This article originally appeared in the May/June issue of PARCEL.
Twenty years ago at this time, Seinfeld aired its famous “yada yada yada” episode — and all of us gained a new catchphrase for how easy it can be to skip over or miss crucial elements of a story.
Take away the cameras, actors, and witty repartee, and you could be describing the fate that often befalls internal logistics, especially when it comes to acknowledging its importance.
Although this practice is clearly alive and well, it is anything but a common topic of discussion in most logistics circles, and even when it is, the attention paid to it is often cursory. As a result, many companies could be forgoing a number of prime opportunities to improve everything from their workflows to their bottom lines.
With that in mind, allow me to elaborate on why this frequently underrated area of the supply chain is truly no joke.
What It Is
Internal logistics describes all of the hand-offs, transfers, and flows that happen within the four “walls” of an organization, whether those walls are literal or figurative. As such, it concerns how materials, documents, supplies, and data move between one department, area, location, or division of your business to another.
Some examples of this area of logistics include ensuring that:
- Offices, manufacturing plants, or store locations have fixtures and key pieces of clerical equipment, paper, printer ink, and other supplies for their employees
- Various hospital departments are able to get everything from pharmaceuticals to housekeeping materials to the point of use via the proper internal channels
- The files for loans, virtual service orders, or job applications are smoothly migrating through various people’s inboxes (physical or electronic)
- A business’s on-site amenities like snack areas, break rooms, or in-house stores remain well-stocked and -equipped
- Companies’ distribution centers (DCs) don’t have service delays due to missing forklift batteries, maintenance parts, and such
Why It’s Important
Like its more famous counterparts, internal logistics clearly supports many functions that help ensure an organization’s smooth operation.
However, unlike them, the kinds of things it enables are usually either behind the scenes, indirectly related to an organization’s core competency, or are smaller-scale in terms of the distances, parties, or number of handoffs involved.
It’s precisely because of these qualities that internal logistics activities are often permitted to transpire for years on end with little to no true analysis or change.
After all, why sweat the minor details of items’ internal flow when there are so many more critical supply chain challenges to attend to, including many that are customer-facing? How hard can it really be to figure out how to efficiently transfer goods from one part of a company’s building, campus, or network to another – or to just pick up the phone and order more of what you need? And will the world really end if an employee doesn’t get his or her daily cup of coffee or if it takes a few extra days to locate a document misfiled in the document storage room?
But just as “for want of a nail . . . the kingdom was lost,” little things sometimes have a way of adding up into major inefficiencies if an organization isn’t careful. That’s what a retailer found out when it moved its store display and fixtures delivery management out of its store operations and into its logistics organization and realized that its previously ad hoc methods had been costing it dearly in terms of additional storage, transportation, and expediting expense.
Equally important, many of the issues or inefficiencies that occur within these “minor” areas are often easily resolved or avoided. Just ask the DC employees who found a way to reduce order fulfillment lead times and improve productivity by thousands of dollars per year simply by switching their label printer to a less out-of-the-way location.
In addition, let’s not forget that as larger portions of companies’ supply chains become well-optimized, it’s the uncharted, often ignored portions of the supply chain that ultimately may hold the key to bigger gains. Unmeasured processes are frequently full of redundancy, waste, and inefficiency, and few corners of the supply chain are more unmeasured than this one.
How You Can Change It for The Better
The good news is that once you’re ready to move forward with a more strategic approach to your internal logistics, there are a wide variety of applicable tools. The better news is that many of them — like the following — are probably in your wheelhouse already.
- Lean. You can teach almost any group of professionals and even front-line operators to use this well-respected continuous improvement discipline (which often yields huge improvements) within a matter of days, and most Lean projects take just three to six weeks. In light of that, why not provide Lean training for at least some of the people who routinely oversee or have a hand in your internal logistics?
- 5S. This highly popular set of kaizen practices (whose five Ss stand for Sort, Set in Order, Shine, Standardize, and Sustain) can work wonders in terms of helping single areas or facilities within your organization reduce clutter and improve organization. Encourage some of the employees involved in your internal flow to give it a try in one or two problem areas, or consider rolling it out on a more widespread basis. You’ll be surprised at how much better these newly organized areas will perform.
- Labor Management Systems. While these highly advanced technologies are typically associated with larger operations or more visible business functions, they are just as applicable to smaller operational areas within an organization, including many that are connected to your internal supply flows. Play your internal logistics cards right, and it could mean related labor savings of anywhere from five to 30%, savings that are increasingly relevant as labor markets tighten.
- Scorecards and Other Visibility Tools. Many organizations are quick to measure their external logistics operations but reluctant to measure their own. If you’re already using scorecards for your 3PLs or carriers, take a page from your own playbook and introduce something similar for your internal logistics processes. Not only will it help you pinpoint areas that need improvement, it could also encourage those who are involved in your internal logistics to step up their performance because sometimes all it takes is just the thought of being measured to inspire better work.
- Outsourcing. Similar to external logistics, there are times when an external company can bring in unique expertise and cost efficiency into an internal logistics operation, whether it is running an inbound-to-manufacturing operation, assembling parts kits to feed a manufacturing line, or provisioning electronic service orders from a remote overseas operations center.
The Full Story
Hopefully I’ve succeeded in convincing you that the practice of internal logistics isn’t just a forgettable placeholder because in the grand scheme of things, nothing could be further from the truth.
So if you suspect your company’s internal logistics has been an afterthought or you’re looking for new ways to introduce additional productivity into your operations, consider applying one or more of the tools I’ve recommended or leveraging many of the other tools and optimization approaches that have been so successfully deployed for your external logistics.
Your employers will be grateful you encouraged them to look within. Your employees will enjoy having better, more reliable ways to access the supplies they need. And you’ll be glad you finally took its potential seriously.
David Frentzel is a partner with New Harbor Consultants. A 26-year supply chain professional, he currently focuses on helping companies to improve business outcomes with more effective supply chain and logistics strategies and operations.