Change in your supply chains is for your business

Roger OakdenLogistics Management, Logistics Planning, Procurement, Supply Chains & Supply NetworksLeave a Comment

Strategies provide growth

Products and sales outlets differ; so do warehouses and storage areas in their design, organisation, processes and use of technologies. How Logisticians respond to changes in markets, business practices and the environment will also differ.

Sales channels and outbound supply chains

Sales channels are the outlets through which goods and any associated services are sold. Logistics designs the outbound supply chains, each of which can include servicing multiple sales channels:

  1. Direct channels owned or controlled by a brand company (a shipper), for sales, storage and delivery of items:
    • Commodity items in bulk (minerals and agriculture)
    • Intermediate items – producers, converters and fabricators
    • Manufactured or assembled items
  2. Indirect channels – reselling, storage and delivery of intermediate and manufactured/assembled items:
    • Wholesale and trade supply examples:
      • Food service for hospitality sector
      • Cut length supply service (steel, aluminium, timber)
      • Electrical supplies
      • Agricultural industry products
    • Other channels
      • Importers and exporters
      • Agents
      • Distributors
      • Franchisers/franchisees
      • Retailers
      • eCommerce direct to consumer

Direct and indirect channels can be supplied using 3PLs services which is both complementary to and competes with a shippers’ internal logistics activities.

Warehouse situation

Investment in eCommerce distribution infrastructure and technologies provides media publicity, but it is the general (or standard) warehouse which is the main warehouse type . This comprises tiered racking for pallets, which are transported within the facility by forklifts.

It is reported that in the US, about 95 percent of warehouse are less than 9,300 sq. metres (100,000 sq. ft.) in area and at least one-third of warehouse do not use a warehouse management system (WMS). So, the majority of warehouses are not centres of innovation.

Challenges for Logisticians

Throughout 2019, Learn About Logistics has discussed some of the challenges that supply chain professionals may encounter over the next five years, These challenges will not equally affect all organisations, so Logisticians will need to prioritise the areas to further understand and address.

Challenges will also differ by country and region, with differences being: the structure of businesses; the culture and organisation; location density for warehouse activities, transport infrastructure, level of communications technology and available payment systems.

Importantly, just copying what another organisation does in terms of its people, technologies, capital investment and performance measurement will not provide the ‘best’ solutions for your business.

Challenges for supply chain professionals could be:

  • Supply Chain performance for 3PLs
    • To improve financial returns, manage exposures to volatility of markets and business risks
    • Further consolidation of 3PLs into fewer and larger businesses to provide profitability and cash flow for investment in technologies and people
    • Each 3PL business requires its own ‘cost to serve’ model – the total handling, storage and delivery costs and working capital requirements
    • Behaviour change in negotiations: shippers may become increasingly dependent on negotiated contracts with Logistics Services Providers (LSPs) to achieve their supply chain and environment performance targets
  • For shippers and 3PLs
    • Inventory form and function decisions by location. Growth in SKUs complicates inventory management
    • Supply Chain organisation: reflect the flows of items. Skills shortages in key functions, as shippers and LSPs require increasingly skilled staff
  • Distribution and Transport infrastructure
    • Operations at transport ‘hubs’ and regional ports: As direct transactions between buyer, seller and transport operator become more common, smaller quantities could be delivered direct from and to smaller ports and centres
    • Governments charges and regulations on road transport: includes road usage charges; delivery time restrictions; access charges for defined areas (such as central business districts) and electric or hydrogen powered vehicle requirements
    • Speed and accuracy in order fulfilment: Does the need translate to increased use of ‘wearables’, sensors, radio frequency identification (RFID) tags, etc. and of robotic operations in warehouse and storage?
    • Increasing urbanisation and the need for additional warehouse infrastructure: Increased land cost in urban centres may influence increased multi-storey distribution centres and smaller delivery warehouses in the fringes of cities
  • Supply Chains and Geopolitics
    • Possible breakdown of multinational trade order, due to limitations on the activities of the World Trade Organisation (WTO)
    • Power used in international trade:
      • Trade agreements: The 17 month period to ‘phase one’ of a US-China trade agreement illustrates the likely time (if ever) to a full agreement. The negotiations indicate potential effects on global trade, which could lead to ‘de-globalisation’
      • The EU could expect countries with a trade relationship to implement a similar ambitious emissions reduction goal. This provides a ‘level playing field’ for EU trading companies
      • Currency values: Changes to supply chains when the value of currencies change as governments attempt to gain a financial advantage against competitor countries
    • Changes to trade patterns due to the implementation of regional trade agreements for intermediate and finished goods
    • World oil and domestic fuel prices projected increase: effect on supply chains and 3PL sector profitability

Global warming and the environment

This is the ‘elephant in the room’ for all supply chain discussions and action. The failure of the recent emissions reduction conference in Madrid just makes it more difficult and expensive for Logisticians to develop a response to the impending crisis. No agreement does not mean the challenges have gone away – as the effects of global warming are exponential, they have just increased.

What does net-zero emissions mean for your business? Addressing climate change risks is more than building more solar or wind farms. It will require major changes to what, how and where items are produced, distributed and consumed. There is not 30 years to decide – only about five years, as implementation will take the other 25 years.

For Logisticians, the (maybe Chinese) saying “May you live in interesting times” is very applicable; the future roles of supply chain professionals will not be dull or routine!

Greetings towards 2020

Thank you for being with Learn About Logistics through 2019. We hope that you find it a useful site. Learn About Logistics is taking a ‘down under’ summer break. The blogposts will return on January 22, 2020.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

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