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The supply chain is increasingly perceived as a means of achieving pricing and shareholder equity in mid-sized companies. (Photo: Getty Images)
The supply chain is increasingly seen as a way to achieve shareholder value and equity for mid-sized companies. (Photo: Getty Images)
The supply chain is increasingly seen as a way to achieve shareholder value and equity for mid-sized companies. (Photo: Getty Images)
The supply chain is increasingly perceived as a way to achieve shareholder pricing and equity for mid-sized companies. (Photo: Getty Images)
Editor’s Note: While most giant corporations have made significant strides in improving the performance of their home chain, many medium-sized corporations have focused solely on product delivery and have yet to join the origin chain revolution. Large corporations (between $150 billion and $1. 5 billion in revenue) can better use the source chain to value shareholders/shares, either through lower prices and service. Future articles will focus on the other levels indexed below as a path to designing an effective source chain. .
There have been many adjustments and disruptions in the source chain in recent years. Between COVID-19 and other changing industry trends, the origin and demand patterns of many shippers and receivers look nothing like they did five years ago. But most importantly, the source chain has gone from a constant percentage of a company’s prices to a giant, developing percentage of its prices, as corporations across the economy are spending more on their supply chains. origin than in the rest.
In many cases, companies’ supply chains have been disrupted like never before due to the COVID-19 response. First, a decline in demand followed by an immediate and unforeseen recovery in demand has challenged many businesses. The inability to obtain and ship products or inputs temporarily (especially imports) has led to significant delays and shortages. E-commerce volumes soared as in-person grocery shopping suffered. Labor issues, from COVID-19 quarantines to the inability to hire staff, have compounded the problems. Even though things have “normalized” in 2023, in many cases, a company’s chain of origin is very different from that of 2019.
There are many reasons to reevaluate your chain of origin, but some fundamental regulations are still valid. Look at the key facets of your business to see what’s changed.
Have the supply locations for your products changed? This may simply mean moving from China to Indonesia, from a supplier in Michigan to one in Tennessee, or adding new suppliers.
Have your consumers and products changed? Winning new business and wasting others has effects on other delivery locations for consumers. New products or trend conversion would possibly favor some SKUs over others.
Has your turnover changed? The existing supply chain will not only have to support existing volumes, which would possibly be higher than in the past, but also continued growth.
Does your existing supply chain meet your current and long-term needs? The location and length of the warehouses are essential to have a good enough stock and short delivery times. Companies with gigantic e-commerce volumes of customers also want to think about how to meet single-item needs. order deliveries.
Finally, are you well stocked with spare parts and partners in your supply chain?Cost will continue to be a determining factor for any replacement in the source chain. They should consider whether to in-house or outsource spare parts, and whether the company will pay a competitive rate. to your partners for the service, who are the most productive partners based on the expressed desires and characteristics of the business, and how much and where to keep stock to fulfill the service, minimizing costs.
The era of lower demand for expansion that many businesses are experiencing lately is an ideal time to make changes to the chain of origin. Activities such as moving distribution centers, replacing carriers, and switching to less expensive modes of transportation are less difficult to perform without the stressor of high volumes and are more productive if implemented outside of the “peak season. “
Change options
You can’t replace everything at once, especially in the context of an ongoing business. That’s why we use a framework for thinking about features across a variety of strategic, tactical, and execution settings and consider adjustments based on the timing of implementation and the benefits that come with it.
Strategic adjustments take more than a year and are often more complex. These are decisions that should probably concern supply chain managers, or even corporate executives. They can be at the heart of the company’s operations and incorporate basic adjustments to the source chain or the way operations are conducted. This would possibly come with decisions such as replacing foreign sourcing/production with domestic source/production, the network of distribution centers through which products will transit, and what the company needs to outsource or outsource. The full implementation of each of those decisions will likely take one or more years, as it takes time to locate and expand new vendors, identify sites for new services and end existing leases, or build a company’s internal capacity to operate and manage a function. These adjustments also require capital expenditures and/or long-term leases.
Tactical adjustments can usually be made in 6 to 12 months and are basic adjustments aimed at improving the existing source chain. They don’t require capital expenditures (or, if they do, very limited), but they probably do require some operating expenses. Tactical adjustments can come with adjustments to the SKUs to be transported, which SKUs are kept in which warehouses, domestic freight aggregation operations, moving from a fleet of personal trucks to a committed transport option through a third party, implementing zone bypasses for package shipments, by implementing supplier to visitor shipping (drop shipping) and conversion of the duration of visitor orders and order-to-delivery cycles (with the help of sales) to increase shipment lengths and fill trailers more.
Execution adjustments, as the call suggests, can be implemented in a matter of months or even weeks with little or no expense. These are also adjustments to the existing source chain that can have a significant effect on pricing and/or service. Adjustments in compliance would possibly come with a new trucking or LTL offering, putting processes in place to control “unwanted” transportation expenses, centralizing the storage of slow-moving SKUs, and outsourcing the unloading of trailers/containers to warehouses.
Technology can be a component of the solution to change, no matter how complex. Applications such as a warehouse control formula, a transportation control formula, or a stock control formula would possibly take several months to more than a year to decide and fully implement. , while other formulas or features within an app are possibly available now, but your company isn’t using them yet.
So what can be changed? Here’s a starter set:
• The warehouse network
• Quantities ordered or sold
• Reference portfolio
• Means of transport
• Single-mode vs. consolidation/deconsolidation and multimode
• Private fleet
• The order cycle
• Contracting, consolidating suppliers or adding suppliers to create characteristics and risks.
• E-commerce versus sales
• Manufacturing locations
• Separation of packaging and production sites.
Even if projects and opportunities don’t play out perfectly, we occasionally categorize a replacement as similar to the product or product suppliers, warehousing, inventory, or transportation. Sometimes, these are separate teams within a company’s source chain organization, so deploying them requires another team. Some adjustments will involve more than one group, such as a replacement in the warehouse network that will have an effect on inbound and outbound transportation. A substitution in the diversity of products transported or in the location of suppliers also affects storage and transportation.
When designing the source chain, also think: Is this what is most productive today? Or do you want to be more productive at some point in the future? For many high-growth companies, the desire to be flexible is paramount. For example, to fulfill low-volume e-commerce orders nationwide, the most productive option is likely a single fulfillment center in the central Ohio region. However, when volumes increase, a two-point compliance design will most likely be the most productive solution. But in most cases, when switching to the two-point run, the most productive option would probably not have any of the DCs in central Ohio. The most productive solution is probably one further east and another on the west coast. Taking into account the cost of the replacement, does the consultation defend the offer or the future? And when evaluating their business volumes, demographic replacements. People are leaving the Northeast, Southern California and Illinois and heading to the Southeast and Southwest. Even if the annual net update is smaller, it will most likely be significant over time, so design for now or the future?
Even within a well-managed source chain/operations organization, there are opportunities for improvement. Even well-planned source chains can temporarily become suboptimal. Predictions don’t come true and there are unforeseen occasions and trends. It’s a dual-filo. de “perfect” supply chain. Distribution centers and transport cars achieve their lowest cost when fully utilized, but they exceed this volume/capacity and prices skyrocket. There is also limited flexibility to take on additional projects beyond the execution of paintings and ongoing staff work. The replacement rate can be significant. The question of how much and how often the changes are important is important. A structured strategy to identify potential opportunities and prioritize them for research or implementation is one way to ensure that the company gets costs out of its efforts and has a short- and long-term roadmap for continuous improvement.
About the authors:
Lee A. Clair is the Managing Partner of Transportation and Logistics Advisors. With more than two decades of consulting experience, Clair has significant experience in helping transportation service providers grow and their financial performance, as well as helping shippers and 3PLs design and manage their transportation chains. ‘supply. Most recently, he has helped 3PLs and buyers of 3PLs and transportation control services. His work has also included LTL and TL brokerage, transportation control systems, e-commerce, and e-fulfillment, as well as intermodal auto parts, LTL, OEM, auto parts, chemicals, fertilizers, metals and other metals, and agricultural products.
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Tuesday, December 12, 2023 – 2:00 PM EST