How the supply chain could fight the economic down-turn

The current financial crisis is spreading around the globe and is impacting many parts
of the global business. However, as far as the supply of goods is concerned, the
modern world expects things to move on as normal and remain relatively stable.
For i


How the supply chain could fight the economic down-turn


 


The current financial crisis is spreading around the globe and is impacting many parts of the global business. However, as far as the supply of goods is concerned, the modern world expects things to move on as normal and remain relatively stable.


For instance, we would not like to see supply of FMCGs like food and beverages being affected by the economic jitters with possible serious political consequences.


So the question is: how robust are supply chains these days? Are our supply chains good enough to fight-off current threats like the constantly changing (and long term rising) oil price, the increase in raw material prices, and the need to show and become ‘greener’ than your competitors?


The buzz phrase of ‘being agile’ does not help, unless the need for agility is driven by a clear internal strategy with specifically defined improvement projects. An increasing number of companies see the need of such initiatives, but are still questioning what they can do in real life projects.


This article outlines the steps which the supply chain should take, demonstrating that innovation (through mechanisation and automation) is the direction forward, mixed with the ability of partnering to share transport and further reduce supply chain costs.


 


 


Good intentions


 


It has been some 10 years that Supply Chain partnerships between suppliers, and between suppliers and retailers have been discussed and implemented. However the true extent of partnering in the transport and storage of goods is still relatively small and based on good intentions rather than economic drivers. More recently the rising fuel cost is bringing supply chain partners together and an increasing number of good initiatives are being taken. A good overview of case studies is published on the ECR website under the ECR Sustainable Transport Project 1 umbrella. Some of these initiatives include:


 


1. Load sharing


Load sharing is comparable to car-sharing initiatives. We all know that it makes sense to share cars and that it would save money, but there are a few obstacles:


– How can we find each other?


– How can we make sure we share the same route at the same time?


– How can we remain flexible, e.g. if I need to arrange my own trip?


These obstacles are the same for businesses but can be overcome by good


communication and can be facilitated by internet communication tools. Today, finding each other via websites and discovering each other’s intentions is easier than it ever has been. For example, a good initiative to facilitate this process is taken by ECR France ‘Cartographie ECR du transport’2 and by the IGD in the UK3. These industrywide organisations work as ‘brokers’ to bring the right partners together: Suppliers sharing warehouse space and transport routes and retailers and suppliers doing the same.


The economic drivers for sharing should be well understood, but sharing the savings on a basis per tonne kilometer is vital to make this work. The driver should be good economic reasons rather than based on good intentions. More and more 3rd party Logistics Providers (3PL’s) are now coming to the forefront of this discussion too and also act like brokers. With the rising fuel cost as the driver for all parties involved, the old 3PL model is being exchanged for a ‘share-and-save’ model, which longer term


brings a more sustainable business for all parties.


 


2. Data Sharing


The need to ‘remain flexible during change’ is another prerequisite for a more robust supply chain. A timely view on changes in the orders (short term) and order patterns (medium term) between supply chain partners is essential to avoid unnecessary costs and strain in the partnership. Standardisation of data definitions lies at the heart of successful data sharing, and it is still necessary to push Global Data Standards4 (GDS) in the logistics and supply chain world, as being promoted by the GS1 organisation. Only if the global supply chain speaks a similar language, the required supply flexibility can be achieved without too much extra cost, created by manual intervention. For instance, essential supply data like ‘preferred slot times’ and ‘extended supply times’ have to be communicated quickly and effectively between partners to avoid supply chain disruption. The GDS initiative is still developing and needs a lot of stamina. Bigger suppliers and global retailers are leading the way and improving the standards. The smaller players in the market should avoid re-inventing the wheel and quickly adopt the GDS standards and implement them in their existing logistics software environment.


 


3. Internal innovation and automation


Most of today’s logistics and distribution can be made more efficient by application of continuous improvement philosophies. Whereas manufacturing technology has thrived in the last 30 years on all kind of initiatives like Total Quality Management, Health and Safety awareness, 6sigma techniques, logistics is still to catch up.


 


It is now time to bridge the gap between manufacturing and logistics & distribution by seeing distribution centres as ‘Order Fulfilment Factories’ and applying standards like Good Manufacturing Practice in the logistics environment. This way of thinking requires a continuous investment in mechanisation and automation, in what is still in many countries a manual process.


For example, manual order picking of goods in sometimes difficult circumstances like deep-frozen warehouses, does not belonging to this ‘Order Fulfillment Factory’ thinking. With an aging workforce in developed countries, automation to the right level in warehousing should be the logical way forward.


Swisslog, a global supplier of integrated logistics solutions, can help you to make the required steps in this drive for automation and continuous improvement. By deeply understanding the customer’s customer requirements, the right level of automation and mechanisation should be found. Recently, successful Swisslog implementations in retail and food & beverage industry have shown that good pay back of these projects can be found. For more information please contact Swisslog via www.swisslog.com.


1 http://www.ecrnet.org/05-projects/transport 2 http://www.ecr-france.org/web/ecr_otdd.asp 3 http://www.igd.com/cir.asp?menuid=84&cirid=1764 4 http://www.gs1.org/productssolutions/


 


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