With the General Election having dominated our television screens for weeks, it is very easy to believe that future success will all be down to the politicians. However, as discussed in our lead article, a change of government is unlikely to have a significant impact on the challenges that are being faced by logistics professionals. Instead, developments in technology and the quest for competitive advantage will continue to be the main driving forces for change for most organisations.
Some of the current challenges facing our industry include:
- Shorter product life cycles and an increased demand for personalised service or products
- Continued growth of internet shopping with the associated use of home delivery and ‘click and collect’
- Continued development of the use of the internet for communication and commercial transactions, including live status reports regarding order fulfilment and delivery
- The use of IT to drive productivity and efficiency throughout the supply chain
- Demand for shorter lead times and smaller minimum order sizes to minimise stockholding
- Company mergers
- Demand for sustainable technologies and the use of alternatives to fossil fuel
- Increased demand for time definite deliveries in the face of increasing congestion on our roads and in our towns and cities.
The increased demand for robotics may also become an issue in the event that the change in government increases the cost of employed staff by clamping down on the use of agency or self employed personnel. Without doubt the flexibility within the UK labour market has contributed to the growth of highly responsive distribution services by allowing labour costs to be more closely aligned with revenue. Any changes which reduce labour flexibility are likely to impact on service innovation if the entry cost for such innovation is too high.
Successfully responding to these challenges is essential to the future success of any organisation, while failure can mean a loss of market share or gradual margin erosion as prices are driven down by more efficient competitors.
The key requirement for any logistics professional is to ensure that the logistics operation fully supports the business strategy in an environment that is constantly changing.
The starting point is to understand the optimum stockholding requirement, having due regard to supplier order lead times, optimum and minimum order quantities from suppliers, product availability and service requirement to meet customer expectations and demand volatility. Different products are likely to have different stockholding demands. The number and design of warehouses is dependent upon stockholding requirements, the nature of the products to be stored, stock value, service delivery requirement, customer order profile and delivery method. Higher value products will tend to favour fewer locations while low value products sourced in the Far East will require greater stock cover to account for the extended delivery time.
The selection of the correct mix of delivery services is also critical and will depend upon the nature of the products, handling requirement, delivery address and consignment size. The range of delivery services is extensive; the trick is to determine the optimum mix.
The effective use of IT in supply chain management, warehouse management and transport operations will have a profound impact on resource utilisation and operational efficiency. A wide range of packages are now available with extensive functionality, many of which can be implemented with minimum tailoring. Selecting the right package can significantly reduce clerical effort and overall operating costs.
Over the years Davies & Robson has helped many companies determine or improve their supply chain operations. Companies we have advised on the optimum size, number and location of warehouses include Acco, Hain Daniels, Movianto, Martin Brower, JD Wetherspoon, Kumho Tyres, Eat Cafe, Highways Agency and Antalis.
Companies Davies & Robson has advised on the optimum warehouse layout include Aldi, Nestlé, HellermanTyton, G A Pet Foods and Dunlop Tyres.
When it comes to delivery services, we also have extensive knowledge of the services available and a powerful transport modelling capability. Companies we have helped include Travis Perkins, Abru Aluminium, Norbert Dentressangle, Calder Industrial and IKO.
In all cases, the approach to determining the optimum logistics solution is the same and involves first understanding the business strategy for achieving competitive advantage, then preparing a comprehensive data set that fully reflects the operation, both now and in the future, and finally evaluating the range of possible options, taking account of cost, service delivery, robustness and flexibility for future change.
The use of advanced modelling techniques means that a range of solutions can be evaluated quickly and cost effectively. Once developed, the model can also be used to address changing requirements or to assist with ‘what if’ questions. Recent assignments undertaken by Davies & Robson include:-
- Determination and evaluation of a plan for small order fulfilment
- Optimum location for a second warehouse
- Evaluation of automated storage and retrieval systems
- Supply chain process and system review
- Optimum stock mix and quantity
- Optimum warehouse design
- Amalgamation of logistics operations following company merger
In the end, while politicians may claim that future success is down to their policies, it is the ongoing attention to supply chain planning that will remain the most important factor for success.