Today’s market is characterised by turbulence and uncertainty. The logistics sector has struggled with labour shortage for years and recent events such as Brexit and COVID-19 have brought additional challenges. Supply Chain resilience is key, but how does one develop this to mitigate these risks and uncertainties?
What are companies doing to strengthen their service offering and increase their supply chain resilience in these challenging times?
Brexit and COVID-19 have brought about some unexpected supply chain challenges. There is now an increased need for certainty of supply and companies have recognised the importance of building supply chain resilience.
Building up stock in facilities (warehouses, external storage or port) is a common way of reducing the risk and building resilience in uncertain times. This is probably the most widely adopted practice or trend and is common across all industry sectors.
However, this is limited to the amount of spare capacity one has in the network, increases the cost of holding inventory (impact on working capital) and puts additional pressure on the network, especially during peak.
RISE IN ECOMMERCE
Ecommerce represents a powerful sales channel and opportunity for businesses that is forcing companies – both B2C and B2B – to rethink their overall sales and distribution strategies. While eCom is way past its ‘infancy’, it is still not in a place where organisations have completely adapted to the requirements.
Order picking and packing in eCom operations provides some unique challenges (e.g. smaller order profiles, unit pick / pack) which require the enabling functions such as planning and fulfilment to work at unit level and meet requirements of individual customers who are constantly comparing service levels and switching from one fulfilment platform to the other.
Omni-channel fulfilment sounds like the way forward but implementing it with minimal changes to existing infrastructure or legacy applications is next to impossible. To add to this, the coronavirus pandemic has forced organisations to move faster towards eCom or risk insolvency. eCom is here to stay and grow, and companies have to adapt in order to make the best of this growth opportunity.
Warehouse automation increases efficiency, speed, accuracy and productivity by reducing human error and intervention. Examples include pick and place technologies such as automated guided vehicles (AGVs), robotic picking, automated storage and retrieval (ASRS), and put to wall picking all of which reduce error rates and increase warehouse productivity.
Automation helps increase storage density (reduced footprint) and increase throughput in warehouses without the need to increase labour. Highly manual processes, especially those which are repetitive in nature (such as picking, packing) can be mechanised, thus reducing labour requirements.
The above benefits along with increasing labour shortages (Brexit, COVID-19) and improving Return on Investments are pushing companies towards mechanisation and automation of processes in their warehouses, and in some cases towards end to end automation.
Companies everywhere are listening to consumer demand for greener products and processes. This applies to products, packaging as well as operations.
Companies are working to reduce their carbon footprint and environmental impact – biodegradable and recyclable products and packaging, reduced plastic, green warehouses (LED lighting, rain water harvesting, solar panels etc), green transport (electric or hybrid trucks) will gradually become common as the governments introduce incentives and the payback becomes more attractive.
DYNAMIC AND NEAR SOURCING
Timely and consistent supply is highly important in order to fulfil orders and maintain adequate stock of product lines. Events such as Brexit and COVID19 create uncertainty in supply, especially if one is dependent on a few suppliers who are shipping from an international, cross border market.
Dynamic Sourcing helps companies switch suppliers dynamically depending on circumstances, thus allowing companies to reduce risk of discontinuity in supply. Near sourcing helps companies work with suppliers in the local market, once again reducing risk of disruptions. These strategies are gaining popularity in the current market conditions.
UK and western Europe have struggled with labour shortage in the last few years. This has been supported by agency labour to a certain extent, but the growth in e-commerce is increasing the pressure on the already strained supply of labour. As online sales increase, there are more job opportunities throughout the supply chain.
Yet, one of the main challenges facing the industry is how to fill these roles. There is a significant shortage of labour in transport and logistics, particularly in the UK where Brexit has begun to discourage EU workers.
COVID19 adds to this problem by mandating social distancing and reducing the number of operatives per square metre. The next supply chain trend could play a vital role in reducing the labour requirement and mitigating this major risk.