Supply ChainIf you are reading this blog then I can guarantee that your lifestyle has led to dramatic changes in our supply chain and logistics functions. I know this because you are clearly not an off-grid spoon whittler in the wilderness of Alaska. You are a consumer used to having goods and services delivered direct to your home, place of work or even your smart phone.

The way in which we are selecting, ordering and receiving our goods and services is undergoing a radical change. In fact what was once considered the end point of the supply chain, the final delivery to the customer, is now no longer the end. Thanks to the Internet of Things we are now interacting with the supplier long after we have received and started using the item.

And, if we return goods that are either not what we wanted, or for recycling, then we are engaging in what is now termed a reverse or circular supply chain.

Our demands have changed

Not only do we now demand fast delivery times, but we want items delivered to wherever we are, not just to an address. And while we might be prepared to pay for express delivery, we want free options as well.

We want to choose our own set of features, not just accept an available product. This increases the complexity of the supply chains. Manufacturers are faced with more frequent change overs of equipment and potentially more stages and hand offs within the manufacturing process, as more departments become involved with making each item.

We also expect to be able to change our mind and return unwanted items at no cost to ourselves. This trend is on the rise as we buy more and more items on line.

Our supermarkets are also becoming more demanding of the manufacturers. I’ve noticed a new trend; where once we would have found separate boxes for each variety of a product, we now find the same size box with a mix of three.

mixed products

 

More choice in less space is good for retailers, where availability and maximising sales/m2 are key drivers. But again it adds a level of complexity to the supply chain.

Added to this, our demands are made against a back drop of rising transportation costs and increasing pressure and legislation to reduce any negative impact on the environment.

It is estimated that 50-70% of a company’s profits are eaten away by supply chain and logistics costs.

The supply chain response

Manufacturers, suppliers and logistics organisations are responding to these pressures and making changes to the way that goods are ordered, made, stored, despatched and transported.

Every component of the supply chain is under the microscope and a combination of lean techniques and new technologies are changing the way our supply chains work.

Here are a few examples:

  1. As well as eliminating waste using traditional lean techniques, the creation of value streams run by cross functional teams, works well to reduce complexity in the manufacturing part of the supply chain.
  2. Late customisation of items is another manufacturing response. Although this can work well, where flavourings or colour are added late in the process, it is not a viable option for all.
  3. The use of real time integrated systems (supported by Cloud computing), wearable technology, GPS and 3D printing is also being deployed to take waste and non-value adding elements out of storage and distribution operations.

Next week we will take a closer look at some of the changes made possible by using new technology.