from previous years that Easter was the busiest time and so they should have hired more transport through their logistics providers.

The company uses an Electronic Data Interchange (EDI) for their customers to place orders. Only 50%-60% of the orders are EDI with the remaining orders being keyed in to Moulin by hand. This process is slow, not cost effective and can generate errors. Use of this channel is limited to a small amount of CSF’s largest customers. Here I think is CSF’s biggest downfall. According to Stock, If the EDI was available to all the customers, Moulin, the system used to generate the EDI orders to the warehouse would be working independently without the need of any keyed in manual orders. This would save time and money, (Stock, 2001)

The final logistics operation happens in the picking area. Once the maps have been made, they are stored in aisles with the maps arranged by country and then by numerical order. When an order comes through scan guns will find the order and tell the pickers exactly where the maps are stored using an onboard display.

When the entire order has been picked, the scan gun is uploaded into Moulin, allowing the system to reorder the necessary stock. The order is then packed and palletised and is ready to be dispatched.

Discuss how the use of various IT applications contribute to enhancing efficiency of the logistics processes. Are there any areas which could be further developed using IT?

Cartes Sans Frontières distributes nearly 5 million maps a year throughout Europe. This figure would not be possible without the use of IT within the organisation. CSF uses a very sophisticated order processing system, a SAP R/3-based system called Moulin.

‘In the face of continual growth, the increased turnover, and an increasingly global and competitive market, Moulin adopted a simple strategy – improve efficiency and manage costs by integrating and streamlining its retail, manufacturing and distribution businesses located around the world’. Strategy behind Moulin www.sap.com Accessed 2.1.2007

Moulin receives an order via Electronic Data Interchange (EDI). Saunders states that, “EDI is the transfer of data between different companies using a File Transfer Protocol (FTP) connection and is becoming increasingly important as an easy mechanism for companies to buy, sell, and trade information. It is unmanned, reduces paperwork and reduces error”. (Saunders C.S,1992:24)

“The purpose of EDI is to eliminate duplicate data entry and to improve the speed and accuracy of the information flow by linking computer applications between companies” (Emmelhainz, M.A.,1992: 17)

An order number is then produced generating a pick list; this is then downloaded into hand-held barcode scanning guns that inform operators which maps to pick up and where they are stored.

Emmelhainz argues bar-coding is a very useful form of an IT application. Varying widths of bars represent letters and numbers, they are simple to use, accurate and quick, and they can store large amounts of information and can produce instantaneous transmission of information giving greater central control and inventory reduction. (Emmelhainz, M.A.1992)

Once the order has been packed and is ready for distribution, the scanning guns are uploaded back into Moulin for the system to re order and replenish stock. This is known as the order processing technology capable of processing ongoing data through data management.

Supply chain management is a focal topic in business today. Render has defined “supply chain management” as the integration of activities that procure materials and services, then transform them into intermediate goods and a final product, and deliver them to customers. (Render.1997:64)

Moulin seems to be a very useful tool in this industry. Although the company is not utilising the system to its maximum potential, unfortunately for CSF, only 50% of orders are received by EDI, with the remainder arriving by other channels either fax, telephone, post or e-mail. These orders then have to be typed manually into Moulin, this is not a cost effective method as man hours are wasted inputting data. The reason for the low percentage of orders flowing through EDI is mainly due to the customers who are placing the orders. Many large companies have an electronic data interchange already in use but for other, smaller companies EDI may be seen as too costly to install and implement. Companies that have EDI installed may also find there system is not compatible with CSF’s, Moulin.

In terms of this application enhancing efficiency and contributing to the business, the Moulin system can identify and fix simple mistakes in an order such as replacing superceded codes with current numbers. Around 97% of all orders pass smoothly through the process. This is somewhat beneficial as it means less man hours are spent fixing small errors.

The Surveying and Design Division use another form of IT application. When it comes to printing the maps, the design division need to set up the printers manually as mentioned above, and one printer can take as long as 4 hours to perfectly align the colours and set up. The case study notes that the Alpha printers are old and can only produce half of the amount to that of the Beta printers output. If CSF invested into 2 new printers where the colour alignment was loaded automatically and gave out the same output as the Beta printers, CSF would save 8 man hours every time a new line was uploaded, whilst generating twice the amount of maps to that of the Alpha machines.

One way for Cartes sans Frontières to significantly reduce manual labour throughout the warehouse would be for the whole operation to become automated, transforming the warehouse using an automated highbay narrow aisle laser navigated rack stacking system. The picking area would become obsolete, with the break through technology of a fully automated laser navigated forklift in the warehouse. Moulin would simply receive the order from the customer then immediately send the information to the automated warehouse, the unmanned cranes would set to work pulling off the right pallets with no error, they would then send them down a large set of rollers called a ‘hydra foil’ and within minutes the order will have been created ready for distribution. Of course not all warehouses will have the infrastructure to house an automated highbay and the cost would be very expensive. The other problem may be order quantities, if a customer only wanted half a palette of each map, the cranes would not be maximising output as they would have to be hand picked in order to make half pallets.

(Bowersox, D.1996)

What actions should be taken by the company to reduce stock levels and improve customer service levels?

Holding inventory is a very costly procedure. When looking over the way Cartes Sans Frontières hold there inventory, I think there is room for improvement. A single map could be held in bulk storage for as much as 6 months. In the case of maps where new roads and motorways are constantly being updated, that map will become obsolete 6 months down the line. I suggest that CSF move to a more efficient way of delivering their product. ‘Just In Time’ (JIT) organises all activities so they occur exactly at the time they are needed, the system coordinates supply and demand using a pull system, where customers demand the orders and those actual orders are used for production. This is a more efficient way of holding much less inventory. CSF host their production on a pull system based on forecasting previous demand; instead, they should use real time data as this would increase stock turnover. (Poirier, C.1996)

There are a number of different solutions CSF could take to reduce inventory. Firstly, they could think about moving from a storage warehouse to a cross docking operation, this uses less storage, lower lead time thus resulting in faster delivery. Secondly they could use a shared user warehouse, enabling overheads, electricity, rent and insurance to be divided. Thirdly they could prioritise fast moving and more popular maps by producing more, whilst reducing the size of slower moving, less popular products. As I mentioned before, they could use warehouse automation. This significantly improves speed and efficiency reducing the amount of people employed. Although all of the above are definite solutions for CSF’s inventory problems, in reality the cost factor may be too large. For CSF to lower there inventory, they need to utilise their real time sales data to forecast stock and sales whilst, updating the warehouse management system for a more stringent inventory control. Ultimately getting the product to the customer in accordance with the customers’ expectation is CSF’s main goal. (Christopher, M.1979)

Bibliographies:

Bowersox, Donald J. / Closs, David J. (1996): Logistical Management — The Integrated Supply Chain Process. The McGraw-Hill Companies, Inc.

Christopher, M. e.a. (1979): Customer service and distribution strategy. Associated Business Press, London

Emmelhainz, M.A. (1992). EDI: A Total Management Guide. International Thomson Computer Press. p17

Johnston et al, (2003), Cases in Operations Management, Prentice Hall p165-p170

Poirier, C and Reiter S E, (1996), “Supply Chain Management,” San Francisco: Berrett-Koehler Publishers

Saunders C.S. and Clark S. (1992). EDI Adoption and Implementation: A Focus on Interorganisational. vol.5, no.1, p24.

Stock, James R., & Strategic logistics management, 3rd Edition, 2001

Inventory optimization www.sap.com Accessed 3.1.2007

Strategy behind Moulin www.sap.com Accessed 3.1.2007