Outsourcing the management of material flows can bring a wide range of added value

Many companies in the manufacturing and process industries have significant development potential in the area of in-house logistics and material flow management.

Many companies would do well to put on their agendas their own KPIs for in-house logistics and material flow management, as well as for quality and punctuality of deliveries: are the related metrics up to date and can they be used to improve performance?

By outsourcing material flow management and in-house logistics, companies can move away from a world of fixed space and staff costs to flexible service contracts, with costs determined by the resources used. This creates the possibility of scaling up and down, meaning that in high times, space and manpower are always available when needed, and in low times, no unnecessary costs are incurred.

"Cost savings are not the only reason to outsource - growing companies may need more production space, for example, without having to invest in expensive new premises. In this case, space can be freed up by taking warehouse space for core business use and moving the warehouse and its management elsewhere to an external service provider. Many organizations are already aware that these things need to be developed, but their own resources are not sufficient and external support is needed."

One area for improvement for many may be the separation of production functions and in-house logistics. In many cases, these are handled intermittently in companies, with, for example, fitters spending their time on picking, which is not an efficient use of resources. This also makes it difficult to visualize the costs of the different stages of the work and thus to generate efficiencies or savings.

Once the activities have been separated, improving in-house logistics can improve the flow of production and allow, for example, fitters to spend their time on their actual work. The end result is improved production lead times, allowing capacity to be increased without investing in production technology.

Measurability and transparency in material flows

Industrial ERP systems do a good job of managing production processes, but they rarely do much to effectively manage modern overall logistics. With access to material flows before and after the production phase, it would be possible to capture a lot of useful data for operational improvement.

The systems in place do not usually provide enough information, but complementary measurement systems have been developed to monitor the different stages of the processes to a greater extent than is usually the case and to share this information in real time with the various parties involved. The data obtained can be used to further improve operations using Lean Six Sigma tools. If such data is not available, the scope for improvement is limited.

Operational efficiency and productivity can also be improved by focusing more on the core business of the company and outsourcing more of the other activities. In addition to warehousing and material flow management, it is now possible for companies to outsource various activities such as pre- and post-assembly or installation. Continuous improvement of its operations is a prerequisite for every company to remain competitive.

Are your company's in-house logistics and materials management metrics up to date and can they be used to improve operations?

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