If your downstream supply chain needs help, you’re not alone. Suboptimal warehouses, worker shortages, complex processes, or outdated technology are some of the most common culprits, not to mention the havoc created by e-commerce and other competitive and disruptive threats.
It can be tempting to start tackling whatever is causing the most angst. Too often, though, companies stitch solutions together until the supply chain looks like a patchwork quilt – a far cry from the sleek and scalable engine needed to propel a company into the future.
“It’s important to make incremental moves to stay in-step with changes, but each one should be part a larger plan,” says Nancy Pagley, UPS business development director supporting customers with warehousing and distribution operations. “Companies in this space are facing some very big decisions which has slowed down their evolution.”
Those decisions may be investments in enterprise or warehouse management systems, automation, data analytics, and possibly the restructuring or relocation of facilities and people. Other barriers originate in the culture and mindset of business leaders, and, for that reason, have been the slowest to change.
These three strategies can help.
1. Find ways to break the inertia
“Most often we see companies overhaul their operations in response to some kind of catalyst,” Pagley adds. “Change for whatever reason can be good, but being reactive increases the chances of taking a costly wrong turn.”
Pagley has seen a number of changes catch companies off guard. An infusion of low-cost automotive aftermarket parts has had manufacturers scrambling for efficiencies so they can better compete on price. Industrial distributors — experts at fostering personal relationships — have been slow to recognize the importance of e-commerce to their survival.
“Fundamental change is difficult because what’s state of the art today may not be state of the art tomorrow," Pagley says. “And the investment needed is often far outside a middle-market company’s reach. But sometimes standing still is riskier than taking that first step.”
Pagley suggests that those looking to evolve faster should consider outside help from a provider offering scalable warehousing and distribution services. Contracting for services can provide access to more advanced technology and advantageous locations with less capital investment and financial risk.
2. Embrace your customer’s new normal: ease, convenience, and flexibility
Operators have spent years building loyal customers through personal and attentive service. Only recently have many found that the formula for loyalty has changed.
Today, once the basics of quality and price are satisfied, ease and convenience are the order of the day. For most customers, that means things like e-commerce, better supply chain visibility, process flexibility, faster response times, and greater cost efficiency.
“Most operations were designed based on historical knowledge that cannot necessarily deliver on what customers need today,” says Simon Bhadra, senior manager for the UPS Industrial Distribution customer segment. “There are valid business reasons that customers demand changes from their intermediaries, or are bypassing them altogether. Pressure to cut costs, reduce turn times, for example.”
Bhadra explains that operators struggle to balance operational efficiency with demand for individualized services and a good e-commerce experience, which are often necessary building blocks of sustained customer loyalty. “But how far can you go with one-off processes before your other customers start to suffer?” Bhadra asks. “There is a tipping point, especially for companies with more manual processes.”
Change is happening. A 2016 study by technology company Zebra of warehouse professionals showed that 75% planned to move to a “more modern, full-featured warehouse management system” by 2020. Of those planning changes of any kind, most cited transportation costs and response times as major drivers. By 2020 those surveyed expect the most dramatic technology changes to involve barcode scanning and Internet of Things. They expect the biggest warehouse management-related expansions to happen in cloud computing and yard management.
Bhadra acknowledges that the scope of change underway makes it difficult for leaders to be sure they’re focusing in the right places. He notes that getting a third-party supply chain analysis can help companies take an objective look at how well they’re meeting customer needs and establish benchmarks for key supply chain metrics.
“It’s really critical that operators set aside the knowledge they’ve amassed on customers in order to get a fresh look at what’s going on out there,” Bhadra says. “It takes unconventional thinking to lead the pack nowadays.”
3. Know who you are, what makes you different, and where you’re going
If the drumbeat for cost savings isn’t driving process change, the growth of marketplaces and direct-to-consumer selling is changing go-to-market plans and blurring the lines between friend and foe.
Clearly, the pace of change requires a more iterative approach to decision-making than ever before. . It’s easier when you think about the long term strategy.
Take the example of US Go-Kart and mini-bike maker, Monster Moto. The company’s dedication to its “Assembled in America” label is a guiding principle for it’s operations. They were also facing challenges with their China operation due to language, time difference, and a slower response to slight variations in assembly processes.
In a series of whiteboard sessions, UPS helped Monster Moto find solutions for moving parts from China to a new, 100,000 square foot plant in Ruston, La., from which they assemble, warehouse and then ship finished bikes to retailers and consumers.
Efficiency was also part of the equation. “A single ocean container could hold 219 completed mini-bikes," says Alexander Keechle, Monster Moto CEO. “If the units were unassembled with engines in one container and frames in another, we can surely surpass 219. If all we achieve is a 50% increase, up to 330 units, our transportation cost will go down.”
As in the case of Monster Moto, a company with a solid understanding of who they are can reduce the number of doors to look behind before making decisions and investments. A vision of the future is key.
“What will your warehousing and distribution operations look like in 10 or even 20 years?” asks Mark Modesti, a consultant with UPS Customer Solutions. “It’s okay to learn down the road that you were wrong. As long as you plant a flag and build a dynamic roadmap that lets you adapt as needed, you’ll be ahead of the game.”