Your supply chain costs you money. Supply chain management and logistics arrangements account for a significant proportion of the cost of providing goods and services.
Are you getting bang for your buck? In our experience advising clients across various sectors in connection with their supply chain management and logistics arrangements, we see a number of trends and common themes in terms of the challenges they face – and how businesses deal with them, with varying degrees of success.
Here's our list of the top 10 things that anyone with a supply chain needs to be thinking about right now.
- Outsourcing is the new normal. Almost everyone outsources some part of their supply chain, from raw materials and component sourcing, manufacturing, assembly and packaging to customs clearance, freight consolidation, transport across all modes, warehousing and returns and repairs. You name it, someone out there can provide it.
- Select sourcing. Gone are the days of putting the entire shop in the hands of one service provider. You do some things well, and different providers do various other things well, so more organisations are selecting their various service providers more carefully and in greater numbers and specialities....
- Rise of the 4PL. ...which can be a lot to manage, especially with interdependencies between the various parts of your supply chain. Hence the advent of the so-called 4th party logistics provider (or 4PL) to help you coordinate your various 3PLs and hopefully realise the benefits that you were aiming for.
- Your objectives. You engage third party assistance with some goal or benefit in mind. Whilst cost has always been a really big driver (because someone else can probably do it cheaper), it's only one reason and there's all sorts of pricing and cost management models to consider. It's important to think about other possible benefits – freeing your resources up to focus on your core business, risk management, greater efficiencies, better customer service, regulatory compliance, and the list goes on. Whatever they are, make sure your arrangements with your service providers reflect your objectives.
- Engagement. Contracting others to carry out part of your business entails risk, so there is no excuse for not documenting your arrangements properly. Sometimes the consignment note or rate card is all you need. Sometimes a more comprehensive SLA with appropriate performance and cost management mechanisms is called for. As customers become more exacting in their requirements and service providers become more sophisticated in their offerings, so too do their contractual arrangements. There's no such thing as one size fits all.
- Powered by technology. Your supply chain has many inputs, variables and permutations, so you need big technology to support it – or to transform it. Warehousing and distribution are as much about trucks and racking as they are about ICT systems (increasingly resident in the cloud or on a software-as-a-service basis) that can harvest big data and ensure precise pick-and-pack, just-in-time delivery and real time tracking. Are you getting the most from available technology?
- You are responsible for driver management. Truckies have a tough gig. We see it in the headlines often enough. But did you know that the workplace in which they operate (being the vehicle itself and the road it uses) is part of your own workplace, whether you have your own fleet and drivers or you engage someone else? Chain of responsibility laws mean that managing driving hours and driver fatigue is something that everyone in the transport chain needs to think about. If you don't, you could be liable.
- You are responsible for load safety. In the same vein, everyone in the chain (from consignor through to consignee and everyone in between) is now also responsible for how goods are packed and loaded onto vehicles. Whether you have your own DC and personnel or not, you need to think about this. If you don't, you could be liable.
- Compliance, compliance, compliance. It's been around for a long time (think taxation, trade practices, environment) and compliance is here to stay and is becoming more pervasive. Considering the driver management and safe loading aspects mentioned above, you can see how the workplace safety compliance umbrella now covers your own supply chain too. Are you compliant?
- Getting the best performance. Your supply chain management arrangements represent an opportunity to enhance customer service. By all means outsource, but don't abdicate. Careful selection and hands on management of your service providers is critical to optimising your supply chain. Are you getting the most from your service providers?
We are keen to hear from you about how you manage your supply chain, what your drivers are in that context and what you see as the key challenges, and to share our own insights and experience with you. So please be in touch.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.