Does Driver Shortage Spell Disaster for Distribution?

CNBC recently ran a segment regarding the potential driver shortage in our industry. While the industry representative was polished and well-versed on the subject, the interviewer seemed genuinely surprised that this potential shortage even existed. It struck me that the interviewer probably represented most of the general public. Like most of us who live and breathe this business, I realized that I’ve been looking at the world through my own logistics-colored glasses. Where I see manufacturers, truck routes and delivery schedules, most people only see the shampoo, snack item or pet food at their local store—or notice when it’s missing. In that moment, I saw things a little differently.

Maybe now is the time our industry had one of those moments. We certainly have a significant set of challenges to face: a potential shortage of drivers, new government regulations, environmental concerns and a slow recovery from the recession, just to name a few. How we face those challenges will help shape the future of our industry.

Will we return to the traditional methods of our past? Or will we take this moment to look ahead and rethink those methods, making them more efficient, more environmentally friendly and more beneficial?

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Distribution

A business page story in USA Today depicting the bottlenecks in the shipping lanes has left many retailers shelves empty. Lost sales in this economy really have got to hurt. Distribution centers play a vital role in the supply chain when they are used effectively and efficiently. The days of high inventories and low turnover are long gone.

The distribution centers of today are rapid response flow-through operations that hold the right amount of inventory and expedited delivery in shorter supply chain cycles, many times performing value-applied services on products on the way out the door. Distribution centers are allowing manufacturers to manufacture in a low cost generic format and have the DC’s perform customization services to add to various retail channels from small dollar channels to large club stores and everything in between.

It is nice to see the activity return to the supply chain and I am sure the tightening of belts made us all better and drive additional costs out with efficiency.

The Christmas retail season is fast approaching and the bottlenecks and out of stocks need to be corrected for everyone to make numbers and satisfy the consumers.

I believe the distribution centers are up for the challenge.

Distribution Centers of Today

Rapid Response
Speed – Speed – Speed

With the reduction in inventory levels we all have seen and shorter order cycle from retailers Distribution Centers are becoming Rapid Response – flow through facilities with inventory moving through at a rapid pace.

The Distribution Centers operating at light speed still must perform their value function insuring the right product hits the right customer, with the correct count, condition, and that EDI’s and ASN’s are timely and accurate. Distribution Centers must also perform product configuration and display building with shorter lead times.

Today’s technology supports these highly functionable fast paced Distribution Centers to deliver the service needed. Coupled this with the expedited transportation services in the market place is what’s needed for this new economy and supply chain.

Traditional View On Distribution May Need To Change

Since the blog is on "distribution," another thought would be blog post on how traditional view of distribution may need to change. Always struck me that the most efficient manufacturing (creating lots and lots of stuff at same time in the same way) creates inefficient distribution (storing all that stuff awaiting a buyer). Question is whether in future "distribution" will look more and more like manufacturing in order to gain efficiencies. For instance, rather than make 20,000 red phones and 20,000 green phones and 20,000 orange phones, a cell phone maker makes 60,000 generic phones and has warehouse do product finalization based on consumer demand for particular colors. How far can this product finalization go? Creating variety packs is simple. Applying faceplates and doing final packaging of cell phones is a little more complicated, but it is being done at the DC. Loading specific software onto a device (flashing) is more complicated still, but it's being done today in the DC. So how far can 3PLs go in expanding the role of the "distribution" center to more of a "final manufacturing" center? Certainly, such a strategy goes a long way to making manufacturing more efficient, reducing inventory, and negating the need for marketing to predict future consumer buying patterns.

Collaboration Works

Along my holiday travels I came upon three fast food stores collaborating on the real estate. In the past, you would see a free standing McDonald's, Subway, and Convenience Store. I’m sure it takes a lot of milkshakes and chips and subs just to pay the rent.
The bug guys McDonalds and Subway have figured out a way to collaborate and satisfy their customers with convenience. Yes, maybe some actually buy a Subway sandwich and washes it down with a McDonald shake rounding out dessert with the candy bar from the Convenience Store.
As we begin this New Year, my resolution is to do everything I can to promote supply chain collaboration! The time is now with the economy beginning to recover and the awareness to sustainability to promote the best practices and synergies collaboration delivers.

Where Did All The Inventory Go?

The recession has had an impact on almost everyone and every business including the supply chain.
When the credit crunch came and CFO’s of leading manufactures looked to tighten their belt, they looked at all the capital tied up in inventory and put directives out to supply chain managers to reduce those inventories and find a way to do business in the future with less. I believe today with the excellent tools available for demand planning and forecasting as well as more everyday low cost pricing rather than promotion build ups and forward buys has change the way inventory flows through the supply chain.
Companies are looking at the inventory levels necessary to meet the customer demands and are not building any surplus or fluff.
Inventory certainly moves faster in today’s supply chain but the question I am wondering is when the economy picks up, will we see a spike in inventory and will it be more to the levels of the past?

Collaborative Distribution

The price of oil is on the rise once again.

While not reaching the height of $145/barrel experienced in July 2008, many economists fear that as the world economy starts to get off the canvas, increased oil prices might not be far behind.

The ramifications to an already volatile transportation industry will be grave. In logistics, where an estimated $0.70 of every dollar goes to the movement of product, the erosion of a company's bottom line will be challenged.

Collaborative Distribution is a solution to this dilemma. It's a supply chain solution in which manufacturers and retailers collaborate to revolutionize their distribution models, making them more efficient and environmentally responsible. The program rewards both manufacturers and their retail customers for collaborating to ship and receive products from multiple vendors as part of a single shipment.

Collaboration is not a new concept in supply chain management. What is novel however, is a program that effectively reduces logistics costs and responds to the global drive toward energy-efficiency.

Today, ten smaller manufacturers likely have ten separate supply chains within a region, with ten or more warehouses shipping to the exact same customers using costly, less­than-truckload (LTL) shipments. Each supplier is interested only in its own line of supply. It's like taking a taxi to the airport, only to discover that five of your friends were going at the same time and you could have paid less, and burned less fuel, to ride a shared shuttle bus.

We keep hearing that we are in the midst of uncertain times and uncharted waters. Today's issues in logistics cannot be solved using yesterday's thinking.

It requires new approach. Collaborative Distribution is that solution.