As with most companies, within Rockwell Automation there is a lot of pressure for productivity improvement – to do less with more or do more with the same. But as the firm’s director of supply chain and customer service EMEA Niek Visarius says, ‘The drivers of cost are not the trucks, the sheds or the people but where we are manufacturing, what we are transporting and who we are serving. Logistics is the last hair on the dog’s tail, not the tail that wags the dog – we can lose sight of that.’
Rockwell Automation (RA) is under pressure to create a larger footprint across Europe for the same cost and headcount. To achieve this requires an understanding of what Visarius terms the ‘three Vs’ of supply chain – visibility, value added and velocity. Visarius says: ‘We needed to look at individual transaction cost factors like customer revenues, number of shipments, number of order lines, freight terms (and are we fully recovering them) and so on. When you do that, it becomes clear that some customer companies are well managed, but others are contributing to a cost of logistics much higher than it should be.
‘We’ve had to learn what our customers look like in relation to us. For example, ecommerce may help a customer cut internal costs (although it’s not only about costs, of course), or it may help our own cost, but we must focus on keeping the whole transaction cost between us and the customer low.’
RA’s EMEA supply chain is working with sales, marketing and account managers to forge tools that will capture and diagnose certain elusive but vital transactional information on a customer-by-customer basis – how many sales orders are involved, is the account shrinking or has it growth potential and is the transaction going through the most appropriate channels?
This begs the question of whether logistics is a value or just a cost. To solve this conundrum, Visarius applies activity based costing (ABC) methods across supply chain and customer service activities to arrive at a customer cost of ownership (CCO). This, he says ‘can start defining the questions of value or cost and help you make decisions as to how to best serve your customer. It’s important to determine what it is in the relationship with the customer that’s important – to you and to them’. Not infrequently, he points out, customers get a type of service for historical reasons that may no longer be valid. Maybe everything still goes express, for example, because that was the right response to a crisis of several years ago.
‘But often, we can simplify everything back to those three Vs. What and where is the added value the customer needs? What velocity does the customer really need and how fast do I need to be to supply that? How much visibility do I want to give the customer and how much does he need?’
These aren’t independent factors, of course. Using IT to give customers greater visibility of, say, shipping dates can improve or resolve other questions relating to value added and velocity.
Visarius suggests that every company on the planet is struggling with supply chain or supply web pressures – more global and consolidated supply sides, diminishing product life cycles, economic cycles shorter than the traditional seven years. A focus on the three Vs and playing with their possible combinations helps reduce capital employed and keep costs to predefined levels. But, Visarius counsels, ‘We need to look at the wider costs. We in supply chain have knowledge but so, for example, does marketing. We have to build a cost and value web to sit alongside the physical supply chain web.’
‘You can use a logistics cost accountant to tease out the values and costs of the supply chain.
‘The conclusion is that it is easy to add services and activities but it’s better to try to remove them. Ask yourself, ‘What do we want our people not to do?’ Focus on what is important and what adds value.
¦ Niek Visarius served for six years as a supply officer in the Royal Dutch Army before moving into the commercial world and a variety of logistics/supply chain/customer service roles
¦ These included positions at Philips and at Ricoh, and prior to joining Rockwell Automation Visarius was manager EMEA logistics with Cisco Systems, where he was responsible for physical distribution an outsourced warehousing for all finished goods flows into EMEA
¦ His responsibilities at Rockwell include supply chain management, warehousing, distribution and customer service across more than 20 EMEA locations
¦ Visarius studied business administration and logistics management, is APICS and CPIM qualified, and has completed a post-graduate course in change management at Nijenrode University. He is a member of a number of logistics/supply chain organisations and sharedservice councils
