Irish Express Cargo

Source: Exec Digital UK

Date :21/05/2007 11:04:12

Irish Express Cargo: Spreading the lean philosophy

Since being acquired by Flextronics International, in 2000, Distribution and Logistics firm Irish Express Cargo is translating the lean techniques it has learned from Flextronics’ manufacturing sector, to its logistics programs. John Carr explains how the company is applying lean distribution practices in the medical, pharmaceutical and retail sectors

Written by James Hurley & Produced by Ben Weaver

Established as a general freight forwarder in 1972, Irish Express Cargo (IEC) expanded into specialist warehousing services in the 1990s. The company now provides technology driven logistics solutions to major corporations, and has super-hubs located around the world, from Dublin to Singapore.

The purchase of IEC by leading global electronics services provider Flextronics in 2000 gave IEC the global power it needed to revolutionise the service that it provides for its clients - with annual revenues from continuing operations of $15.3 billion in 2006, Flextronics helps customers design, build, ship, and service electronics products through a network of facilities in over 30 countries on five continents.

John Carr, vice president of supply chain solutions at Irish Express Cargo, says this global presence that the company can now call on is vital in terms of securing new business and offering a good deal to customers. “Flextronics operates distribution facilities across the globe so we also have similar programmes operating in the US, Brazil, China, Mexico, India, Malaysia and Japan. We were traditionally very strong in Western Europe, and the US, we’ve been gaining in strength in Central and Eastern Europe, we now have a truly global footprint.”

Demand management and the implementation of lean

Carr says that the significant growth that IEC has experienced has largely been down to the securing of new business in the retail, medical device and pharmaceutical industries. “Our traditional core sectors, which are electronic, computing and telecommunications, remain steady. We’ve taken the best practices that we’ve applied over the years in the electronics industries and we’re starting to apply those distribution practices in the medical, pharmaceutical and retail sectors. We’re finding a huge amount of acceptance of these best practices in the industries that they weren’t traditionally associated with.

“In electronics and technology sectors, inventory integrity is paramount, quality is paramount, but the key aspect in the supply chain is velocity – they work at an extremely hard pace and they hold minimum inventory. We’re now finding the medical and retail sectors are under similar pressures to reduce their overall inventory and at the same time improve their overall levels of customer service. Our vendor management inventory programme has significant take up in these sectors. The programme is a demand management programme. It links suppliers with the customer from an IT perspective and links the various service providers, including transport and warehouse operators.”

The evolution of IEC’s vendor management inventory programme, Carr says, has been inspired by the knowledge and experience that Flextronics have been able to pass on. “They have truly taught us to implement six sigma and lean principles. We’re applying lean and six sigma to our distribution problems. We’ve taken these programmes from the manufacturing sector and our adapting them and implementing them in our distribution services.”

Lean manufacturing, which has its origins in the Toyota Production System, is renowned for its focus on waste reduction in order to improve customer value. A secondary approach to Lean, however, focuses not on waste, but on a system-wide perspective that monitors the flow of work through a system. The implementation of flow eliminates unnecessary work and waste reduction is therefore a natural consequence.

“We keep control on our costs through the implementation of lean. We look at every single ‘touch’ in the operation. Every single time we touch a product it has to add value otherwise we eliminate that touch. The whole idea behind our technology is that we’re not creating paperwork. The integrity that we have in our warehouse means that we’re not finding stock discrepancies; when a person goes to a location a part is physically there. We’re delivering very high performance levels.

“We have also implemented what we call performance dashboards so we can measure productivity per head throughout our operations. A lot of companies have toyed with these, but not many have actually used them to improve overall productivity.”

This supply chain management tool is something Carr believes will greatly benefit,

logistics services to the fast moving Consumer Electronics, and Retail sectors.

“We want to expand the vendor management inventory model and take it into sectors that have not made full use of it. We want to penetrate the retail sector. I firmly believe retailers today are carrying buffer to cope with seasonal demand. They’re incurring significant holding costs. I think they need to re-look at their buffers. With continuous cost pressure, any company that can operate with a minimal inventory will be successful. You can pass on price reductions received from suppliers to end customers immediately. If you’re carrying a buffer inventory, there’s a time lag. It’s all about managing demand, customer order cycles, the seasonality of demand and the entire length of the supply chain to manage inventory successfully. Vendor management inventory can benefit many more sectors that it does currently,” he says.

Investing in technology

While the logistics solutions that IEC provides are ultimately only as strong as the philosophy that inspires them, the company also needs to ensure it continuously monitors technological developments, and implements them where there is a benefit to be found. “We have to continuously invest in new technology,” Carr says. “We’re recognised as a leading technology company by our customers and companies that we speak with.”

One of the most significant potential developments in logistical services is the use of radio-frequency identification (RFID) throughout the supply chain, to create an integrated chain from warehouse to consumer. RFID is an automatic identification method that allows products to be stored and remotely retrieved using transponder tags.

“We’re one of the leaders in terms of trialling RFID,” Carr says. We’re involved in live trials in the US and Europe. We have trialled the technology at container level and we’re now moving down to carton level. The challenge there is with the technology itself, improving the data integrity associated with RFID. This is an industry challenge. We’re working with what we call middleware (interface companies) and hardware companies to improve the overall integrity of the RFID solution.”

IEC is implementing paperless warehouses, whereby every single transaction is operated

electronically. The company is also investigating the merits of voice technology, to

support different customers. “We will be working with a leading company on

implementing an end to end voice supply chain,” Carr explains. “We’ll be trialling this

over the coming months and we believe this will further improve the speed of order

fulfilment, for customers who do not require the capture of product information. Voice

picking and voice acknowledgement have a lot of applications in the retail sector.

The sheer size of Flextronics means that IEC can offer its customers an excellent service at a very competitive price. As Carr says, this would be impossible without the financial and logistical clout that Flextronics can provide. “We spend in excess of $350 million dollars on global transportation services. That’s a significant spend. We’re able to leverage that global spend to the benefit of our customers by the virtue of the fact that we manufacture and distribute with so many companies. We have a significant spend on air freight, ocean freight and road freight. We leverage those contracts for the benefit of our customer base. If you’re a medium sized company, you have medium sized volume and you don’t get competitive rates. By consolidating your volume with our volume we end up getting excellent global contracts. A smaller operator wouldn’t have access to those global tariffs.

“We also offer door to door distribution, where a lot of companies don’t. We deliver to worldwide customer locations. We can now offer services that we would have had to outsource, including customer repair and warranty support. Also, Flextronics gives us a much broader spread. It has distribution facilities across the globe so we also have similar programmes operating in the US, Brazil, China, Mexico, India, Malaysia and Japan.”

In short, IEC is now in a position to offer the complete supply chain solution and translate best practices across sectors.