In a series of articles throughout this year, we will talk about the challenges, pitfalls and success factors of logistics projects. In the first part, we take a look at the launch of these projects and the role a consultant should play in it.
Only a few companies put a new distribution centre (or even several) in operation every single year. For most of our customers, setting up and working with a new logistics centre is an extraordinary event, for which the normal processes and structures of the company are not prepared.
Therefore, many deciders in business and logistics resort to hiring a consultant. But this leads directly to the first crucial point: what should be part of the consultant’s responsibilities and what shouldn’t? What are the objectives of the consulting firm? What might seem like a trivial question at first, is certainly worth a thought or two.
Setting your objectives
Every project starts by setting the objectives. This is a task that must not be delegated. Who else but yourself is able to specify what the new facility or centre is supposed to achieve? Go ahead and describe the objectives in your own words, with the requirements of your business in mind. In this initial step, don’t concern yourself with logistics parlance or performance figures. The translation can be done later, possibly with the support of a consultant.
But watch out! Exactly here, where the individual objectives of the project need to be translated into a profile of requirements or a request for proposal, is where the same mistake happens again and again. Instead of a neutral specifications sheet with logistical requirements, they outline a solution and a bid invitation for this particular solution. Without even realising it, you may be depriving yourself of a large potential for optimising and cost-cutting.
A useful as it is for someone without the relevant experience, to get help from outside advisors on how to phrase the specification sheet, it is dangerous to limit the range of possible solutions. Presenting prospective bidders with an almost complete facility layout and only accepting tenders that fit this layout exactly, is highly questionable.
At first sight, it might seem the most logical procedure and promise transparency and comparability. But how can you be sure that the solution outlined by your consultant is a good one, let alone the best one? To make this very clear: in the tender stage you are going to benefit the most from the competition between different concepts, not from the competition in unit costs and hourly rates.
Sure, it is difficult and therefore expansive to evaluate seemingly incomparable concepts and offers from different suppliers. But if you managed to outline your actual objectives in a smart, thorough and comprehensive way at the beginning, this apparently impossible task is not that tough after all. By the way, we are going to talk about identifying the “right” objectives in a separate post in this series.
Who should be responsible?
A cardinal question in defining the structure of the project is the one about responsibility for integration. In principle, there are possibilities:
- The initiator of the project (You), is responsible for integrating the different suppliers and subsections
- A third party without physical contribution takes over this task. This could be the consultant.
- One of the suppliers assumes responsibility for the integration as an integration service.
Integration service providers are usually referred to as general contractors. This brings us to the heart of the matter. Responsibility for integrating the project only makes sense, if it includes entrepreneurial responsibility and the risk of financial losses. For reasons that are fully understandable, consultants are usually neither capable nor willing to take over this financial risk.
Equally important as the question of responsibility for integration, but rather underrated, is the organisation of the launch and the start of the operation. An experienced consultant can save you a lot of trouble here. In the end, almost every new distribution centre comes with changed or new processes.
This leads to numerous consequences, which people fail to consider or prepare for adequately. Employees have to fulfil new tasks or have to work on their present tasks in a different way and with new tools. Some of their new tools might not function, for example because certain processes have been documented inaccurately or not at all, and got implemented that way.
The entire team is going to experience a lot of stress from new, unfamiliar technology, the need to learn new tasks, the mistakes they make along the way and the challenge to manage the start-up of the facility. During this phase, a seasoned logistics advisor, who can guide you through this process, proposing solutions instead of assigning blame, makes all the difference. The right person for this job would be someone with personal experience in launching and operating a distribution centre. Of course, it is important that they are not trying to defend their own contributions or mistakes. This is yet another reason why the supplier of the facility, and not the consultant should be responsible for the logistical solution.
I hope that these remarks help you in setting up a logistics project, decide upon the potential role of a consultant and find the right person for this job. In a later blog post, we are going to talk in more detail about the “right” objectives of a facility project.