Logistics companies and roles have been facing severe threats in the last couple of years: the challenge of responding to the increased need for speed, while facing rising transportation costs is pushing supply chains to the limit.
The sector is constantly being challenged to adjust its offer to the new service expectations of an increasingly demanding economy. During the last decades, we have witnessed a move from local models towards a globalized operation, bringing cost efficiency and centralized control. The sector was harvesting the benefits of this move, but a new reverse shift is arising – local-nearshoring strategies.
Given the challenging environment, players can only survive through an optimum trade-off between on-time delivery and operational performance. The sector has been learning gradually that efficiency and agility are essential. These capabilities will secure adjustment to whichever trend comes next.
Advantages of an efficient logistics process
In an era of globalized, worldwide trade where the price war is so fierce, logistical leaders are looking for ways to reduce cost, while uplifting service levels, but many still have not found the right path forward. With mounting pressure for effective last-mile deliveries, players who achieve an agile and Lean supply chain, able to adjust in real-time according to demand, will achieve a competitive advantage, resulting in increased market share and profitability. For granting an optimized and steady flow of goods, the focus must be placed on improving productivity at an operational level while rethinking the whole network.
The most controversial principle in logistical operations is the shift from resource efficiency to flow efficiency: in the former, each part of the process may even seem efficient due to its high occupancy rate, but the flow breaks at a steady pace and materials keep waiting between links for hours or days.
Only in the latter, the focus is placed on the right element – the customer – allowing goods to flow evenly throughout the chain in a shorter timeframe, safeguarding the overall performance in terms of costs and service level.
The good news is that this move – from local to global optimization – does not necessarily mean a high investment – it means setting up Streamlined Logistics, with more productive and customer-centric processes instead. With solid and efficient processes in place, logistical companies can shrink the end-to-end stream, reduce lead time, minimize cost-to-serve, and grant speed and reliability in connecting all the dots.
How to improve logistics efficiency
In the recent past, the pre-pandemic efficiency-focused scenario has been replaced by a resilience-centered reality, resulting in a huge turnaround in a business’s course of action. Economic shortages, the eastern European war and the acceleration of digitalization are issues that are pushing for competitive ideas across the sector.
In the face of this scenario, unsuitable infrastructure, logistical challenges and inefficient carriers’ management undermine the growth of companies and increase the risk of stagnation across the industry. But what are logistics companies doing to improve their logistics operations?
The most common approaches involve investment in advanced software, infrastructure, or automated solutions as part of the innovation strategy. But aren’t leaders missing something? Such a path brings out the lack of basic stability in the organisation’s core processes and may turn the system more rigid rather than more flexible. These challenges are not to be overlooked, of course, but they may be drifting attention away from what matters: processes.
When it comes to warehousing operations, managers keep working according to a functional, category-based approach and claim that the lack of resources and space are their top concerns. Moreover, traditional single-load, high-turnover carriers and the paradigm of rigid delivery slots are still common among transportation players.
These entail hidden productivity losses and an increase in the Lead Time from the customers’ perspective. Best-in-class logistics companies have already overcome these drawbacks…
We know from experience how to solve these problems effectively and the benefits that top performers can achieve. For this, we have compiled the key initiatives to carry out to boost logistical performance in a practical, sustained way, and address both warehousing and transportation flows.
Lean layout design
The choice of the warehouse layout can make or break overall operational performance. Every distribution center faces problems that cause multiple stoppages and cumulative productivity losses including non-flow-oriented layouts, poorly sized teams, unbalanced workload and excessive material handling.
For conceiving an optimized warehouse configuration for simultaneous capacity optimization and productivity improvement, one should follow the Lean principles of an organization by value stream, U-shaped layout, item location and packaging according to consumption and storage area optimization. These may be combined with visual management principles, standardization and error-proof systems, and must always safeguard ergonomics, health and safety.
Streamlined dock-to-dock flows
Since most of the resources’ time in a warehouse is spent moving, the focus should be put on delivering the same value with less effort. The ultimate goal is to reduce the manipulation of materials to smoothen the flow of inbound and outbound operations, including unloading, storage, replenishment, picking and loading.
The core initiatives to achieve this must call on to separate between picking and replenishment or to set dedicated corridors to sort items by destination immediately at the time of picking, to minimize records and documents, to eliminate stoppage points, to favor cross-docking when suitable, to eliminate repacking, to perform sampling quality control during the flow, to execute hands-free picking whenever possible, and to use appropriate picking methods according to demand profile.
Flexible network planning
Operational efficiency has a determinant impact on results, but when it comes to growing towards achieving next-level performance, tactical and strategic planning should also be called into question.
It is not enough to build high-performance warehouses if the fulfillment network behind is too complex, rigid in responding to demand and driven by low-accuracy forecasts. For a global optimization, the logistical network must focus on avoiding common empty, wasteful runs that lead to over costs.
Traditional behaviors of decentralized, manual planning, low pallets’ height and excess paperwork must be replaced by a fully Lean breakthrough model based on: redesigning the whole network to streamline the macro flows through hubs’ strategic location, capillary distribution and intermodal, scalable fleet, reducing the chain Lead Time with a full-empty freight system and flexible, accurate delivery windows, decreasing transportation waste by promoting backhauling trips and minimizing reverse logistics.
Accurate transportation execution
Supply chain managers are more than ever seeking to optimize the time wheels are turning. Non-optimized delivery routes, dispersed players’ locations and demand volatility are generating cumulative order delays and emphasizing the effects of rising transportation costs.
Transport optimization initiatives should be raised to prevent these drawbacks to ensure increased service levels and high occupation rates. First, one needs to accurately predict sales and volumes in the medium term, based on flexible forecasting algorithms and real demand. Then, capacity planning is summoned, meaning right resource sizing to respond to needs, load leveling to preserve efficiency and order cut-off setting. Finally, the transportation execution itself is called through routing design algorithms, vehicle and crew scheduling and volume integration.
Continuous operation control
No one will get the most out of the above measures if no monitoring process is built in. Although commonly neglected, the traditional episodic and reactive course of action never made it possible for any organization to be successful.
Creating monitoring systems that track performance in real time allows for fast problem-solving and fine-tuning. This means building a data-driven operation and implementing live resource sizing tools to effectively meet demand.
By setting up performance review dynamics driven by shopfloor data, employees will become more comfortable with data and performance monitoring. This will help the teams to work towards a common goal and will open the possibility of performance-based pay.
How to determine if you need help implementing an efficient logistics process
Most logistics companies are still working under a traditional landscape – broken operations, emergency-based activity, reverse logistics, batch handling, unlevelled flows, empty runs, and low occupation rates, among others.
This is the common footprint among conservative practitioners. Teams are open to listening and discussing new ideas, but they seek support since their previous misconceptions are weighing them down and preventing them from evolving.
The real opportunity lies on the shop floor where the work is done, and quick wins are visible… we just need to become aware of them. By doing a thorough analysis of the processes in the field, with the participation of all the relevant teams, companies will be able to design a demand-driven, profitable vision for their businesses that will get the breakthrough improvements they aim for.
The pieces of the logistics puzzle are known and those organizations that do not settle for the status quo, that seek excellence in their processes, and that become agile in their strategy will be closer to the desired results. It is necessary to add value to the business based on reconfiguration that relies on ensuring reliable, fast, and agile delivery by adopting a disruptive approach. Only the boldest, most disciplined, and most innovative organizations will thrive and be able to decrease total cost-to-serve while delivering higher value to customers.
