Introduction to the Company:
SWIFT courier company is a reputed Parcel and Document courier company. Operating since 1989, it has offices in Oxford, Reading, Swindon and Newbury. It has grown exceptionally since its inception and now caters to the entire UK population. It also provides Logistics and Supply Chain Management solutions to some of the leading players in the business like DHL. It is also a preferred corporate partner with corporate giants like Herma UK Ltd., Epic data, Stryker UK Limited among others. SWIFT has tie ups with a number of global players, ensuring that its customers can also make international shipments (SWIFT Couriers, 2009).
SWIFT’s success hinges on its values of integrity, team work, customer centric business operation and providing a platform for people development.
SWIFT provides three standard services both to the general public and corporate clients alike:
Same day Parcel delivery and Courier Services: A premium service wherein shipments are collected and delivered across to any UK destination on the same day.
Next Day Parcel Delivery and Courier Services: Shipments are collected and delivered to any location in the UK within one business day’s time.
International Parcel Delivery, Courier and Freight Services: A high end service offering catering to international logistics demands. The company operates its own fleet of transport vehicles and also uses third party networks in service delivery.
The firm is highly responsive to market trends and provides a fleet of vehicles for business operations. It has on its range Small courier Vans, Mercedes Vitos, Mercedes Luton Tail Lift, 4ft Arctic Lorries, Mercedes extended sprinters and 7.5 tonne lorries.
It offers both branch and on line bookings. Customers can choose to place their orders at any of their 4 branches, over the phone or online through the company’s website. It allows for the online baggage tracking and has a tie up with Prudential Insurance to provide ‘lost baggage’ insurance to all its shipments.
The company has an impressive pricing strategy and is one of the low cost service providers operating in the same day delivery market. It has secured numerous corporate partnerships and is now an official carrier for a large number of manufacturing firms, solely relying on its competitive pricing.
Operations and its cycle:
SWIFT has close to two thousand employees working in its operations department and another 400 providing supporting functions to the operations team.
The company’s Operations cycle can broadly be classified into four divisions:
Sell: The marketing team is responsible for lead generation and execution of deals. For the Operations staff, this is the input for their functioning.
Source: The purchasing department is concerned with the acquisition of the transport fleet and other equipment necessary to provide the service. The staffing function is outsourced to professional recruiters who provide the necessary human capital.
Build: The operations staff is now concerned with the delivery of shipments. For domestic shipments, the operations team ensures the product delivery. For international destinations, the network management team works with third party operators to have the package delivered.
Delivery: The online tracking system generates an automatic delivery confirmation to the customer.
The Operations function starts with a delivery consignment being keyed into the company’s ERP. Depending on the package’s dimensions, its weight and the delivery timelines, the ERP routes the details to the respective teams. The tagged pick up team then picks up the package and transports it to the ‘take away’ shuttle points. Various packages are then sorted at the shuttle point according to their destinations. Using the Mercedes Vitos, they are all routed to their ‘base collection’ centres. The bases currently operating are Gatwick Airport- for international consignments, Lambeth – for domestic same day deliveries and Oxford – for domestic nest day deliveries. Air carrier fleet then transports these packages to the local distribution centres- Edinburgh for Scotland destinations, Cardiff for Whales and London for domestic. From these distribution facilities, the packages are finally routed to their respective destinations using a range of road carrier fleet. The Operation function ends when the recipient signs digitally on the collection barometers upon the receipt of the consignment.
At Swift, Operations assumes the most critical of the business functionalities and is the organization’s ‘Bread Earner’. It has a layered relationship with the other departments and works in tandem with them. The Operations Function consists of two teams- IT and Fieldwork. The IT team is the brain of the company and does all the calculations for finding the most effective route to deliver a package. It encompasses a strategic and an operational role. It literally details the specified route for each shipment and the fieldwork simply follows the channel to deliver the shipment.
Company Vs. Market performance:
The UK logistics services business has grown multi fold over the past decade. The market has seen over a hundred new entrants, a majority of them being successful global brands. The industry has seen a lot of players create a mark in the niche segments as well as a few firms like Fedex and UPS, spread their wings with diversified and customized offerings to all segments.
In 2004, the industry has posted 7% growth rate, 10% in 2005,11% in 2006, 12% in 2007 and 9% in 2008. 2009 has been a dreaded year. The current economic downturn, coupled with the freezing consumer spending has contacted the market; diminishing its value by 15%. According to Highbeam Research Consultants, the UK courier market will grow to 127% by 2011.
SWIFT has grown quite well in this lucrative market. The company, over the past two decades has been posting impressive growth rates each year. The company has posted a 15% growth in bottomlines in 2004, 13% in 2005, 16% in 2006, 5% in 2007. It has declared a negative growth of 5% in 2008 and 25% in 2009.
Though the company has fared well for the better part of the last decade, it has been sluggish over the past two years. A recent survey conducted by the company on the cause of its declining market share has shown that customer dissatisfaction is the main reason for this dismal performance.
SWIFT runs its operations in traditional ways using very little automation and a lot of manual intervention. The scale of its business, currently, does not support complete automation as by firms like Fedex, UPS and DHL. This makes the functioning error prone. Numerous packages have been misplaced and delivered outside the timelines, resulting in a lot of customers looking for alternative operators. SWIFT has even lost 3 corporate clients over the last 3 years.
A lot of these errors have been traced to the point of collections- the earliest part of the supply chain. Lack of clearly defined routing procedures mean that a package to be delivered to London could easily be mistagged to be delivered to Glasgow. The mistake could only be identified when the package has been delivered to the regional collection point in Edinburgh. It then has to be returned back to Lambeth from which it is finally routed to London. All this happens at huge unplanned costs for the company. Added to this, it leads to delays in shipping the consignment. In a tough and competitive market, customer dissatisfaction is aggravated and the customer starts looking at other carriers. According to the company sources, erroneous routing has cost the company over five hundred thousand pounds in 2009 and lost atleast 2000 customers from transacting again.
A few mistakes have also been committed downstream, by the regional collection centres. They have been dysfunctional in identifying the most cost effective and quick modes of disseminating the shipments. As an instance, a package arrived at Lambeth for final destination to London is grouped with packages to be delivered to Cranfield. By the time the Trucks have delivered all the packages in Cranfield, only to see a last package to be delivered to London, a transit has to be made all the way from Cranfield to London for a single consignment. With the rising fuel prices, this can be very costly for the company.
Analysing the business operation, it can be seen that a lot of efforts are being wasted in areas that make no contributions to service delivery. In other words, there is a high propotion of Non Value Add (NVA) pieces in its model. As an instance, two separate hubs- one as a collection hub and the other as a delivery hub, can be avoided.
In times as dynamic as the current and in a market with ‘cut throat’ competition, the business has to look at a mix of innovative and tested business techniques to reduce overhead expenditure and to ensure higher levels of customer satisfaction.
We suggest the management to adopt the tried and tested Six Sigma concepts in Operations. Though this will involve a complete revamp of the functioning and some major decisions in Operations Strategy, the positive outcomes of successful implementation will overshadow the costs by a fair margin.
Six Sigma is an Operational concept, originated by the Motorolla Corporation of Japan and widely used across the services industries. The Six Sigma culture aims to achieve operational excellence by consistently writing off the ‘errors’. It aims to minimize variability is Business production. It preaches the provision and management of appropriate tools and techniques which ensure that the error tolerance is no more than one defect per million operations (DPMO).
The term ‘Six Sigma’ has its roots built around the concepts of probability. In this case, its the probability of a defect. Majority of the things in the common world have a probability which form a normal distribution. The normal distribution can be explained on two parameters: mean- the average of the expected values of the parameter and Standard deviation- variability(fatness of the curve). This can be measured by the distance between the mean and the perpectual closing points on either one of the sides. This distance is also popularly termed as ‘Sigma’.
The term Six sigma emphasizes that if an organization has sophisticated working conditions which ensure that the lower and upper service levels (or the range of tolerance) is within six standard deviations on either side of the mean, the chances of a manufacturing defect are only 3.4 per every million operations.
Suggested tools for implementation:
SWIFT can implement Six Sigma across the length and breadth of its operations using two basic tools: Business Process Mapping and Failure Mode and Effects Analysis (FMEA). The scale of its operations do not, yet, suggest the use of more complex and sophisticated techniques like Quality Function Deployment (QFD) and Process Capability Analysis for two reasons:
- High costs involved in the analysis.
- The medium scale operations of the firm will not provide the sufficient data for a more rigorous analysis.
Business Process Mapping:
Business Process Mapping refers to an activity involved in defining the exact functioning of a business. It aims is present, in clear and quantifiable terms, the objective of each business vertical, the steps to be followed in achieving the objective, the acceptable standards of the goods are services produced, the roles and the responsibilities of every person involved in the business functioning.
It results in an illustration of the business functioning, usually through a flow chart.
Services industries use two software packages for business stream mapping or business modeling as it is called in a few companies- Microsoft Visio and Casewise Business Modeller. We suggest the use of Visio because it is inexpensive. Casewise is amongst the most highly priced softwares and the scale of our operations do not justify its use.
Failure Modes and Effects Analysis (FMEA):
FMEA is a procedure used in Operations management. It explores the potential failure within a business function with an aim to rate the severity of the failure, the probability of the occurrence of the failure and its effects. Failure modes are anything which originate the dysfunctionality within the business. Effects Analysis studies the effects of these failures on the business.
The three principal parameters of an FMEA are : Occurrence, Detection and Severity.
In an FMEA, all the
Implementation of Six Sigma on the job floor is a very important function. The effectiveness of the whole project depends on careful planning and implementation in a phased manner. We suggest the following technique be used in the structured implementation and effective absorption of the Six Sigma culture.
The initialization phase is strategic in nature. Responsibility lies with the Senior management to initialize the Six Sigma thinking. The CEO/ Chairman understands the concept of Six Sigma and how its implementation influences the business’ core competencies and effectiveness. Upon the management’s decision to proceed, an enterprise – level delivery leader, having a direct line of sight and reporting to the CEO should be identified. A set of formal guidelines, policies and implementation plan have to documented by the identified leader, in consultation with Operations, Human Resouces, Finance and other support functions.
With the framework set, it is now turn to put the plan into action. The company has now to select domain experts from different functions and assign them to work full time on the project.
Training is now crucial. Having identified the people who would be the as the quality team, experienced consultants have to hired to train them on the Six Sigma and Lean concepts.
Initial projects should then be identified. These could be any major problems that the business is facing. The projects must clearly identify one or more of the organizational goals thereby contributing to the enterprise’s core competencies. The goals must be clearly defined and be practically achieved within three to four months. There has to be a continuous review of these projects by the senior management.
As projects are deemed to be completed and additional ones taken up, objective vs benefits assessment is to be done. The phase serves as a control mechanism. This is to ensure that:
- Key constituents of the Six Sigma Initialization plan are being achieved within the predefined time lines.
- Identify and manage any variability between set goals and actual accomplishments.
- Six Sigma is all about continuos improvement (Kaizen) and continuos learning. An assessment is necessary to ensure the knowledge is being shared across the business verticals.
- Promote discipline and accountability.
The assessment could be a formal illustration or a word based. A sample suggestion is provided below:
Project Selection and Execution:
Having looked at the organizational wide implementation, the next focus should be on the individual projects. We propose the use of DMAIC thinking.
Define: Identify a suitable defect.
Measure: Measure the impact of the defects.
Analyze: Analyze the defects and identify solutions.
Improve: Implement Improvement opportunities.
Control: Set up a control mechanism to monitor the project.