Ensuring
Inventory Integrity (September
8, 2003)
When
we talk of warehousing, logistics or distribution
as a function in any organization, big or small,
some of the things that come to mind are customer
satisfaction, delivery efficiency, order cycle
time, savings in transport costs, headcount, materials
handling equipment, warehouse management systems,
etc. But in all of these, no matter how efficient
and cost effective an organization is, every investment
and effort is wasted if "inventory integrity"
is doubtful.
On
many occasions, partners (brand owners on the
one hand and distributors/logistics service providers
on the other) have walked away from their partnership
simply because they could not agree on the correct
inventory balances under the care of the distributor
or logistics service provider.
"Inventory
integrity" has always been a pain in any
business partnership, and the tendency of brand
owners to be "all-knowing" does not
help resolve faults of the system. Huge amounts
have been claimed and paid when, in fact, the
majority of inventory variances or stock shortages
are mere "paper variances" and not losses
due to pilferage. Hijacking while goods are in
transit is, of course, another issue altogether
but one I do not wish to dwell on; the industry's
frustration on the subject is no secret to anyone.
In spite of modern warehouse management systems,
delivery systems, inventory tracking systems,
etc., why do "paper variances" continue
to occur? Simple! Because people who post transactions,
stock receipts or issues in these systems have
not been properly trained and/or achieved a level
of pride in their work that will make them by
nature cautious and perfectionists.
Other than errors in the posting of transactions
in an otherwise system-controlled environment,
the low quality and low accuracy of physical counts
(or what others prefer to call stock takes) contribute
to the problem of inventory variances.
In my many years of experience in the logistics
and distribution industry, I had been asked by
industry colleagues why they can't seem to get
a stock take correct in just one count. My answer
is, again, simple enough. Count errors being human
errors will always happen at roughly 20% of the
time. These are proven statistics - at least locally
- particularly when bar-coding systems are not
employed in stock takes.
So the answer to this problem is to count the
stocks TWICE!! There must be two independent teams
to represent two independent count sheets. After
the two independent counts have been completed,
the two count sheets must be compared. You can
be sure around 20% of the counts sheets will not
match. Imagine the variance (either way) when
results are compared with system balances.
Also,
one must make sure that the teams who conducted
an accurate count are recognized and those who
committed massive errors are reminded of the critical
task. Accountability, after all, is an important
factor.
The
next thing to do is for the 20% errors to be counted
a THIRD time. In this stage, you can be sure all
participants will be very, very careful. Now,
is this not the way to ensure an accurate stock
take?
In
closing, it would be advantageous if the ECR sets
up for its members a continuing training program
on inventory management as this function impacts
the industry as a whole. Imagine if all companies
boasted a sound inventory management! This will
dovetail favorably with the purchasing of raw
materials, production planning, replenishment
of stocks in the pipeline, management time, distributor-brand
owner relationship, and so on.
Reprinted
with permission from the author and publishers
of ECR Trends newsletter. The author is president
and CEO of United Terminals Services. For questions,
email him at racarino@united-terminals.com.
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Stopping
the Circle of Death at Sea, Part II (August
25, 2003)
Modernizing
the Domestic Fleet
WE can not grow as an archipelagic country for
as long as we have an unsafe and inefficient sea
transport infrastructure. We need to modernize
our merchant fleet and our ports system. Sure
we have obstacles to overcome: lack of financing
for acquisition of replacement vessels, lack of
funds to reconfigure municipal ports to be able
to accept safer but deeper-draft steel-hulled
vessels, the inability of the market to absorb
higher freight and passage rates to justify investments
in steel-hulled vessels, to name a few. But with
political will on the part of the government and
with the support of private-sector stakeholders,
we can do it. We have to do it. Modernizing the
Philippines' domestic shipping is investing in
safety in Philippine waters.
Typhoon Warning System
Most sea accidents happen in times of heavy weather
with rains and strong winds inducing rough seas
and reducing visibility at sea. We have to have
a more effective typhoon warning system for our
domestic vessels to keep them from harm's way
during typhoons.
At
present, there is no organized way for vessels
to receive authorized or official weather advisories.
Ship operators and ship crews depend generally
on commercial radio broadcasts of weather reports
from our weather bureau and from official advisories
from the Japan Maritime Commission, to plan for
whether their vessels can leave port or whether
they should take shelter after having left port.
The
Coast Guard, like the Japan Maritime Commission,
should operate a weather station exclusively for
shipping and fishing to broadcast on 24-hour basis
weather and sea conditions along storm-affected
routes and to issue any advisory for vessels to
stay in port or to proceed to the nearest shelter
coves. As part of safety procedures, vessels should
be required to tune in to the Coast Guard weather
station on a regular basis.
Coast
Guard detachments must be given very specific
guidelines on granting vessels departure clearance
at the onset of stormy weather in their areas
of jurisdiction. Where there is no Coast Guard
station, the Coast Guard should be allowed to
deputize LGUs or the local police to act on a
vessel's request for departure clearance. This
arrangement can be covered by a DOTC-DILG agreement.
It is best not to leave the decision to sail in
uncertain weather to the shipowner or the ship
captain.
Vessel Traffic
Separation Scheme
Narrow sea passages, like that between Corregidor
and Linbones islands where the MV San Nicolas
collided with the Superferry 12, and busy channels
to harbors make navigation tricky. Maneuvering
vessels are liable to get into close-quarters
situation, especially when visibility is poor.
It
is difficult to understand why the government
has not found it important to establish navigational
sealanes and mandatory vessel traffic separation
schemes in narrow passages and congested harbors.
We could have avoided the MV San Nicolas-Superferry
12 collision if we had one in place in the Corregidor
Island passages.
We
have been talking about navigational sea lanes
and vessel traffic separation for years. Let us
stop talking now, plot those lanes on the nautical
charts, find the money and set up a workable traffic
separation system in each critical area.
Swift Justice to Instill Discipline
It has been a while since a Special Board of Marine
Inquiry found the captain and chief mate of the
MV San Nicolas at fault for the May 25, 2003 collision
and recommended filing of charges against the
two. Nothing has yet been heard about the police
or some prosecutor initiating criminal proceedings
on the case. If the public does not watch out,
that case may find its way to the archives later
if not sooner.
It
is imperative, if we are to prevent further accidents
at sea, to quickly hail to court a captain liable
for loss of lives of passengers and crew and to
put him behind bars if found guilty. Swift justice
against an erring ship captain will instill the
discipline within the ranks of our seafarers to
uphold the maritime code of safety at all times.
The
Philippine Coast Guard should be held accountable
for insuring that its fact-finding Board of Marine
Inquiry does its job with dispatch and the Board's
findings forwarded to, and acted upon by, the
prosecuting agency without delay.
Breaking the Cycle of Accidents
The Philippines suffers the ignominy of being
branded the "maritime disaster capital of
the world" for the sheer number of lives
lost from the series of accidents in Philippine
waters in the recent past. That the Philippines
is one of the oldest maritime nations in the world
and that Filipino seafarers, being the number
one seafarer of choice among foreign shipowners,
proudly and competently man 25% of the world's
fleet, do not square with the notoriety the country
has gained because of those accidents happening
in her waters with eerie regularity.
We
must stop the circle of death at our seas. We
have to break this cycle of sea accidents. Let
us focus on the immediate causes of the accidents.
With nothing more than common sense, we can find
the solutions. All we have to have is the will
and the unity of purpose to do what is right and
necessary, no matter the cost.
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Stopping
the Circle of Death at Sea
(August 11, 2003)
IN her statement to the media
on accidents at sea on June 2, 2003, President
Gloria Macapagal Arroyo mentioned that "as
the painful stories of this tragedy (the sinking
of MV San Nicolas on May 25, 2003) move out of
our front pages and headlines, we must dedicate
ourselves to doing more to prevent similar accidents
in the future."
I can not but agree that we need
to do a lot more to prevent accidents in the future.
Much more than finger-pointing and conducting
investigations that do not lead to any punishment
- for those guilty for loss of lives - heavier
than suspensions of licenses and transfers of
personnel to some other posts. Much more than
congressional hearings pursued "in aid of
legislation" which do not produce legislation
to make sea transport safer. Much more than threatening
to slash the budget for a maritime agency, as
if abolishing that agency can nudge a ship away
from colliding with another vessel.
But as we try to do more as the
President exhorts us to do, let us be smart that
we do first things first. We confront the most
obvious causes of maritime accidents. We institute
measures that have the most immediate impact on
minimizing the risk of maritime accidents recurring.
Later, after the leaks are plugged, so to speak,
we can start talking about other initiatives that
should be part of a holistic approach to preventing
sea accidents but which, by their nature, would
not produce an immediate impact or would take
time to put in place.
The Human Factor in Sea Accidents
The President expressed concern that "smaller
vessels like the MV San Nicolas are commanded
by Major Patrons who don't have the formal training
necessary to secure a license." Her concern
is not unjustified. Research has shown that up
to eighty percent of maritime accidents could
be attributed to human error, meaning failure
on the part of those in command of the vessels
involved.
We do not have to look elsewhere
to find support for the conclusion that human
error is the principal factor contributing to
accidents at sea. In the case of the MV Do-a Paz
incident in 1987, the investigation concluded
that the smaller vessel, MT Vector, a petroleum
tanker under the command of a Major Patron, was
at fault. The weather and the sea were not heavy
and neither vessel reported any engine or mechanical
trouble. It could only be a case of human error.
In the case of the more recent accident off Corregidor,
the Board of Marine Inquiry faulted the captain
and chief mate of the MV San Nicolas, both Major
Patrons, for their "erratic maneuvers"
in violation of basic rules of the road.
The officer who goes on watch
at the bridge of a ship at sea should be the primary
and immediate object of an accident prevention
strategy. We can have sophisticated aids-to-navigation
infrastructure all over the place. We can streamline
our fragmented maritime administration with the
creation of a Department of Maritime Affairs.
We can establish a Transportation Safety Board
as well as an Admiralty Court. We can even enact
a Maritime Code. We will not prevent sea accidents
with these initiatives for as long as we allow
an officer to take command of a ship, who lacks
the skill to use his radar or plot his position
on his nautical chart, or who is not sure if he
should pass the other ship on his starboard or
port side.
It is disconcerting that after
major sea accidents in the past, including those
obviously caused by human error, everybody would
talk about everything else but the aspect of our
seafarers' competency. It is time we focus on
this problem, and a few other critical issues,
before we spend time, effort and resources on
much less urgent matters.
Competency Testing and Requalification
The immediate task to my mind is to require every
seafarer performing watchkeeping duties on board
domestic vessels, except those already certificated
under the 1995 International Convention on the
Standards of Certification, Training and Watchkeeping
(STCW 1995), to go through a rigid requalification
process. Those who fail the test should be sent
to a comprehensive recurrency training and be
required to take the requalification test another
time. A second failure should lead to non-renewal
of license. The whole idea is to have only those
proven qualified, stay in command of domestic
vessels.
A competency testing and requalification
program should be so designed as to cover Major
Patrons and all other merchant marine officers
not holding the STCW 1995 Certificate within as
short a period of time as possible, hopefully
without adversely affecting the operations of
shipping lines. Shipping lines may be asked to
bear the cost of requalifying their own officers.
The government, for its part, should provide shipowners
incentives to mitigate the cost of the requalification
process.
Major Patrons Commanding Vessels
Many vessels in our merchant fleet which are less
then 500 GRT, including wooden-hulled ships, are
commanded by Major Patrons - seafarers who start
as ordinary sailors and who, through the years,
learn to navigate vessels on the job and eventually
are entrusted command of their vessels. Most Major
Patrons have not gone beyond high school and have
no formal education in navigation. I still have
to understand how they obtained their licenses.
On the other hand, we have more than 70 maritime
schools which each year turn out more than 5,000
graduates on marine transportation or marine engineering
with bachelor's degrees.
It is injudicious to continue
with the present situation where officers without
formal education and training and professional
licenses command many of our domestic vessels,
including passenger ships, while thousands of
graduates from our maritime schools are idle,
or employed nowhere near a vessel. We must upgrade
the level of education and training among those
entrusted to command our domestic vessels as part
of an accident-prevention strategy.
A phase-in program for licensed
maritime graduates to match a phase-out program
for major patrons over a period of say 5 to 10
years should be put in place. To ensure that enough
licensed officers are available for domestic vessels,
the government may have to require service time
on any domestic vessel before an officer is allowed
to be deployed on a foreign vessel on the license
he holds. When the officer obtains a higher license,
he can again be required to serve time on a domestic
vessel on that higher license. Of course, waivers
can be granted in instances where no positions
are available on domestic vessels, which means
some government agency should be tasked to keep
a supply-and-demand data base.
The government must encourage
shipowners to give licensed officers higher pay
rates than those given to major patrons to be
replaced under the program, with some kind of
fiscal incentives.
For the time being, serious consideration
should be given to limiting major patrons to carrying
out voyages not more than six hours, only at daytime
and only in sheltered waters. There will definitely
be some initial dislocation in interisland shipping
with those restrictions on the employment of Major
Patrons. That should be a small price to pay for
the sake of safety at sea.
Vessel Inspection System
After the officer performing watchkeeping duties
on a vessel, the next most important target of
a sea accident prevention strategy is the pre-departure
vessel inspection and clearance system. The whole
procedure is intended to keep an unseaworthy vessel
or an overloaded passenger ship from leaving port,
unless rectifications are done to the satisfaction
of the inspector. When a vessel sails with a clean
bill of health, so to speak, the risk of that
vessel becoming a marine casualty en route to
her destination is greatly minimized.
The Philippine Coast Guard, to
its credit, has designed a comprehensive pre-departure
inspection system. Theoretically, it is a fool-proof
system that should prevent such situation as that
where the MV San Nicolas was given the green light
to sail, when the vessel reportedly had taken
unmanifested passengers. The problem is that the
Coast Guard can not perform the inspection routine
on one hundred percent basis, given its puny resources.
An ever bigger problem is that many of the smaller
ship operators are unable to meet the desired
safety standards - for economic reasons. If the
Coast Guard throws the book at each of our 5,000
vessels in the domestic fleet, a significant number
of non-convention-sized ships, including our wooden-hulled
vessels, might not qualify to leave port, disrupting
interisland commerce and movement of people. The
subject of obsolete or unseaworthy ships in the
context of accident prevention will be discussed
later.
With only 4,000 coast guards deployed
on various missions at different places, pre-departure
inspection being only one of their many functions,
the Coast Guard is definitely not equal to its
enormous task. It is bound to fail somewhere.
In fact, it has failed specifically in the area
of pre-departure inspection a number of times.
Our headline-grabbing politicians, they who materialize
ever so quickly for some media mileage after each
sea accident, better put their money where their
mouths are. Whining and ranting won't prevent
accidents. Finding the money to increase the organizational
capability of the Coast Guard - at least for its
pre-departure inspection function - is what will
help reduce the risk of accidents at sea.
To enable the Coast Guard to do
a good inspection job on each of the more than
5,000 ships that sail at any time of the day from
at least 1,000 loading or embarkation points all
over the country, we need to triple the Coast
Guard's personnel count. That's a lot of money
but, again, it should be a small price to pay
to prevent loss of lives at sea.
Need for Passenger Terminals
The pre-departure inspection system should be
able to effectively prevent overloading of passenger
ships. It's all a matter of setting up a passenger
processing and manifesting system similar to what
we have in the airports. But without passenger
terminals, that system can not be enforced, and
the Coast Guard will have no recourse but to do
the head count on board the vessels where unticketed
and unmanifested passengers can play hide-and-seek
with headcounters. Our port authorities should
start putting those passenger terminals now in
ports where there are none.
Phase-Down of Wooden-Hulled Ship Operation
The wooden-hulled ships in our merchant fleet
- the batels, the pumpboats and the motorized
bancas - have been the backbone of our marine
transportation system between small islands and
centers of populations in the bigger islands.
Their significant contribution to the growth of
remote island economies and interisland commerce
can not be disputed. But it is time we graduated
from the wooden hull age not because a wooden-hulled
ship is inherently unsafe, but because we have
the steel-hulled vessel as an evidently safer
alternative. (The Galleon ships which traded between
Manila and Acapulco in Mexico in the olden days
were built of wood. That probably was because
they did not have steel vessels then).
Our maritime authorities should
now formulate a long-term national merchant fleet
development plan which should provide for the
retirement over time of wooden-hulled ships and
obsolete steel-hulled vessels. Pending formulation
of a fleet modernization master plan, we must
start a phase-down of the operation of wooden-hulled
vessels. We should limit their operation to voyages
not longer than six hours, at daytime and in sheltered
waters. We may allow them to continue only where
and while no steel-hulled vessel service is available.
Operators of wooden-hulled vessels who will be
affected by these limitations should be given
the first crack at offering steel-hulled vessel
service on routes from which they will be asked
to withdraw their wooden-hulled vessels.
To be continued on August 18
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