The world of non-production shipping and receiving undergoes a major transition every decade or so. The widespread adoption of outsourcing was the last large-scale transition that happened more than 10 years ago. Whats the next step?

The next transition, which is already underway at some advanced organizations, is the transformation of the isolated shipping and receiving departments into an enterprise-wide service that enables the transformation into an internal logistics service. The purpose of this transformation is to support value-added services above and beyond handling of inbound and outbound packages.

This transformation is accomplished by applying lessons and technologies from other areas such as supply chain management (SCM) to the realm of internal logistics. The effect of this transformation is to simultaneously reduce overall costs and increase revenues by enabling your company to operate more nimbly and efficiently.

Enterprise-wide Internal Logistics Services

Most non-production mail centers and shipping/receiving departments are operated on an independent, standalone basis (see figure 1) because most business services departments are organized around geography. There can be considerable variety from site to site, including variations in process, training and support and variations in staffing with some sites outsourced and others not. Often there is no company-wide attention focused on horizontal services like mail services or shipping and receiving.

A successful transformation requires clear definition of the services to be provided and of the processes that will be followed to deliver them. Agreement on service levels and key performance indicators is needed across the company. Performance management is needed to monitor the actual levels of performance delivered each day.

A mechanism for process governance is needed because the companys needs for the process will change over time. If the process does not change in a well-managed way, then it will go off-track and counteract whatever benefits it had previously created.

The result of this change is that shipping and receiving become an enterprise-wide service that is visible, accountable, trackable and reliable (see figure 2). Internal customers receive a better level of service, complete visibility and trackability from their desks to the recipient every step of the way that is simply not possible through any other means. This builds an increasing level of trust throughout the organization.

The enterprise-wide service directly reduces external costs, such as shipping costs. Lets look at one example of how this happens. If your organization is large enough, then many overnight shipments are sent between individuals at different sites within the company. Much of this traffic on the more important lanes can be diverted into accountable interoffice mail service (pouch mail). Customers get even better service (desk-to-desk tracking instead of dock-to-dock tracking), and external shipping costs go down because many items are moving as a single shipment.

Enterprise-wide service also reduces indirect costs, including training, support and losses. Managing the service across the enterprise makes it possible to better manage outsourcers. It is now possible to compare the costs and performance of different sites or different outsourcers.

Transformation into Internal Logistics

When the basic services provided (handling inbound and outbound packages and accountable interoffice mail) are working well across the company and trust has been developed in the service, then the shipping and receiving department can offer value-added services to other parts of the company.

Providing value-added services transforms the shipping and receiving department into the internal logistics service. Utilizing the new internal logistics service makes the company
nimbler and more likely to take full advantage of existing assets and to increase the velocity of non-production materials moving around within the organization.

The internal logistics function is similar to the external logistics function developed as an integral component of supply chain management (SCM). Forward-thinking companies are realizing that enterprise-wide tracking for non-production materials is also very important in the smooth and efficient functioning of the overall business. Because although internal and external logistics share similar goals such as providing accountability and visibility, reducing transportation costs and developing deeper relationships, whether it be with partners or within the company the reality is that internal and external logistics are inherently different, and external logistics processes tend to be much more consistent and defined than internal logistics. The differences reflect the relative maturity of business practices and processes. SCM has benefited from two decades of thinking and evaluation of practices. Some of these lessons can be applied to internal logistics, which, being a newer discipline, provides opportunities for significant improvement. Tracking for SCM is an integral part of ERP systems, whereas enterprise-wide tracking is still a new concept for many companies.

Three Managers Achieve Success

Here are three instances of how forward-looking managers have offered value-added services to their internal customers. For example, tagging assets can be a labor-intensive process if assets are not tagged when they first come into the company. The internal logistics group at a major network equipment manufacturer gained enough trust and respect that they were asked to tag all incoming assets. Receiving teams at different sites were responsible for opening packages containing incoming assets, scanning manufacturer serial numbers and applying and scanning asset tags. Packages were resealed and delivered. The asset information was passed over to the asset management group. This asset tagging function saved the company the time the asset group would have otherwise spent walking all over their campuses. In this case, the company integrated the shipping and receiving function with the asset management group, and the asset accountability increased significantly.

Another manager discovered that too many toner cartridges were being purchased compared to the number of pages printed and copied at the headquarters campus. He worked with the purchasing department to switch from decentralized purchasing of cartridges to centralized purchasing that delivered the cartridges to the internal logistics department. Now, a spare cartridge is left with each copier/printer/MFD along with instructions on how to request another. Savings from centralized purchasing of cartridges was over $200,000 per year.

Yet another innovative manager took over the responsibility for overseeing the spare parts for his companys national network. Part of his team is responsible for ensuring that spares are shipped to network engineers as they travel around the country maintaining the network. Ensuring that parts are delivered on time and at the right location requires a lot of hard work, but it is done well and helps ensure that the companys network remains reliable. This service helps reduce the costs of maintaining the network and in managing the associated shipping costs.

There are very few functions in the corporate world that have not been reinvented and changed over the last couple ofdecades. The transition to enterprise-wide services and transformation into internal logistics can provide significant benefits to your organization. This is a great time to be in this field!

Anthony Meadow is the president and co-founder of Bear River. He can be reached at tmeadow@bearriver.com.