It’s All About the Logistics

Stephen DeAngelis

August 02, 2019

Sun Tzu, the famous Chinese general, military strategist, writer, and philosopher who lived in the 6th century BC, wrote, “The line between disorder and order lies in logistics.” It’s a lesson succeeding generations have had to learn. Four decades ago, Rich Weissman, CEO of Rich Weissman & Associates and an experienced supply chain management practitioner, was just beginning his career. He was hired as a purchasing agent and was directed to obtain some procurement training at a local certificate mill.[1] “During the first few hours,” he writes, “we went over the pertinent areas of a purchase order. When it came time to discuss ‘shipping method’, the instructor said always write in ‘Best Way’. He followed up with the remark that ‘no one cares about shipping anyway’.” Sun Tzu, famous for his temper and demand for strict obedience, probably would have had that instructor punished for stating something so asinine. Weissman had a better idea, he dreamed of naming a trucking company “Best Way” in order capture the unintended market share. Smart man. Weissman adds, “Fast-forwarding through the decades, [the instructor’s] comment cannot be further from the truth. Today, logistics and fulfillment [are] the underpinning[s] of any successful supply chain management processes, be it in the business or consumer markets.”

Logistics in the digital age

In an earlier era, consumers were willing to search through mail order catalogs for merchandise, send in their order, and wait weeks to receive the product. In the digital age, the customer is king and a desire for instant gratification is a more likely consumer trait than patience. Consumers are no longer willing to wait weeks. Two-day or same-day shipping is becoming the norm. The key to customer satisfaction and improved logistics in this always-on business environment is connectivity and communication. A couple of years ago a survey conducted by Convey and eft Supply Chain & Logistics Business Intelligence, found, “Nearly 72% [of respondents said] improving access to data for in-transit shipments across consumer service, operations and logistics teams is crucial or very important. Similarly, 70% confirm it is either crucial or very important to improve ‘bidirectional communication’ with consumers regarding their delivery expectations, package tracking and resolution of delivery options. Another 70% agree that ‘the ability to take dynamic and proactive action on in-transit issues (i.e., re-routing or expediting shipments, communicating efficiently with carriers),’ is crucial or very important.”[2] Here’s the rub, “More than 50% [of respondents said] reducing costs and improving margins is still crucial, with another 28% saying it is very important.” In other words, supply chain professionals find themselves between the proverbial rock and a hard place making customers happy (which comes at a price) and reducing costs (which improves margins).

Mark Jackson, Vice President for Contract Logistics Solutions at UPS Europe, asserts, “The digital revolution changes the way we think about logistics.”[3] He adds, “This digital revolution has led to huge growth in areas such as e-commerce, global collaborative research, development, and manufacturing, as well as in logistics. … Dozens of companies are even trying to invent the future too, looking at how to use drones for data collection, for last mile deliveries, or for other purposes. When it comes to supply chain management, such rapid advances are forcing organizations to constantly re-evaluate their networks and use digital technology to significantly enhance their services. One driver of this demand for supply chain redesign is e-commerce. In order to meet customers’ growing appetites for online purchasing, retailers look for ways to support e-commerce growth. Customers expect top-class service levels, with same-day or next-day delivery services, so online retailing always needs to look at improving the customer experience.”

Changing with the times

Like Weissman, Paul Ericksen began his career about forty years ago. He was hired by a global Fortune 100 corporation. Even though the company was global, he discovered, “Logistics was almost an afterthought.”[4] Although logistics is no longer an afterthought in most businesses, Ericksen believes many logistics functions are sub-optimized. “The logistics function has evolved to what it is today,” he writes, “because most current sourcing practices do not result in optimizing supply and demand.” Optimizing supply and demand requires understanding supply and demand and that requires analyzing data. Fortunately, we live in an era where data is generated at a record rate and cognitive technologies are available to analyze that data almost as fast as it is generated. Jackson notes, “In designing and building an optimized network, the key criteria to consider include sourcing, manufacturing, distribution, delivery, fulfillment, and returns.” He continues:

“This would include the number of site locations, transportation and alternative modes, warehouse design, route optimization, and business processes. Sustainability and visibility are also important — particularly factors like carbon footprints, carbon neutral shipping, and end-to-end supply chain visibility, web integration, and billing solutions. The next step is to analyze the parties that touch the network — the suppliers, the manufacturers, the distribution centers, and the customers:

  • Suppliers: How many raw material suppliers are there? Where are they located? What products are sourced?
  • Manufacturing and distribution: How many manufacturing and distribution facilities are there? Where are they located? Which products are manufactured and in what quantities?
  • Customers: How many customers are there? Where are they located? How are they served and where should they be served from? How do you handle the returns process with high levels of customer satisfaction?

… The dynamics of the modern digital age mean that businesses need to adapt quickly. Logistics and supply chain networks are increasingly being put under pressure to deliver to more complex networks due to globalization and higher expectations regarding service levels. In order to achieve this cost-effectively, digital technology, smart network design, and optimization are key to a company’s success in a rapidly changing world.”

Burhan Wazir (@BWazir1) asserts logistics connectivity (and performance) will improve in the years ahead thanks to new technologies like 5G mobile communication and the Internet of Things (IoT). He writes, “Logistics presents an ideal hothouse for innovation using 5G and IoT devices.”[5] He adds, “Recent developments, such as just-in-time deliveries, which were once only accessible to a select few, could become mainstream as 5G and IoT devices make tracking deliveries possible in real time. The IoT devices would boost efficiency between warehouses and distributors, giving customers a clearer visibility of their deliveries.”

Concluding thoughts

Ericksen cautions logisticians to pursue the latest technology for the right reasons — not just because it’s cutting edge. He concludes, “The lesson here is to not necessarily get in line and follow new procurement trends like so many lemmings, but rather look at practices with a fresh perspective to see if they actually support the best overall business case.” That’s always good advice. Wazir believes many supply chain professionals will conclude a business case can be made for new technologies. He explains, “The use of 5G and IoT will speed up transportation of goods by rail, road and motorway.” And I believe cognitive technologies will help many aspects of logistics activities from understanding supply and demand to overall process optimization. As Sun Tzu stated, “The line between disorder and order lies in logistics.”

Footnotes
[1] Rich Weissman, “The New Logistics Economy,” Longitudes, 30 June 2019.
[2] Staff, “Customer Experience Now a Top Priority in Supply Chain Operations,” Materials Handling & Logistics, 16 February 2017.
[3] Mark Jackson, “The World Is Digital. What About Your Logistics?,” The Wall Street Journal, 27 May 2015.
[4] Paul Ericksen, “Is Logistics Sucking Your Resources?IndustryWeek, 31 May 2019.
[5] Burhan Wazir, “How 5G and IoT are revolutionising logistics,” Raconteur, 19 December 2019.