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Recent Articles |
Supply
Chain Integration Solutions
Let's take a quick look and analyze your position in the Supply Chain. You are
either the one driving the truck, the one pumping the gas, or the one paying the
other two.
SCM & Distribution Guide
Supply Chain Management is a decisive element of good overall business management. To ensure profits, customer satisfaction, repeated sales and future growth a company needs to have an efficient supply chain management for any type of sales.
Creating Supply Chain Value W/ Cycle Time & Inventory Yield
A supply chain is not a series of links forged together for a common purpose. That is a nice image. However it minimizes the reality of the chain and how each link in that chain must design its own logistics process...
Accurate
Data And Inventory Management Systems
Inventory management systems are required to automate and efficiently keep track of your inventory levels. If your inventory levels are not properly tracked, it will result in rising costs. Accurate inventory is one of the most important aspects of inventory management. Three points must be recognized. First, lean requires a strategy.
3PLs Need to Take it to the Next Level - How to do it
Outsourcing of supply chain management tasks has been functioning at a similar approach level for years. 3PLs, whether they are international or domestic, whether their corporate roots are forwarding, ocean transport, warehousing, trucking, customs brokerage or other...
Lean SCM - More Essentials
Being able to understanding and identify waste then requires removing that waste. The initial question then is where and how to begin implementing lean supply chain management. Three points must be recognized. First, lean requires a strategy. It is not just a supply chain...
Paving the Road to Success: Modern-Day Logistical...
For any business looking to trade worldwide, properly integrated logistical systems can mean the difference between roaring success and dismal failure. A successful business needs to understand the needs and wants...
Oracle Responds To Real-Time Events
The company's Event-Driven Middleware Suite debuted last month can complement service-oriented architectures with its pervasive messaging technology. Popularity of service-oriented architectures (SOA) on standards-based platforms continues to grow. However, they are dependent on the input of the application user.
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10.27.06
Logistics Costs And Bean
Counting Don't Add Up!
 By
Michael Stolarczyk
Does you company actually have true fiscal visibility throughout the supply chain?
Many claim they do...very few really do...what should you do?
Supply chain management (SCM) is one of the key drivers in today's business world
with offshore sourcing, foreign competition and global markets. The responsiveness
required to keep the inbound supply chain flowing with materials and products
and to keep store shelves filled is demanding. SCM requires reducing costs, increasing
inventory velocity and compressing cycle time; and some say these three may not
be compatible or consistent.
Doing all this "and doing it well" takes creativity and management skill. However
there is a factor that limits the design, development and implementation of such
supply chains. That factor is accounting (ie; bean counting), and how it recognizes,
and treats, logistics costs.
My view, is accounting is an impediment for logistics, whether for supply chain
management, both international and domestic, for lean and for outsourcing. This
is a fact, not because of accountants, but because companies simply do not understand
how to fiscally account for their supply chain!
Generally accepted accounting principles create the foundation so that every company
reports its financial data the same way. Or so they say...
This financial snapshot is consistent then from firm to firm (or it should be).
hence, this makes analysis of the data and comparisons possible.
These accounting standards have a long history. They date back to Henry Ford and
the Model A. Companies then may have been vertically integrated with a primary
focus on domestic sales, sourcing and production. This business model has become
nearly extinct, especially for large companies, that source internationally. As
a result, accounting rules have not kept up with present business operations and
practices.
Some differences with supply chain management and accounting are:
Process versus Transactions
SCM flows across the organization. As a process, it flows across many of the organization's
departments and boundaries. Accounting is transaction-oriented, with its focus
on identifying and summarizing vertical sales and make-or-buy activities.
Organization Direction
Supply chain management is horizontal and crosses departments and organizational
boundaries. Transactions are vertical and are consistent with organization silos.
Scope
SCM extends into suppliers and logistics service providers to gain inventory velocity
and to reduce cycle time. Accounting stays within the company facilities and boundaries
and looks inward.
Outward or Inward
Supply chain management looks both inward and outward to deal with suppliers,
transport firms, warehouses and other logistics service providers. Collaboration
is important when managing the complex, global supply chain. Accounting is traditional
and focuses within the corporate boundaries.
Continuous versus Discrete
SCM is ongoing. Product is always flowing. Accounting looks at different summaries
which create supply chain disconnects. Logistics costs are organized individually,
not recognized at all, or recognized in different places.
For example, freight and warehouses show on the income statement and are recapped
monthly.
Inventory appears on the balance sheet and is presented annually.
ARRRGH! I am already driving myself nuts with this post! Just think what its
like in a multi-national organization!
So three key logistics elements are dissected and shown in different financial
reports!
And nowhere does "actual time," a vital business driver and the action that creates
inventory and service, appear on any financial statement. Add time and to a great
extent, this view of logistics costs makes accounting obsolete for supply chain
management.
Dynamic versus Static
Supply chain management is constantly changing--as suppliers, customers, plants
and warehouses, shipment sizes and order mix and as store locations change. This
contrasts with accounting which has the historical perspective of what has already
happened.
Read
the rest of the article here.
About the Author:
Michael Stolarczyk is currently Senior Director, of Business Development for Exel
in their Westerville, Ohio General Office for the Americas. He is also on the
Board of Advisors for West Virginia University’s School of Business. |
