Archives for December 2013

Logistics Excellence Predictions for 2014

By Chris Jones | 12/23/2013 | 11:42 AM

Hopefully, you will get some down time during the holidays to enjoy your family and let your mind ease from what was most likely a busy 2013. It looks like 2014 will be an even more transformative year. What will next year look like and what will the supply chain “winners” be doing to beat their competition? Here are some thoughts to consider when you have some free time over the holidays.

Omni-modal versus multi-modal distribution. The term “Omni” is hot in the retail market as retailers look to optimize and create a unified selling front to consumers whether they are in store, on line, or on their smart phone. The notion of multi-modal distribution – the optimization of deliveries across the delivery modes - has been around for a long time, but for most distribution-intensive companies it has been limited to simple mode selection (e.g. size and weight). Instead, omni-modal takes the process a step deeper looking for the counter-intuitive delivery combinations to squeeze out more efficiency and great customer service. For example, a retailer has a customer who orders a large item for delivery next Wednesday, but the same customer buys smaller items this weekend. The traditional multi-modal approach would have two deliveries, one on the “white glove” service and the other through a small package carrier. Why not merge the 2 together and eliminate the parcel delivery cost? That’s the approach omni-modal distribution takes.

Execution, execution, execution. The push for next and same day delivery will drive many markets in 2014. This pressure will dictate that supply chains be much more streamlined and responsive. Hence the focus will be on execution-based processes and technologies that reduce supply chain cycle times. The real innovators in 2014 will drag their supply chain partners into this exercise as much of the critical path for increased supply chain speed and responsiveness is related to partner performance and integration. That brings me to the next point.

Supply chain injection. In the quest for greater speed and responsiveness, tiers in the supply chain will be skipped in 2014. The challenge for many distribution-intensive companies is that their supply chains were optimized for lower cost and not necessarily responsiveness. Leading supply chain operators will fully engage their supply chain partners, evaluate more dynamic transportation strategies, information sharing and labeling that makes suppliers REALLY look as if they are a natural part of the supply chain, not a “bolt on”. LSPs offering related services will have to up their integration competency with their shippers in 2014 to meet this challenge.

Fleet is back. After years of eliminating them, shippers will turn to fleets (private or dedicated) in 2014 to improve their customer service performance and as a hedge against the increasing commercial driver shortage. Supply chain innovators will take this a step further, focusing on driver training and delivery service competency. Don’t be surprised to see these innovators pay their drivers MORE and use routing and mobile technology to get the level of service and competency that they need to compete. Similarly, leading specialist carriers will adopt many of the same tactics to improve their service levels and productivity in an effort to differentiate.

Android apps with smart real-time back-end systems. Sorry promoters of iOS and Microsoft, the debate is over. While 2013 was a tipping point for the use of consumer grade devices, 2014 will see many more commercial grade solutions appear. Consumer devices proved that as an operating system, Android could handle logistics problems, but not necessarily provide the reliability and battery life. Android device pricing will continue to decline, spurring greater adoption. While mobile devices will be more prevalent, there will also be an increase in sophisticated “back end” applications that create real-time closed loop control systems for mobile workers. Same-day delivery will be a great example of where there will be an explosion of smart applications to maximize driver productivity and customer service.

Data Security. The increasing adoption of cloud-based solutions, the NSA surveillance and now Target’s highly publicized breach will accelerate the focus on securing the supply chain data in 2104. Data is the life blood of modern supply chains and ensuring that it cannot be compromised is critical business operations. However, data security will be a balancing act for enterprises as they continue the trend to integrate supply chain partners. The knee-jerk reaction will be to severely restrict access, but leading supply chains operators and related cloud solution providers will focus on technologies that drive deeper levels of security (e.g. encryption), but still facilitate collaboration.

The trend in supply chain for reinvention and reassessment of traditional practices accelerates in 2014. Not since the late 1990s has supply chain performance as a competitive weapon been addressed at the board level in so many companies. What important or break-through trends do you see for 2014? Let me know.

Happy Holidays

Turds of Wisdom

By Chris Jones | 12/05/2013 | 3:45 PM

Recently, I was reading a blog post that sent my blood pressure skyrocketing and reminded me that “best practices” are like bananas – they ripen and then stink in short order. What bothered me most was that the “expert” advice in the post was dated and anyone who heeded it would end up being just slightly better than today’s average fool. My conclusion is that best practices should be thought of as temporal. New business processes and technological changes are continually obsoleting what was once considered “best”. The lesson for supply chain and logistics professionals is that resting on the merits of your last “best practice” success may have already or shortly put you behind the competition.

Let me explain. In the case of the blog post I mentioned above, the “expert” was proposing that a best practice was making sure that trucks are sent out fully loaded with as little empty space as possible. When logistics technology was simple, this was as good advice as any. The problem with this “best practice” is that it is focused on a single metric, capacity utilization which is an indirect measure of business performance. If you focus on utilization, you could end up spending all of your full truck load savings and then some, driving all over the place to unload that full truck. Today’s better practice is lowest total delivered cost which is based upon the direct business metric. Lowest total delivered cost balances utilization with the cost to deliver all of the deliveries that could go in the truck. A lowest total delivered cost focus can be counter intuitive. For example, in the case of a fleet owner, it may be more cost effective to park a truck and use a contract carrier than incur high costs to drive to some remote customer location.

Geoffrey Moore, the technology marketing guru wrote a book called “Living On the Fault Line” that does a great job of summing up the challenge for supply chain and technology professionals. The basic context behind the book is the advances in technology diminish capabilities that were previously considered differentiating. You need to understand this march and continually obsolete what you have done before someone else does. The same can be said for supply chain or logistics business processes. Look at what happened to Dell. It dominated the PC market with its superior build-to-order supply chain model. Eventually, the competition found other ways to compete, while Dell largely stood pat. Over the last number of years, Dell has struggled and recently went private for a fraction of the value it had during its hay days.

So what is your “second act”? How are you continually challenging the best practices of your organization? Do you know if any of your best practices are in fact leading edge or current? Here are a couple of examples of ways to know where you stand. First, how many of the operational metrics you use to make decisions are indirect indicators of business performance? Second, what do your customers say about your supply chain or logistics performance? Is it the reason they buy or buy more from your company?  Third, how long have you been operating the way you are today? If your business practices are based on decisions made in the 1990s or earlier you stand a good chance of being a supply chain laggard.

The term “best practice” can be like the siren song, an alluring qualifier that is as likely not be true and certainly not permanent. What are you doing to better your current best practices? How do you know if you have achieved “best” status? Let me know.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.


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