The rapidly evolving supply chain: Key trends impacting change today
Author: Bruce Stubbs, Director, Industry Marketing, Honeywell Sensing & Productivity Solutions
Adapting to an e-Commerce driven supply chain
Australia is geographically unique when compared to many other markets in the world due to the fact that it shares no land borders, like the U.S does with Canada and Mexico, or Europe does on many fronts. In the past this geographical isolation was often a negative for Australian retailers, as when solely operating out of bricks and mortar stores, they only had access to consumers within one country.
In Australia and beyond, e-Commerce has opened up new opportunities for goods manufacturers and retailers to expand their markets beyond Australian shores and sell their goods internationally. On the other hand it has also opened up the market in which Australian consumers are able to play, creating increased competition for local retailers from businesses overseas.
If you think of high end brands, such as Tiffany & Co. jewellery, it was once only available to people via physical stores located in a select few major cities. The introduction of e-Commerce now means people in any location, such as the Australian outback city of Broken Hill, can now order their Tiffany necklace online.
A major factor in the introduction of e-Commerce was the move by the big global logistics players – DHL, FedEx, UPS - to expand their presence and operations globally. In turn, this global offering and reach opened up much more opportunity for retailers to expand than the regionally focused logistics providers they had previously worked with. The global logistics leaders are also now offering retailers add-on services such as what the transportation world calls ‘front hauling’ and ‘back hauling’. This basically means they are double-utilising their fleets by not only making deliveries to urban, regional and remote areas across the world, but also bringing goods back - whether it be returning with exports, customer returns or store transfers via air or ground transport.
While Transport & Logistics (T&L) providers were the people who initially embraced e-Commerce, they have not taken on the trend without facing a number of challenges. Key pressures that have been felt include e-Commerce increasing the number of small piece orders and the number of deliveries, as well as reducing the timeframe in which these orders are expected to be delivered. While in countries with land borders, many goods manufacturers can strike up a partnership with a business in the neighbouring country to handle their deliveries, from an Australian perspective there isn’t this option and they will either have to use their existing T&L capabilities that have been designed for bulk domestic store deliveries, or otherwise look to outsource to a 3PL who already has links established internationally.
As with the T&L industry, distribution centres (DCs) are having to find ways of coping with the increased movement of single goods. DCs built to deliver only to stores, are now delivering to two channels – e-Commerce and store orders. Additionally, the e-Commerce orders need to move much more quickly than the traditional store delivery DC model is designed for.
In order to deal with the pressures caused by e-Commerce, T&L, 3PL and DC operators will need to look at technologies that are geared to cope with the increasing number of orders and speed of delivery. Voice technology solutions are proven to increase productivity by 25 to 35 per cent, meaning more orders can be picked and shipped in a shorter space of time. Voice also offers almost 100 per cent accuracy, which is an important factor in e-Commerce, as customer satisfaction is paramount to return customers, and if the wrong order is delivered the consumer is unlikely to purchase from the retailer again.
The rise of Re-Shoring
While there is a rising demand for goods from the growing Asian middle class, this region, which has long been relied on for goods manufacturing and distribution to other parts of the world, is unlikely to be able to produce enough goods to meet local demand. Another contributing reasons why Australian producers and manufacturers may have the opportunity to re-shore their operations is that many Asian countries are raising wages in regions where businesses previously outsourced their operations due to lower cost of labour. Furthermore there is a perceived or, in some cases, a real reduction in the quality of goods manufactured off-shore. And lastly, many of the off-shore countries are also experiencing political instability and have been home to many of the recent unfortunate natural disasters that make the prospect of manufacturing in Australian even more attractive.
These factors combined will potentially offer countries such as Australia the opportunity to return goods production back home, after a few decades of production being sent off shore. However, re-shoring is very challenging because when off-shoring, Australian producers and manufacturers often lost their local workforce and facilities.
Rather than undergo the costly exercise of fully rebuilding their logistics infrastructure and re-hiring staff, many businesses will look to outsource to 3PL providers who have the facilities, systems and personnel in place to perform their customer delivery operations. 3PLs may also be called in to collaborate with manufacturers and handle other aspects of the supply chain, such as receiving and storing the raw materials used by the goods manufacturer, moving the goods through production, as well as the return of the finished goods to the warehouse, picking and shipping. Sometimes the 3PL may operate in a separate building to the manufacturing operations, while it can also work to have both in one facility.
When both manufacturing and logistics are operating in one facility it is possible to integrate a WMS with automatic identification and data capture (AIDC) technologies, including voice solutions, into all work processes. This offers the advantage of not only tracing goods as they travel through the supply chain, but also tracking manufacturing progress, instructing on steps in manufacturing and knowing where inventory is so that the next stage of production can be automatically triggered for optimised efficiency and productivity.
Real-time goods traceability from the beginning of production also means manufacturers are in a position to meet local and international traceability standards and regulations.
Surviving in the supply chain industry into the future
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