Insight: Implementing and monitoring your revised logistics network strategy

In the final of a series of articles, The Supply Chain Consulting Group looks at why implementing and monitoring a sustainable logistics network strategy is so important.

After considering various scenarios, and selecting the best option, implementing a sustainable strategy to make it work is important. This is the point at which we check back to ensure that our potential solution aligns with the business strategy. The next step is the implementation: to consider the “how” and the “when” of each initiative or sub-project, bearing in mind where you are today.

Hurdles to overcome

It is here that the realities start to intervene. The data-gathering process will have uncovered some limitations such as lease commitments to existing buildings and fleets, third-party contracts and employee considerations and liabilities. The ideal end-result may not be attainable immediately for some large organizations, especially retailers, but progress can be made along the right road. We must work around the limitations. A pre-requisite for moving into the implementation phase is to confirm the support of top management and important stakeholders.

 

The transformation roadmap

A roadmap is a visual timeline of capacity against projected growth, with key milestones, tasks and decision points shown. One approach is to develop a broad two-year project plan with a more detailed version for year one. For example, if it may take two years to construct and bring on-line a new distribution facility, at what point in the time plan must the decision be made to go ahead? Consider interim solutions, e.g. using available storage at third-party premises or a short-term lease for additional warehouse space. Any expected change in resources must be quantified and fed into the plan.

Each initiative and its related actions must be risk-assessed and an expected return on investment calculated. It is important not to lose sight of the original objective: reduce costs, minimise risk and satisfy customers. This means improving the day to day operation of all distribution facilities to improve service levels and keep operating costs down. Progress towards the optimum solution requires periodic reviews to ensure alignment to the overall business strategy.

The speed of change

The speed of change in the broader business environment is not compatible with traditional review periods and contract lengths etc. For example, building leases can be for 10+ years and 3PL warehousing contracts are often for 5 years or more. Being agile may mean employing a different mix of dedicated and shared-user assets. Current economic challenges require companies to continually review their capacity, capability, and costs.

Industry trends

In the grocery sector, the increased use of e-commerce and new regulations is causing unusual challenges. There has been a move towards picking orders from both existing stores and dedicated ‘dark’ stores to extend capacity in dense urban areas. Picking efficiency is the key to cost containment and the speed of delivery. Backroom automation can determine the schedule and sequence picked orders for specific delivery routes. Modelling tools can track the available capacity and ensure that it is used to best effect, e.g. to maximise the number of online grocery home delivery slots.

The growth in e-commerce in the fashion and general merchandise sector and increasingly faster delivery expectations have changed fulfilment practices. Mega-sheds that are in areas where labour and rents are low are central enough to distribute into smaller forward-stock locations and parcel hubs, before delivery to the customer. Many items in this sector are sourced from China. Recent disruptions, political uncertainty and anxiety over delivery dates have led to the need for more space to hold buffer stock and the receiving of full container loads.

Transport trends

According to the United Nations, by 2030 two-thirds of the world’s population will be living in cities. The consumption of goods and services will increase as well as the logistics needed to support it. More focus will be on sustainability, including the use of alternative- energy-run vehicles to reduce emissions and air pollution. Self-driving vehicles will also be a factor in improving city transport logistics. New alternatives such as drones will be used to meet increasing e-commerce needs. With the maturity of 3D printing, it will be possible for some goods to be produced much closer to the consumer, reducing the pressure on transport.

A logistics solution that worked in early 2020 has been subjected to changes that could not have been foreseen. Even the best-designed networks are struggling with optimising warehouse facilities, inventory levels and managing deliveries. Advances in technology and changes in customer behaviour could be the clues that your current strategy is due for a review.