Reprinted from TRAFFIC WORLD, November 10, 2008
Why Flexibility Matters
We have all heard the litany of challenges caused by current economic conditions: higher fuel costs, higher raw material costs, lower consumer spending, tighter capital, fluctuating exchange rates and growing uncertainty about the future. If there has ever been a time for thinking creatively and remaining flexible, it is now.
What flexibility means is being able to re-think, reconfigure and redeploy resources whenever circumstances change. We’ve known that for years - but in the current economy these beliefs are being put to the test.
As part of a recent presentation to the Council of Supply Chain Management Professionals, David Simchi-Levi, professor of Civil and Environmental Engineering at the Massachusetts Institute of Technology in Cambridge, Mass., suggested that companies that want to maintain their competitive edge will need to continually re-evaluate the design and operation of their supply chains, “even if it means ditching recently adopted strategies.”
“Ditching” a strategy that has only recently been adopted may sound radical. It may sound risky and disruptive. But this could be the new reality. The weakness of our economy - and the unpredictability of what might come next - calls for forward thinking, yet careful analysis.
To address today’s challenges, here are some supply chain options worth considering:
- Identifying ways to shorten the distance between points along your distribution channel - manufacturing to warehouse to customer. Some companies are moving manufacturing back onshore; some others are adding warehouses in more regions, moving closer to the customer.
- Rethinking your transportation strategy to include shorter hauls and less expensive modes (i.e. land instead of air).
- Working with a supply chain/transportation partner who can consolidate truckloads by combining your shipments with their other customers.
- Eliminating the extra miles it takes to get your product to a co-packer and back by handling value-added services where the products are warehoused.
- Reviewing inventory strategies, such as delaying deployment and reducing safety stock levels, to identify potential savings.
- Outsourcing warehousing and/or transportation; companies are looking at this option to cut costs and reduce asset utilization.
Now, here’s the part of the new reality that minimizes risk and increases flexibility: A strong, collaborative partnership. When companies and their logistics/supply chain management providers are true partners, they already have established the basis for sharing information, identifying options, modeling alternatives, and setting strategy. Then, if the strategy requires change, the partners have the capability for all those “re” words - rethink, reconfigure, and redeploy.
Not so long ago, the best supply chain was one that was put “in place” and stayed there. What a good provider brought to the table was competency and efficiency. Those are givens today in any supply chain partnership, but a partner must do more.
In the best of times and in the worst of times, a strong partner will:
- Advance the customer’s strategies - and this means understanding overall business goals as well as day-to-day objectives.
- Proactively explore options and contribute information and knowledge that enable smarter, more timely decision-making.
- Be poised for action.
Whatever the current economic climate, in the area of supply chain management, there is a major difference between having a logistics “provider” and having a logistics and supply chain “partner” - and that difference can impact the ability of a company to make the right move at the right time. And when good times return, strong partnerships will have the flexibility to seize new opportunities together.
© Copyright Traffic World. Novemeber 10, 2008. All rights reserved.
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