Time value in logistics It is no coincidence that cities and industrial clusters are situated around great harbours or other nodes in transport networks. Easy access to food, medicines, industrial inputs and markets goes a long way in explaining the location of economic activities. To the contrary, superior communication has led to increased geographical clustering of economic fields while the world’s most peripheral countries have become increasingly economically remote over time (Redding and Schott, 2003). This paradox is first due to the fact that as transport, finance, communication and other trade costs come down, more is traded and trade costs remain as serious as ever for location of production. World trade increased from 23% to 47% of world GDP from 1960 to 2004 (data of World bank 2005). Second, remote areas become relatively more economically remote when infrastructure and logistics are improved in main areas. Better roads will encourage investment in larger trucks that cannot economically service remote areas, greater ports encourage investment in larger and quicker vessels that bypass smaller ports and so on. For many developing countries this means that integration into world markets need a long bound forward as far as availability and quality of transport and other logistics services are concerned.
Time as a management instrument has been added in manufacturing industry since the advent of Taylor’s scientific management principles. Lead-time, standard hours, clocking time, throughput, velocity ratios, etc. are just some of the criteria used in manufacturing since the 1920s. The wordbook of time is in common usage, well understood, and supplies a firm foundation for time compression activities. The development of some of these metrics and concepts of personal time management to process management, particularly paper work and supply-chain processes, gives instant focus for effectiveness improvements.
Research more then ten years continues to point that it is not uncommon for the average time spent actually “adding value” within a manufacturing environment to be as small as 5 per cent of the total process time (Stalk and Hout, 2000). In effect, this means that in such a context we waste 95 per cent of the time. For the total supply chain segments are generally even worse, as small as one-tenth of 1 per cent has been found to be “adding value” time. In effect this means “time-related positioning” is not reached in such a supply chain for over 99 per cent of the time.
Time-based systems with an emphasis on accelerating up process times result in a reduction in cumulative lead times. This results in lower inventory and thus a further reduction in response time. A time compression “virtuous circle” is produced (Christopher, 2002) in figure 2:
How should time-basedstrategy companies evaluate performance. Table 1 represents the key differences which have been identified betweentime-basedcompanies and those with a more traditional approach (Bhattacharya, 2005). Companies can take two variant approaches to improving performance. They can focus on cost decrease or on time compression. The differences between traditional companies and timebased companies you can see in table 1:
Cost is a lagging measure which follows some time after the physical activity is complete. It is often difficult to calculate and may convey the wrong messages. Time, however, is a more effective management tool. It forces analysis down to a physical plane and generally provides quicker feedback on improvements than cost. Because the measures are physical they are common, visible, easy and fast to use, and obvious to all concerned. Time-basedcompanies meter the cycle times and lead times of all their main activities. However, these meters need to replace some of the traditional measures (Maskell, 2001), otherwise we are collided with conflicting messages about the focus of the company, we getlog-jammedtrying to reach too much, and the company does not work forward.