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Redefining the Race to Profitability Through Innovation
By John Paugh



Every manufacturer, supplier, and U.S. business is feeling the effects of today’s tough economic conditions. It has neverbeen more important to control costs and operate efficiently. The pressure is on for manufacturers to reduce waste, and operate in a truly lean manner. These facts are even more prevalent in theautomotive sector, where profitability depends on efficiency. Proper management of the supply chain and the costs incurred during transportation can have significant impact on these manufacturers’ bottomlines.

“Lean management” and “just-in-time” are no longer just industry buzzwords; they are now deciding factors in the race to profitability. To be Lean in today’s world, companies must drive allwaste out of their processes. Reducing or eliminating on-hand inventory is one way automotive manufacturers rid themselves of unnecessary overhead. The old saying “Time is Money” can easily bereplaced with “Inventory is Money.”

Inventory costs equal more than just the cost of the parts being stored. Labor costs, warehouse overhead, insurance, and the risk of damage are all expenses that mustbe considered. Also, as innovation continues to occur at unprecedented levels, the risk inventory obsolescence also increases.

The solution to these costs is just-in-time deliveries. Not allcompanies have the scale to order full truckloads daily or even weekly, however. Less-than-truckload (LTL) shipments have traditionally been the answer to this issue, but there is a better way.

Somelogistics providers are going beyond LTL to operate a “milk-run” system. By combining customers with common suppliers, they can offer an “every part, everyday” commitment. The milk-run system takes itsname from the dairy industry practice where one tanker collects milk from various dairy farms and delivers it to a single milk-processing firm. The same solution works for collecting parts from various...