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Panalpina and Cardiff Business School in search of the ‘hidden formula’ for lean inventories

Mar 21, 2013

Global logistics and freight forwarding company Panalpina and Cardiff Business School, Cardiff University in Wales (UK), have agreed a strategic partnership for knowledge transfer. The partnership brings academic thinking and practical experience together to develop innovative solutions in the world of logistics. One of the goals is to develop new ideas and implement lean practices to facilitate the management and execution of complex supply chains within the framework of the product life-cycle.

Over the last few months, Cardiff Business School and Panalpina have worked together on a number of projects, both academic and commercial. The new partnership agreement allows both organizations to recognize the success of these projects and forms a solid base on which to build future collaborative initiatives. The goal is to remain at the leading edge of academic research and business innovation. “We want to advance logistics, which is why we partner and share ideas with universities and leading organizations around the world,” says Mike Wilson, Panalpina’s Global Head of Logistics.

 

Logistics is about the constant flow of products, not storage

Panalpina’s focus in Logistics is not on the storage of products but more on holding as little inventory as possible for its customers, and working with them to keep products moving. Wilson explains: “We don’t want our customers’ products to spend extended periods of time sat on a shelf or rack in a warehouse. Logistics is about the constant flow of products, not storage. Things need to be moving – fast. Asset velocity is the key.” The overall goal is to have the right inventory at the right place at the right time and, most importantly, at the right levels. Too much inventory ties up working capital and raises the risk of obsolescence, particularly in fast moving products such as mobile phones, tablets or high fashion items. Too little inventory will lead to stock-outs, missed sales and disappointed end consumers.

 

Mapping the product life-cycle

Panalpina has set out to map inventories across product life-cycles. ”Mapping the product life-cycle helps us to understand at what stage the inventory changes,” says Wilson. “By predicting the points of inflection of inventories we can estimate the maximum and minimum inventory holding.” The benefit of this approach for Panalpina is that it can then predict how much space is needed at its facilities, where to position the facilities and what services to offer. The benefit for the customers is that they have a partner who will work with them to keep their products moving and minimize working capital requirements in their supply chains. Wilson, who graduated from Cardiff’s MBA program in 1993 and is originally from Blaenavon in South Wales, calls this approach ‘Demand-Driven Inventory Dispositioning’, in short ‘D2ID’. He adds: “There is a wealth of material and research readily available on modelling inventory and lean principles. We are not trying to re-invent the wheel, but take some of this work and add original research to approach it from the perspective of holistic product-life cycle management.”

 

A new inventory forecasting model

For Panalpina, the knowledge transfer partnership is an excellent opportunity to get access to the brightest new minds, industry changing innovations and to play its part in new fields of research, such as inventory dispositioning, product life cycle planning and matching service with market trends. The company brings its international experience in the complex logistics industry to the table, while Cardiff Business School adds the scientific approach and knowledge from outside the logistics industry. “This is how you drive innovation,” says Andrew Lahy, responsible for the continuous improvement of Panalpina’s global Logistics operations. “Panalpina, and the industry as a whole, must constantly adapt and innovate. The best way to do this is to encourage students and academics to challenge the way we do things now, and work with us to improve our operations for the benefit of our customers, such as by working towards leaner inventories.”

 

The benefits for Cardiff Business School are equally exciting, as Professor Aris Syntetos explains: “Having practitioners lead workshops and lectures is a real benefit to the students here at Cardiff. Students get to see how the theories they are learning are being applied in the actual world of logistics. As an academic, it is also great to have access to real business data and to understand the challenges in the industry. This allows us to develop research that is relevant and focused to the real business and industry needs”. A possible outcome of the partnership could be a new demand-driven inventory forecasting model to facilitate inventory reductions.

 

The Panalpina Award for Strategic and Innovative Thinking

One way Panalpina is encouraging students to propose new ideas is through the Panalpina Award. The company asks students to suggest new strategies that would enable it to excel in the logistics industry. A prize is given to the student with the best new idea and, more importantly, Panalpina invites the winning student to present the idea to senior management at its annual Global Logistics Meeting. The student and management team then develop plans to implement it. “As a provider of solutions, we continually explore opportunities to keep broadening our service offering to our customers and develop new ideas. Doing this as a leader, not a follower will help keep Panalpina at the forefront of our industry,” concludes Wilson.

 

About Cardiff Business School, Cardiff University

Cardiff Business School is widely recognised as one of the leading business schools in the UK. In the latest UK Government Research Assessment Exercise, it was ranked fourth of the UK’s 96 business and management schools for the quality of its research, with 35% of its research projects classified as ‘world leading’. It has recently become the first business school in Wales, and the sixth Russell Group institution, to be awarded accreditation from the Association to Advance Collegiate Schools of Business (AACSB), a hallmark of business school excellence which is awarded to less than 5% of the world’s business schools. It is the largest single School of Cardiff University, itself a Russell Group organisation, and educates over 2,600 students from 60 countries each year.

 

About Panalpina

The Panalpina Group is one of the world's leading providers of supply chain solutions. The company combines its core products of Air Freight, Ocean Freight, and Logistics to deliver globally integrated, tailor-made end-to-end solutions. Drawing on in-depth industry know-how and customized IT systems, Panalpina manages the needs of its customers' supply chains, no matter how demanding they might be. Energy Solutions is a specialized service for the energy and capital projects sector. The Panalpina Group operates a global network with some 500 offices in more than 75 countries, and it works with partner companies in a further 90 countries. Panalpina employs 15,000 people worldwide who deliver a comprehensive service to the highest quality standards – wherever and whenever.