Ship to Line / direct provision of goods
With ship to line or direct provision of goods, the supplier/manufacturer puts together the shipment and delivers it directly to the place of consumption – without the need for the customer’s warehouse or logistics. By taking over the value-adding processes such as goods receipt, storage and retrieval by the supplier or manufacturer, the efficiency of the supply chain is increased.
The focus in the direct provision of goods and raw materials is on replenishment. This can take place via continuous replenishment, for example. Here, the producer coordinates demand together with the supplier on the basis of the collected production quantities (production planning). For example, using the Heijunka lean method. This type of replenishment takes place quickly and usually without a planning lead time(material requirements planning). The supplier can also be the manufacturer at the same time.
Ship to line in practice (example): The goods or raw materials are organized directly to a production line (production) or assembly by the supplier. The producer does not carry out any warehousing activities. The delivered goods are immediately received by production and are not temporarily stored in stock. If a certain quantity of the required product is processed, automated quantity recording triggers replenishment; for example, using the Kanban system or the milk run concept – supply via the above-mentioned continuous supply of goods is also conceivable.
Objectives of Ship to Line:
- Inventories are significantly reduced
- Replenishment times are shortened
- Improved quality through continuity
- Better transparency in the processes
- Processes are simplified
- Storage space requirements are reduced
- Cost savings
If the partners manage to meet the targets, this automatically minimizes the degree of utilization of resources or operating resources. The following applies: the closer the theoretical value(simulation in the supply chain) is to the real value(key figures), the better the actual degree of capacity utilization during the real production phase.
Problems of Ship to Line:
- If there are major fluctuations in demand(bullwhip effect), this can lead to shortages in the long term. It therefore makes sense to constantly monitor and reassess replenishment.
- Quality of the goods: If faulty goods are delivered, the defects usually remain unnoticed until they are sold or installed (assembly, production) because there is no goods inspection on the part of the customer (buyer). As a result, the supply chain may come to a standstill or suffer other adverse effects (assembly and production lines are disrupted). The supplier and customer should therefore consider a process that enables the introduction and removal of complaints and spare parts without hindering the actual line (delivery, production).
- Dependency: The dissolution of previous internal warehouses increases dependency on the performance of the external supplier and its logistics processes. A precise agreement and contractually guaranteed statements between customer and supplier are therefore essential.
Ship to line makes sense under the following conditions:
- Delivery time is shorter than that of the competition (proximity to the production site is an advantage)
- Quality is impeccable
- Product variety is small (concentration on only a few products)
- Consumption rate of goods is high
- Product size is small (no furniture or other bulky parts)
For more information, see Just-in-time and Just-in-sequence, two other forms of goods provision.
Image rights: Daimler AG / CC BY-NC-ND 2.0