Does your downstream supply chain need help? If so, you’re not alone. Suboptimal warehouses, worker shortages, complex processes or outdated technology are common challenges, and so are the new operating challenges driven by e-commerce and other competitive threats.
It’s tempting to tackle the squeakiest wheel first. However, that can cause companies to stitch together solutions and makeshift processes – far from becoming the sleek and scalable engine needed to propel a company into the future.
“Each incremental move you make should be part of a larger plan,” says Nancy Pagley, UPS business development director supporting customers with warehousing and distribution operations. Pagley notes that the decisions faced may be investments in enterprise or warehouse management systems, digital transformation and data analytics, among others. She also notes another challenge: A business culture and leadership that is resistant to change.
These three strategies may help.
Decades of experience in warehousing and distribution can be an overwhelming advantage. At the same time, that proficiency can lead to inaction and the mindset of “if it’s not broken, don’t fix it.”
Pagley cautions companies not to interpret their currently smooth and efficient operations as a sign of success. “Very often we see companies overhaul their operations in response to some kind of catalyst,” she says. “But making changes without a clear strategy increases the chances of taking a costly wrong turn.”
She notes instances where companies were caught off guard by change, such as an infusion of low-cost automotive aftermarket parts which had manufacturers scrambling for operational efficiencies to better compete on price. Industrial distributors were also slow to recognize that e-commerce would become critical to their survival.
“Big change is difficult because what’s state of the art today may not be state of the art tomorrow,” Pagley says. “But sometimes standing still is riskier than taking that first step.”
Companies looking to modify their warehousing and distribution capabilities may consider outside help from a provider offering scalable, global solutions. Contracting for services can also give companies access to more advanced technology and advantageous locations with less capital investment and financial risk.
Fostering customer loyalty through personal service is still a worthwhile ambition. The difference is, buyers, especially Millennials, have a new definition of what personal service means.
Today, once the basics of quality and price have been satisfied, ease and convenience become the order of the day. That means most customers want things like e-commerce, better supply chain visibility, process flexibility, faster response times and greater cost efficiency. They want the companies to know them well enough to make their purchase processes fast and nearly effortless.
“Most operations were designed based on what worked in the past, and, of course, that can’t necessarily deliver what customers expect 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 are working quickly to adapt to customer demands that seem to change and grow by the day. He says, “It’s difficult to make meaningful changes and still be productive and keep customers happy. People say it’s like trying to build an airplane while it’s in the air, and that’s pretty accurate.”
Change is happening, however. A study of warehouse professionals by technology company Zebra showed that the most dramatic technology changes expected by 2020 would involve barcode scanning, the Internet of Things and data analysis – further evidence of the steady march toward digital transformation (DX).
“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,” Says Bhadra. “It takes unconventional thinking and a broader set of collaborators to make smart changes.”
The drumbeat for cost savings has long been driving process changes. More recently, the growth of online marketplaces and direct-from-manufacturer purchasing has been blurring the lines between friend and foe, causing many to rethink longstanding business practices.
UPS’s Pagley notes that the iterative steps operators need to take to remain competitive should still be guided by a long-term strategy.
Take the example of U.S. go-kart and mini-bike maker, Monster Moto. The company’s “Assembled in America” label is a guiding principle, but it faced challenges with its parts operation in China due to language, time-zone difference and a slower response to slight assembly process variations.
In a series of whiteboard sessions, UPS helped Monster Moto find solutions for moving assembly from China to a new, 100,000-square-foot plant in Ruston, La. In short, by grouping and shipping unassembled bike parts together, such as engines in one shipping container and frames in another, they were able to lower their transportation costs enough to fulfill their “Assembled in America” designation.
“Monster Moto had a solid understanding of who they are as a company,” says Mark Modesti, a consultant with UPS Customer Solutions. “Understanding where you want to be can reduce the number of doors to look behind before making decisions and investments.”
Modesti says that it’s okay to learn down the road that that some of your supply chain bets on the future were wrong. He says, “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.”
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