Ever wondered how you could cut down on transportation costs and at the same time improve customer service? Milk run logistics might be your answer.
The term originated in the dairy industry, where a milkman delivered milk to homes and businesses daily. The milkman would make his rounds, picking up empty bottles and delivering full ones. Over time, the milk run became a metaphor for any repetitive trip to deliver goods.
This guide focuses on the origin of the milk run, its development over the years, and the benefits of using the milk run method in logistics.
Top 5 benefits of milk run in logistics
With a good idea of how milk run works, it’s time to explore some of the benefits of using this strategy in logistics.
1. Improved just-in-time inventory management
In many cases, having too much inventory can tie up working capital and lead to significant storage and obsolescence costs.
Milk-run logistics can help companies reduce their inventory levels by making just-in-time (JIT) deliveries. With a milk run, suppliers deliver materials to a central location regularly. From there, the materials are redistributed to individual customers as needed.
A good example is the Toyota Motor Corporation which uses milk-run logistics to revolutionize its supply chain. Toyota is an excellent example of a company that employs the just-in-time method.
Toyota only receives raw materials in the factory once it is ready to manufacture a vehicle. This method reduces inventory-holding expenses.
2. Increased reliability and delivery frequency
Milk has a shelf life of approximately one week and must be collected more frequently. When the same is applied comes to logistics, it increases the number and frequency of deliveries.
This is the standard assignment in a modern, high-volume manufacturer. It means that one to four deliveries will be necessary for each shift. There may be up to four suppliers on a particular milk run route.
Milk runs can guarantee a more predictable supply chain, decrease inventory, and enhance visibility by providing more regular communication between suppliers and customers. Consolidation of deliveries is beneficial to receiving operations as well.
3. Reduced idle time and malfunction rate
Idle time is the time a machine is not in operation. It’s a big problem for many companies because it leads to lost production and increased maintenance costs.
The milk run delivery system can help reduce idle time and the rate of machine failures. The system can ensure that machines are always supplied with the necessary parts and materials. As a result, they’re less likely to experience disruptions in the production process.
In addition, the milk run system can help reduce the downtime associated with traditional deliveries. The system can enable companies to schedule their deliveries in advance and use their time efficiently.
4. Improved quality control
When parts and materials are delivered on a milk run schedule, tracking and controlling their quality is easier. This is because the deliveries are more predictable and regular.
This, in turn, leads to improved product quality and fewer defective products. For instance, a company that manufactures electronics can use milk-run deliveries to ensure that it only receives parts with a low defect rate.
They can do this by setting up quality control procedures at the suppliers’ premises by either having their quality control staff or working with a third-party quality control company.
The goal is to ensure that only high-quality parts and materials arrive at the electronics manufacturer.
5. Reduced carbon emissions
According to the World Economic Forum one-fifth of the world’s carbon emissions is coming from the manufacturing and production sectors.
One of the biggest polluters is certainly the automobile industry in China. The market is very competitive so many manufacturers are starting to rely on lean manufacturing to optimize their operations – which can lead to reducing the carbon footprint.
A group of scholars even constructed the green vehicle route milk run model for inbound logistics of auto parts in China.
Research published in the Sage Journals shows that optimization of the milk run route can shorten the total journey distance and reduce carbon emissions. Also, it can help in creating a healthier environment and have social and economic benefits.
The model they researched and developed showed that journey distance is shortened by 4.6% which led to energy consumption lower by 2.7% and 27.0% fewer carbon emissions!
Cons of milk run in logistics
Despite the numerous benefits of using milk run in logistics, managers must analyze and think deeply before making the transition. They must consider not only the benefits but also the drawbacks. Here are the main cons of this system.
1. It is a very complex method to implement
Milk run requires strict synchronization between production managers and suppliers to ensure a constant flow of goods. It is time-consuming because managers must consider several aspects such as delivery time, transport volumes, and driving time.
Facility managers must monitor the system in real-time to synchronize the production line operations and procurement process. Warehouse Management Software is suitable for ensuring a constant flow of materials, coordinating movements, and optimizing costs and time.
The milk run method in logistics requires a lot of testing, experimenting, and time before you get it right. Because of its complexity, some facilities work with transport experts, who help facilitate the process.
Facility managers must accurately determine the following so that the milk run system is effective:
- Which cart or trucks will collect materials or suppliers’ parts?
- The sequence of each truck or cart.
- The delivery times.
- How to effectively stack and park the materials in the cart or truck.
2. Mistakes could hurt the production
Milk run in logistics requires a commitment to all stages because any delays in the supply of inputs can halt the entire production process. The system requires very reliable suppliers. However, aspects beyond the supplier’s control, such as traffic obstructions and weather conditions, can negatively impact production.
Poor planning and a lack of accurate information on operational capacity and processes may lead to inefficient supply deliveries. Dealing with third-party suppliers and shipments may lead to higher risks of delays.
Moreover, milk run distribution is more effective in mass production contexts. The system’s complexity could lead to inventory management errors when production requires more varied materials or components. Any mistake while transporting any of the materials or components could disrupt production.
Any delay in production ultimately affects order fulfillment. Eventually, the company could lose its credibility and negatively affect customer satisfaction.
3. It can lead to additional costs
The planning process and transition from a traditional to a milk-run system can be costly. The change may involve replacing material handling equipment. Since supplies are made in small quantities but frequently, you may require equipment that can handle smaller amounts.
In addition, you may need more of this equipment to handle the frequent deliveries, which may result in higher costs.
Usually, tugger trains replace forklifts in a milk run system, especially in assembly lines. They are set on a lane or track within a facility and can easily transport parts to different workstations.
However, in some instances, you may still require heavy material handling equipment, which will add to the costs. Transporting the assembled parts on tugger trains may be challenging, and you may still need heavy material handling equipment for efficient handling.
Therefore, you may still need forklifts to help lift and move the assembled parts. The increased handling operations, equipment, and person-hours may lead to higher costs.
With an expected increase in e-commerce and the growth of the global economy, the demand for logistics services is only going to increase.
And as companies look for ways to cut costs and improve efficiency, the milk run model is likely to become more popular.
From consolidating shipments to reducing transportation costs and environmental impact, the milk run method offers many benefits for logistics managers.
However, like any other system, milk run is not without its drawbacks. Therefore, facility managers must consider this system’s cons and appropriately plan for them. Because of its complexity, any simple mistake could be costly and hurt production.
When implemented correctly, milk run can be a powerful tool for improving a company’s supply chain operations.
About the author
Luke Goodwin is an experienced marketing manager with a demonstrated history of working in the logistics and supply chain industry. Currently, he works as a CMO at FlexQube. To learn more about FlexQube and see more articles from the industry you can visit their news website.