Opinion Supply Chain Costs The squeeze is on
Michelle Campbell, supply chain industry director EMEA, RedPrairie, looks at where and how hard retailers can squeeze their supply chains to take out cost whilst continuing to meet both the needs and increasingly high expectations of their customers.
The supply chain is often referred to as ‘the heart and lungs’ of a business
and could also be thought of as the arterial system that must carry everything smoothly, effi ciently and predictably to where it is required.
Consider what happens to the human body when that system is squeezed – the pressure rises, the fl ow is interrupted, bits stop working and we die.
Michelle Campbell, supply chain industry director EMEA, RedPrairie
Although no one would contend that the health (or otherwise) of a supply chain has quite such fi nal consequences, it can represent the difference between profi t and loss – the commercial equivalent of life or death.
The retail supply chain has long been seen as a rich source of cost savings and never more so than over the last few years. However, squeeze the wrong bit or too hard and the consequences can be severe – for example, whilst sourcing from low-cost locations has obvious advantages, these must be weighed against the risks associated with extended supply chains in terms of quality and time to market.
GET THE BALANCE RIGHT The trick, then, is to squeeze in just the right place and with the right amount of pressure to take out cost, whilst continuing to deliver a high-quality product that is available when and where the customer wants to buy it, without ending up with a warehouse full of excess stock.
This is possible through the application of lean techniques and technology to provide supply chain visibility and control,
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from point of origin to point of consumption.
For example, the latest technology allows retailers to forecast demand much more accurately from item level data in their sales channels, where true consumer demand begins, and fl ow this up through the supply chain.
Within the distribution centre, modern warehouse management systems not only ensure complete visibility and accuracy of inventory, but optimise productivity through the automation of processes and system-directed tasking. ‘SaaS’ and computing in the cloud make this
technology accessible to smaller organisations.
Of course, inventory is not the only cost within the supply chain and there are other areas in which companies can streamline their operations.
Whilst the various elements of the supply chain may all be well managed, no business can be stronger, faster, more stable or more effi cient than its weakest point.
For example, those who manage the warehouse may believe that transport is a separate entity and therefore ‘not my problem’. In reality, if the interface between warehousing and transport operations is not properly managed, you are creating congestion in your own facility. A transport management system allows companies to determine what needs to go on which loads in line with delivery windows and capacity constraints and ensures that pick plans are built around transport plans in order to optimise throughput.
www.shdlogistics.com
POWER TO THE PEOPLE Labour also represents a signifi cant proportion of supply chain cost. Whilst simply taking people out will have a negative impact on effi ciency, a major opportunity exists in relation to optimising the productivity of those people.
This can be done by optimising the warehouse itself in terms of layout and also through the use of industrial engineering techniques to model every aspect of the warehouse operation, in order to establish the most effi cient methods for every task. Combined with technology to monitor the performance of staff in relation to these standards, companies can achieve productivity improvements of 10-35% in a typical warehousing operation.
Although there are risks associated with taking cost out of the supply chain, perhaps a bigger risk relates to the failure to invest in ensuring that the supply chain can meet the needs of today’s ‘buy anywhere, get anywhere’ consumer.
Although capital expenditure
is diffi cult to justify in the current environment, there is overwhelming evidence that the more channels a consumer uses to shop a brand, the more money they spend.
Thus, while implementing the technology, processes and operations to properly capitalise on social and mobile channels presents a major challenge, it is one well worth investing in to overcome. ■
www.redprairie.com
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