This guide outlines several strategies to modernize supply chain logistics and ensure you can meet demand in the future.
Global supply chains logistics problems
Companies that have striven to put their products in stores and distribution centers before the holiday shopping season are now beginning to assess that the end of the problems that have affected their supply chains is still far away.
This is a crucial issue for retailers and manufacturers who plan investment, purchasing and production strategies for next year. Comments from company executives on the latest quarterly results and interviews with logistics experts suggest that relief expectations are being increasingly pushed to 2022 and even beyond.
Many companies pointed out problems in supply chains as barriers to profits. There are growing signs that problems such as congestion in ports, the difficulty of getting truck drivers, slow deliveries from suppliers and the increase in the costs of raw materials and components such as semiconductors are affecting the economy as a whole.
Companies such as Clorox, Majestica Steel USA, water heater manufacturer A. Smith Corp and clothing retailer Under Armour are making changes in operations and supply that will last beyond current bottlenecks, in a sign that palliative measures in response to lack of raw materials and transportation problems are being incorporated into operations.
“We believe that supply chain problems will persist in the market until the second half of 2022, before they begin to decrease,” Tarek A said. Robbiati, chief financial officer of Information Technology company Hewlett Packard Enterprise, at a meeting with analysts on October 28.
Under Armour says it reduced its order book for the second and third quarters of 2022. “We are taking precautions to cross part of the volatility and business interruptions scheduled for the first half of 2022,” said David Bergman, the company’s chief financial officer and a conference call on Tuesday.
Ford is “planning for greater interchangeability and replacement capacity,” also ensuring multiple component suppliers, Hau Thai-Tang, its operational and product platform director, said at a meeting with investors on Monday.
Logistics experts say that the interconnected nature of supply chains means that there is no quick solution to resume the constant flow of goods in the world economy. “We do not expect any relief until the end of 2022,” said Sara Banks of Accenture consultancy. “But the continuous problems in supply chains cast doubt on whether this is still possible. There are some positive signs, but it is still unknown how long we will still be in this situation.”
How to modernize supply chain logistics
Supply chain logistics design has a huge influence over how well your company operates, and it’s changed a lot over the years. As technology advances and logistics professionals have more tools at their disposal, supply chain logistics design has evolved — and it continues to do so as the pace of technological development quickens.
So, if you haven’t updated your supply chain logistics for a few years, you could be missing out on many of the benefits of a modern, efficient supply chain design. Here’s what you should do to bring your supply chain logistics up to date — and why you should bother.
Prioritize Value Creation
These days, supply chain logistics design no longer focuses on mere cost reduction, because cost reduction isn’t the end-all, be-all of successful supply chain design. While keeping costs to a minimum remains important, supply chain and logistics professionals are increasingly seeing that creating value for your customers is often more important than just going with all the cheapest options.
That’s because consumers today are more and more interested in supporting local businesses, shrinking their carbon footprints, and other things that tend to be incompatible with a supply chain design that puts cost-cutting measures first.
Supply chain designers are feeling the pressure to trade low-cost services and goods for higher-cost services and goods that will nevertheless generate more revenue, because they’ll be more appealing to customers. It might cost more to contract with local suppliers, but customers who want to “shop local” and support their local economy will be more likely to buy from your company if they feel that your supply chain decisions align with their own values.
Source Locally
Sourcing locally, and cultivating multiple sources for important materials, parts, and services, doesn’t just increase your revenues. It can also strengthen your supply chain logistics, because the further away you have to go to get the goods and services you need, the longer your supply chain stretches out, and the more vulnerable it becomes to disruption.
If there’s a shortage in a factory in China, for example, the repercussions could cause ripples that affect companies all over the world that rely on that factory for parts and materials.
But if you’re getting your parts, materials, and services from a local supplier, you won’t be affected by that shortage in China. Your source of materials will be right in your backyard, and if you’ve cultivated multiple sources of materials and services, you’ll have somewhere else to turn if one source dries up momentarily.
Or you can also choose to outsource local pick and pack services for your business if you want to lessen your worries regarding your supply chain logistics. Third party companies will handle the inventory, picking and packing orders, and order fulfillment for you.
Build an Interdisciplinary Team
Managing supply chain logistics is no longer a job just for logistics professionals. You need to bring other professionals from other functions onto the team. Sales, finance, and marketing specialists need to be brought into the fold to optimize supply chain performance and design.
As many companies have learned thanks to recent upheavals like Brexit and the COVID-19 pandemic, cross-functional teams are better-equipped to come up with effective responses to rapid changes that demand new logistical strategies, because they can bring a wider range of experience to bear on the problem.
Make the Most of Artificial Intelligence and Data Analysis Tools
Artificial intelligence (AI) and data analysis tools, like those available at https://www.coupa.com/products/supply-chain-design, are making it easier to design flexible supply chain logistics that can accommodate sudden changes in policy or upheavals due to issues like pandemic disease or the emergence of higher barriers to trade.
Data analytics and AI tools allow you to model supply chain logistics networks with spatial clustering analysis to create visualize store clusters along your distribution route, for example, and pull demographic data on the customers that use your stores at each node. You can easily analyze shipping routes and optimize them for maximum efficiency in terms of time and distance, or even adjust routes to provide the smoothest, safest journeys for the products you’re shipping.
When thinking about supply chain management, it is crucial to understand two important terms and the difference between them: fulfillment center vs warehouse. As you may know, fulfillment centers are the backbone of contemporary eCommerce and logistics. It’s all about focusing on efficient order processing and shipping, ensuring that customer orders are quickly picked, packed, and shipped with precision.
In contrast, warehouses primarily serve as storage facilities for inventory. While both fulfillment centers and warehouses play vital roles in the supply chain, grasping the distinctions between them is essential for optimizing operations and providing seamless customer experiences.
Practice Continuous Reviews
If there’s one freight and logistics lesson you should have taken from the events of the past two years, it’s that supply chain logistics need to be designed to pivot on a dime so that sudden changes don’t cause massive disruptions.
Implementing a continuous review process, rather than a periodic one, can give your logistics network resilience in the face of uncertain and volatile times. Continuous review processes can help you anticipate, and prepare for, potential disruptions in the supply chain.
Conclusion
These days, you never know what kind of catastrophe is going to affect your supply chain, whether it’s severe weather, a pandemic disease, political unrest, or changes in trade policy. That’s why it’s so important to develop resilient, modern supply chain logistics. It could mean the difference between life and death for your company.
