Over the past 20 years, leading, if not many, organizations have adopted continuous improvement and lean initiatives to stay profitable, as well as relevant. The last 10 years alone have seen a major shift in consumer behavior, from a linear retail-focused model to an “I want access to it now” accelerated customer decision, also known as the Amazon Effect. As a result, many companies have started to review their approach to determining proper inventory levels, operational capacity, logistics, and warehousing, and finding that elastic supply chains are easier to adopt than they’d previously thought.
The days of reducing inventory to the furthest possible degree (JIT) may be ending, and instead, organizations will need to respond to the growing volatility in demand, or consumer behavior, with “elastic” strategies – the “flexibility to expand and contract capabilities to meet demand with the supply chain system in a given time frame”. Below are three elastic supply chain trends helping companies scale and maximize their resources.
3 Emerging Trends in Elastic Supply Chains
Most organizations face similar issues as they relate to fluctuations in logistics demand; perhaps there are specific times throughout the day/week/year when you experience peaks in on-demand orders that need to be delivered in short time spans and external delivery services help you scale to meet that demand. Or maybe you rely on 3PL’s to help you meet increased demand when you decide to run seasonal promotions at certain times throughout the year to drive sales.
Whatever the reason for demand fluctuation, established companies such as DHL, FedEx and UPS are partnering with local players to address local, last-mile delivery demands. The complexities of last-mile delivery make the odds against fulfilling a perfect order overwhelming, but as companies are discovering, perfect orders are the ultimate measure of customer satisfaction.
A perfect order is defined as an order delivered to the right place, with the right product, at the right time, in the right condition, in the right package, in the right quantity, with the right documentation, to the right customer, and with the correct invoice. And with the staggering number of options for consumers, there’s little room for error.
In Europe, global logistics leader DB Schenker has partnered with the online freight exchange provider Uship to track/map drivers and shipments more effectively1. This partnership enables DB Schenker to leverage Uship online platforms and cloud-based software, saving millions in new development costs. It also allows customers to book loads themselves, versus DB’s traditional middle-man model. Other examples are UPS’s acquisition of Coyote Logistics, and C.H. Robinson Worldwide purchasing Freightquote.com in 2015. Many companies are hopeful that new technology investments will reduce internal operating costs, increase efficiency, and subsequently win new customers.
As far as elastic warehousing goes, there’s no “one size fits all” elastic warehouse model, however the goal remains the same: manage demand exactly when (time) and where (location) required to keep up with seasonal ebbs and flows, all within the confines of the existing location. According to Touchstar Technologies Ltd, a data collection and computing solutions company, the following are some of the elastic strategies companies are using as they pertain to warehouse management2:
- Elastic Overheads – making your existing technology, people, and warehouse space investments work harder.
- Elastic Outsourcing – outsourcing warehousing and distribution of key seasonal lines for a finite period.
- Elastic Technology – a complete technology lead implementation.
- Elastic Blend – cherry picking the elements of the first three approaches to give the ultimate financial and operation control.
3. Everything as a service (XaaS)
Everything as a service is a strategic and operative roadmap which places business capabilities, products, and processes not as subtle vertical offerings operating in individual swim lanes but, rather, as an assortment of horizontal services that may be accessed and leveraged across organizational borders.
An easy example to reference is ride-sharing services. Uber, Lyft and even Zip Cars offer on-demand access to Transportation as a Service (TaaS). Now, thanks to smartphones and the IoT, it’s possible for individuals to get from point A to point B quickly, efficiently, and most importantly, without the operational expenditures associated with owning a car. With ride-sharing, corresponding activities are delegated to someone else.
Supply chain as a Service (SCaaS) is another emerging trend to watch for. SCaaS has a variable cost structure, so companies will receive the benefits of partnering with top supply chain talent, longstanding industry relationships, and proven technology and systems without the commitment of hiring full-time staff.