Several years ago, we began publicly challenging the industry to rethink the idea of “supply chain.” The traditional definition of that term, “a set of inventories connected by transportation,” didn’t go far enough, we argued. Sure, there the traditional piles of inventory to manage: Raw materials, work in progress, finished goods and spare parts / replenishment goods. But the transportation connecting those warehouses of goods represented an inventory to be managed in itself–The Fifth Inventory™.

Our original editorial, published in Inbound Logistics, can be found here.

The Five Inventories: Invisible to Customers, Crucial to the Bottom Line

It’s even more timely today than when we originally posted the piece in 2005. That’s because of enormous pressure to reduce the amount of goods in warehouses. Now, much of an OEM’s critical stock is in motion, where it’s sometimes invisible or inaccessible.

Morgan has made its name managing The Fifth Inventory™ in the world’s key outsourced, manufacturing and distribution hubs. We have our own assets on scene–from trucks and drivers to management personnel, real-time visibility technology and, yes, warehouses. So, whether your goods are rolling through Chongqing or Chicago, Penang or Philly, Guadalajara or Georgia, we have that inventory under control.

Think about your inventory in transit: Can you see it? Do you know who’s carrying the goods, and are they complying with all S.O.P. and security requirements? Then, think about how Morgan can help you manage your Fifth Inventory™ wherever those goods move throughout the world.

At D.W. Morgan, we pride ourselves on our efficiency and quality of service. Part of this has to do with the fact that we have highly experienced professionals working for us; part has to do with the technology we have developed for communication and visibility. But another all-important factor, and what I’m going to talk about today is location. You’ve all heard the old real estate adage, “location, location, location”?. Well, in fact, prime real estate is among the determination factors for our success in this biz.

In our industry, we have to work quickly in order to keep our customers happy, and one of the ways we do this is by establishing facilities in strategic locations that complement both our customer base and our specific capabilities. Not only that, but we train our own personnel in each of these locations, exactly the same way as their counterparts abroad.

A recent article in Inbound Logistics discussed the mountains of data that are now being used to decide where companies store and distribute goods. Local transportation, airports, regulations, labor costs, reliability of the route and consumer demand all factor into these decisions. But regional factors play a bigger role than you might think.

Put simply, it’s a matter of anticipating where the global manufacturing supply chain is going. We’re not faddish in rushing off to the latest hotspot. Three years ago, everyone was talking about Hanoi. Others leapt, we considered, and it turns out there are some huge issues there that have kept them from really blossoming as an adequate manufacturing center.

Still, we look at where the manufacturing is going. Right now, that’s inland China and Brazil. And there are reasons, both economic and social, that both regions are more likely to succeed in the long run. If we’ve anticipated correctly, which I assure you we have, having established facilities in these areas will help us continue that efficiency and quality of service that we guarantee for our customers.

What do our clients’ transportation projects and marathoners have in common?  Both either succeed or fail in the last mile.   Silicon Valley’s avid runners will be getting together on the morning of October 31st to run the Dean Karnazes Silicon Valley Marathon (DKSVM).  As the Last Mile sponsor, D.W. Morgan will usher runners to finish the last mile of the race with some TLC, complete with a cold bottle of water for their 26.2-mile effort.

But how does this marathon have anything to do with D.W. Morgan?

Think about it: Where have you heard the term “last mile” before?  Being the last-mile specialists that we are, we bring supply chain solutions to many types of tech businesses you’ll find in Silicon Valley, including biotech, military/defense, and telecommunications companies.

The full marathon course starts and ends in Downtown San Jose at Almaden Blvd. Want to learn more?  Have a look at the DKSVM website: http://www.svmarathon.com/ for more information.

D.W. Morgan is dedicating a portion of our success to fight hunger through our Delivering Hope for the Hungry fund-raising campaign. Our goal is to provide 30,000 meals to starving children around the world in March, by making a donation for each shipment delivered through our supply chain! Our partner in this amazing initiative is Feed My Starving Children, a non-profit organization focused on providing critical meals to the most poverty-stricken areas in Africa, Asia and the Americas.

Our corporate donation will be supplemented by fund-raising efforts via social media. Delivering Hope for the Hungry has its own website which can be accessed at www.MorganDeliversHope.com. It costs just 17 cents to produce one meal, so $1 goes a long way!

We chose to partner with Feed My Starving Children because 94 percent of our donation is directly used for their meal program.

In 2008, Feed My Starving Children brought more than 73 million meals to children, providing children in Haiti with more than 25 million meals. The organization makes a difference and we’re thrilled to be a part of this outstanding effort.

Please visit www.MorganDeliversHope.com to help us raise much needed dollars for these children. Every little bit counts!

Feed My Starving Children meals are distributed in more than 60 countries through missionary partnerships at orphanages, schools, clinics, refugee camps and malnourishment centers.

Here’s what your donation will do!

• $30 feeds 6 children for a month
• $62 feeds a child for a year
• $170 brings 1,000 meals
• $310 feeds a family of 5 for a year
• $1,530 feeds a village of 100 for 3 months
• $6,120 feeds a village of 100 for a year

Give now! Go to www.MorganDeliversHope.com.

At a meeting the other day, a prospective client asked me how Morgan gets information into its system on time, completely and correctly. I explained to him that to achieve this, we devised what we call the “perfect shipment,” an innovative quality assurance program.

Our Perfect Shipment initiative began about three years ago, after I had attended a conference during which the W.W. Grainger concept of the “perfect order” was discussed.  A “perfect order” is achieved when a set of criteria are met.

Out of that we at D.W. Morgan developed our own criteria for the “perfect shipment”:
1.    In our system within 30 minutes
2.    Picked up on time
3.    Client informed of delivery status
4.    No damage claims
5.    Timely proof of delivery
6.    Invoiced within 24 hours of completion
7.    Minimum profitability level achieved

We’re not perfect yet, but we are closing in on that holy grail. For the most recent period, we scored 87 percent, and we now average 85 to 90 percent. A significant improvement over our first year, during which we–ahem–scored 6 percent. And to think: Our customers liked us back then!

The stumbling block in achieving the perfect shipment, we found, came from the lack of a corporate-wide vision within the company’s divisions. Individual employees were focused on their tasks, but they were not invested in the big picture.

We told our drivers, “Don’t be late and don’t break it!” But that’s all they saw as being important. When it came to filling out shipping documents and updating the system, they were chronically late, which led to late billings and customer annoyance.

The accounting department was focused on billing, but the clerks didn’t see the bottom-line value of each shipment. Thus, we lost money on some shipments.

To address these challenges, we invested in a company-wide training program, and we offered quarterly incentives to the employees based on how well the company performed in terms of perfect shipments. We rallied the company around that single perfect-shipment number and instilled the notion of teamwork. Accounting began talking to the drivers, and the drivers began asking accounting, “How are we doing”? The number of perfect shipments shot up dramatically.

Even so, while we are pleased with 87 percent perfect, we are not satisfied. We continue to shoot for that perfect score.

In today’s just-in-time global economy, one of the toughest supply-chain and transportation logistics challenges that manufacturers face is the “last mile” — arranging critical inland transportation for their goods.

The easy part is sending components overseas to a factory via airfreight or ocean. But handling requirements, tracking visibility and delivery coordination often break down when the shipment is handed off to a local delivery company for that last leg of the journey. That’s the weak link in the supply chain.

To help companies deal with this ongoing problem, D.W. Morgan created an industry-first Global Drayage service. We have established a ‘Supply on Demand‘ footprint everywhere there is a key high-tech manufacturing center, whether the goods are moving to America or Asia. The network of dedicated and Morgan-managed assets stretches across North America and to manufacturing and distribution locations in Asia, Europe, Africa and Latin America.

After nearly a decade of providing services in Mexico, we now have a full office in Guadalajara–and we’re building a dedicated fleet of trucks transporting goods for high-tech manufacturers throughout Mexico and to/from North America.

Having our feet on the ground at the world’s major manufacturing centers allows us to help companies solve that critical “last mile” problem so their goods arrive just in time.

Real-time communications is de rigueur for efficient supply-chain management and transportation logistics, especially in the “supply on demand” world we now live in.

Tracking visibility and delivery coordination are all-important.

That’s why Morgan adopted the Apple iPhone as its mobile communications platform. The device is relatively inexpensive and it is supported in more than 85 countries. What’s more, it builds GPS and many other essential features in to the handset.

Thanks to the iPhone, our customers get shipment tracking reports and recipient signatures in real-time.

It’s also saving us a ton of money. For the past 10 years we looked at our options, but found nothing that offered the flexibility we needed at a reasonable price. With the iPhone, we can document a healthy ROI. (I think a starting point of $100,000 in savings is healthy, no?)

And it’s good for the environment. D.W. Morgan is now paperless. We have eliminated paper way bills and remove some 150,000 pieces of paper—a stack as tall as a five-story building—from the consumption cycle each year.

For the icing on the cake, we got a great profile on Apple’s website. Check it out at: http://www.apple.com/iphone/business/profiles/dw-morgan/.

Fortune Small Business also featured us in a recent story about creative uses of GPS technology (July/August issue, p. 48), and online at: http://money.cnn.com/2009/07/08/smallbusiness/inexpensive_gps_phones.fsb/.