Equating "Liquids" with "Process Industries" is a huge logistics mistake – liquids are in fact the lifeblood of Discrete and Service Industries. Over 24 billion gallons of liquids per year flow through discrete/service industries such as Automotive, Healthcare, Foodservice-Hospitality, and Manufacturing in the U.S., and corresponding quantities in Europe and the Far East. With these large volumes and the advantages available from liquid-based logistics techniques, liquids represent an unrecognized opportunity for efficiency gain and cost reduction in many Supply Chain operations.
Why are liquids so unrecognized as a logistics factor in these industries? In many cases it’s because the liquids are put into packages and are thus handled as discrete items for logistics purposes. A company that orders ten 55-gallon drums of a liquid receives, stores, and issues the liquid in discrete units – drums – rather than in liquid units – gallons. It is essentially the container, rather than the liquid product itself, that is being handled for logistics purposes.
A closer look at the industries listed above demonstrates the importance of liquids in Discrete and Service industries. In the Automotive industry lubricants, fluids, and coolants are required for the operation of all types of vehicles as well as their production. Cleaning fluids and laundry detergents keep Healthcare facilities operating, and these liquids together with beverages are used in vast quantities in the Foodservice-Hospitality industry. A Manufacturing company may use liquids such as chemicals or colorants in its products, and certainly uses liquids such as machine lubricants, cleaning liquids, and paints in its processes and in the operation of its facilities.
Once a company recognizes the quantity of liquids it uses, it can begin to exploit the tremendous logistics advantages that liquids offer. In our example above, a company that takes delivery of 550 gallons of liquid using liquid-based techniques rather than in 55-gallon drums becomes more effective in many ways. The liquids may be piped from the point of delivery to the holding tank, and from there to the point of usage – thus completely eliminating manual handling of the drums/jugs/bottles by company personnel. Since there are no containers to be handled, the liquid holding tanks may be placed in "unusable" space such as overhead racks or in unused corners, thus freeing up valuable floor/storage space. Of course the handling of the containers themselves is eliminated – the need to cut them up and dispose of them, return them, or recycle them – which represents a significant reduction in Supply Chain costs.
The implications of a liquid-based approach to liquid products in discrete and service industries are described in detail in the book Supply Chain for Liquids®: Out-of-the-Box Approaches to Liquid Logistics, and include an array of financial, environmental, and marketing advantages. The financial benefits involve cost reductions and efficiency enhancements as outlined above. The environmental benefits begin with the elimination of packaging, and in a properly designed liquid-based system go far further. For example, such an approach offers the ability to make off-peak deliveries which reduces congestion/pollution while making the delivery process much more effective, and allows for more efficient space usage and land usage at all points along the supply stream. In marketing and strategic terms a liquid-based system offers opportunities for product placement and product configuration that are simply not available from discrete-based logistics systems.
The untapped power of liquids in discrete and service industries means that companies in those industries can make paradigm-leap advances in their logistics practices, and gain broader benefit to the company in financial, operational, and strategic/marketing terms as well.
Author’s Background:
Wally Klatch has over 25 years experience in industry both as a management consultant with global and regional consulting firms and in executive positions of production and distribution companies. His book Supply Chain for Liquids®: Out-of-the-Box Approaches to Liquid Logistics is part of the St. Lucie Press Series on Resource Management.
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