Transportation Excellence

INTRODUCTION

Purpose: The purpose of this paper is to answer the question: Is process improvement important to achieving transportation excellence?

Background: This paper is the fifth module of the course. For it I will use information I've found in articles provided on the course disk as well as information found throughout the internet via search engines.

DISCUSSION

Within industry today, there are a variety of organizational transformation initiatives which are designed to have organizations focus on both the needs of their customers and the processes within the organization which enhance quality customer service and nurture life-long customer loyalty. The organizational benefits of such an approach include: expanded market share, increased productivity, customer responsiveness, and profitability (Krenek, 1997). Over the years, these initiatives have become known as: "Total Quality Management"(TQM), "Continuous Quality Improvement," "Business Process Improvement," "Reengineering," "ISO 9000" and new to the list, "LEAN"...to name a few.

Elements of philosophy, principles, strategies, and tools provide the conceptual framework and practical applications that are necessary in order to strengthen interdependent work relationships (Harps, 2003). But conceptual framework and practical application alone do not guarantee success within organizations today. Success is measured one customer at a time, through their perceptions, as a result of their experience in being provided with products, services and information, which are provided by every interdependent department within the organization.

Logistics has been (for the most part) something that most companies just do.

As a discipline, logistics has not been near the top of the priority list as managers have been preoccupied with quality and cost reduction. However, supply chain strategy and planning are useless if a company has poor execution capabilities (Harps, 2003). As demand has become more global, time more compressed and pricing more constrained, an increasing number of companies have been examining distribution and transportation for potential value opportunities (Harps, 2003).

At the start of the new millennium, the concept of transportation has evolved far beyond management of trucks and trailers. In today's highly fluid business world, the role transportation plays in logistics and supply chain strategies can be the hinge on which success - or failure - depends. There's a revolution taking place in the field of transportation, one that isn't focused on managing trucks, trailers and drivers. Today, transportation is being unavoidably linked to logistics and supply chain management as part of a key business strategy for success. (Trent, 2004). The result is a total alteration of the way fleet managers do business and a dramatic change in their roles within the organization.

The total system cost of supply chain activity devours the lion's share of corporate profits each year, but few firms ever realize their life bread is at stake (Trent, 2004). Transportation usually receives the most scrutiny by senior executives. But they sometimes fail to dig deeper and analyze costs of transportation logistics at all of its levels, sometimes leaving it only reviewed as an individual function when in fact it is related to many other support activities. Understanding transportation's role in the larger supply chain issue is critical to a company's fiscal health. Companies are becoming more focused on shrinking the amount of inventory they need to keep on hand than on cutting transportation costs (Harps, 2003).

Speeding up the supply chain is important to controlling costs, and speed can be translated into financial terms (Krenek, 1997). This can be done by taking the value of the inventory a company has on hand, plus accounts receivable and minus accounts payable. This allows the company to put a cash-flow value on inventory. The speed of the supply chain becomes important because it allows companies to keep inventory down and more cash on hand. Speeding up the flow of inventory, however, requires a different viewpoint when it comes to transportation. No longer can transportation be looked at as a standalone cost center. Rather, its impact on the supply chain - indeed, its ability to influence costs and performance throughout a company - becomes a critical factor (Krenek, 1997).

The real benefits are seen when we look at how all the other areas of a company are affected by a more efficient transportation department. The transportation cost might go up, but the cost per unit delivered through the supply chain might go down. From a business strategy perspective, it boils down to inventory and transportation trade-offs. This is about either storing or moving goods. If a transportation network can be built that is dedicated and can get the goods to their destination reliably and quickly, you don't need as much inventory. That also means you don't need as many warehouses out in the field anymore, which really cuts cost out of the supply chain (Harps, 2003).

Companies want to move to a more dynamic transportation system with electronic interface support between all participants - suppliers, plants, carriers, etc (Harps, 2003). This allows them to plan and run their businesses much more efficiently.