An article in American Global Logistics titled “The Logistics Industry in 2021: Using strategy to deal with volatility and uncertainty” (December 11, 2020) describes adaptability, responsiveness and resilience as key features of logistics systems, enabling “adapting to winning”. The article suggests form supply chain partnerships, flexible fulfillment, supply chain diversification and a focus on business continuity. How should logistics systems deliver these capabilities while also remaining cost competitive ? Should logistics systems have multiple versions that synchronize with customer willingness to pay ? How should performance metrics adjust to encourage such strategies ?
- Demand Surge
- Dual Sourcing
- Fast Fashion
- global supply chain
- Low Margins
- Loyal Customers
- Rare Earths
- river transport
- Supply Chain
- February 2022
- September 2021
- August 2021
- August 2020
- December 2019
- November 2019
- February 2019
- January 2019
- November 2018
- October 2018
- September 2018
- August 2018
- April 2018
- March 2018
- December 2017
- November 2017
- September 2017
- August 2017
- June 2017
- May 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- June 2016
- April 2016
- March 2016
- February 2016
- September 2015
- August 2015
- April 2015
- March 2015
- February 2015
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- November 2012
- October 2012
- September 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- October 2010
- flash memory
- Global Contexts
- intellectual property
- Made in USA
- Operations Management
- Service Operations
- Supply Chain Issues
Indeed, each supply chain must have the flexibility to cope with the challenging time. For the delivery of the logistic system this capability, the company should invest more resources in the development of the strategic partnership with the shipping service company and also develop multiple versions that synchronize with customer willingness to pay. For example, an e-commerce business could provide different types of shipping ETA and charge a premium for the fastest shipping service.
Supply Chain Partnerships:- Partnerships designed to share information to have transparency of demand patterns between layers can be essential in planning for capacity for stress scenarios. The Tier 2 and 3 suppliers can get much quicker forecasts of demand and plan accordingly. It will stabilize the order quantities and make ordering cost stable with less variability in Lead time. This can offset the cost of implementing this strategy.
Flexible fulfillment:- During periods of stress the company may be forced to spend more on logistics due to the higher demand faced during those periods. The above method of creating partnerships will ameliorate the effect of uncertain demand. To have flexible fulfillment w.r.t need , scenarios have to be tested in which different categories of product face spikes in demand and simulate appropriate allocation of shipping resources to balance the “long term” cost of dissatisfied customers. Even 3PL logistics firms can be temporarily contracted for meeting sudden demand and have a long term agreement for the same with lower cost.
Supply Chain Diversification:- Diversification is necessary to lower risk. Geographical combined with Public health risk is what has caused the major problems with supply chains due to COVID 19.
Many industries pay up to 50% of their cost to logistics due to centralization of manufacturing in China. Due to the trade war and now COVID-19, the global logistics cost has quadrupled leading to companies not able to serve customers as well as losing profits. Moving manufacturing closer to the point of consumption will reduce transportation costs. Having alternate suppliers from South America could be fruitful for companies as they can have lower lead time with lower geopolitical risk. The cost of establishing such facilities has to be analyzed w.r.t to frequency of stress-like scenarios to give a comprehensive picture of the value of diversification.
Focus on Business Continuity:- Major Supply chain disruptions with impact on lead time of above 2 months are occurring more frequently than ever. Continuity of Operations Plans(COOPs) was a cursory document which was maintained by a company for compliance requirements. The current crisis has dramatically increased the significance of the document and its constituents. Creating accommodations for public health crises, testing Mission critical functions for stress and creating an action plan for various scenarios is empirical to achieving supply chain resilience. The cost of revamping the COOP has to be weighed against the cost of disruption of operations. There is also competitive opportunity cost associated with such a plan. The company stands to lose its competitive edge if its operations are not highly streamlined and resilient against disruptions.
Multiple versions w.r.t willingness to pay:- Products can be classified as big/medium/small ticket purchases. Price customizations in terms of delivery charges can be implemented for desired segments and separate channels for fulfilling each segment with inclusion of DTC logistics.
Metrics Adjustment:- Operations metrics along with Customer satisfaction metrics have to be considered in discerning the position of the company in the market along with the usual suspects top-line and bottom-line numbers. Longer term view has to be taken to get an accurate picture of the costs to implement new strategies and their varying payoff curves and uncertainties.
A great strategy stems from ideation and proactive planning and that is what today’s global and dynamic supply chains need. Post COVID, every company has realized the importance of supply chain and how it can impact profits. Companies should try and integrate the end to end supply chain to remain cost competitive while delivering more value to customers. Having Supply chain diversification, flexible fulfillment and business continuity is easier when there is complete integration and coordination between all channels of Supply Chain. Competitiveness can be maintained by adapting the combination of Multi-Echelon Inventory optimization models with AI, Big data and Machine Learning.
The end goal is always to create value and achieve customer satisfaction which should be the most important part of the performance matrix along with profitability and other parameters.
During the pandemic time, many retailers faced lots of issues with logistics systems, especially the automotive industry, and electronic manufacturers. From my perspective, the company can use technology in supply chain partnerships, flexible fulfillment, and supply chain diversification because now internet cost is quite low compare with before. For example, using the internet to find potential logistics partners and suppliers. Furthermore, implementing a logistics ERP system will also be a good choice for companies because using software such as SAP can easily trace the crucial logistics problem currently face. The cost which saves from logistics problems might compensate for the setup free of the software. Besides, collecting all the logistics data can evaluate current suppliers and partners, plan the production and make the fulfillment more flexible.
Logistics systems are better classified into a different version for huge companies and SMEs because the current SAP or Oracle system is expensive for most of the SMEs because they provide many functions which SMEs seldom use or are not necessary to use. Therefore, there are several companies provide light logistics system such as ODOO. In conclusion, adopting new technology is crucial for any company in post-COVID time.
Nowadays supply chain and data visibility are hot topics in business. In order to sustain supply chain partnerships while driving the cost down, there needs to be communication and coordination to maximize the profit for supply chain and for individual entities. To balance the tradeoff between high carrying costs and potential lost sales, retailers can coordinate and set the optimal service level. By opening up to more suppliers, businesses create a competitive pricing strategy to drive down the costs. Selecting suppliers with long term mindset and building relationship with suppliers are essential to a business’ continuity. Demand variability also have an impact on the business, therefore we should always look to retain customers.
In the article, I think the author focuses on the comparison with the 2020 and 2021, which is the post pandemic era. Logistics system will be more cost competitive if they can form supply chain partnerships, flexible fulfillment, supply chain diversification and business continuity well. One of the examples that the building up the supply chain partnerships effectively can help the company make better arrangement with the in-stock, and it can make the logistics more stable and predictable. For example, during the pandemic, the partners might want to send their products to the warehouse as many as possible because people were buying online; however, the warehouse might be paralyzed without sufficient workers to afford the huge volume everyday. Sending more inventory to the warehouse cannot guarantee that it can be shipped out immediately. The logistics system definitely needs to be flexible, but at the same time, to keep the input stable as possible might support the logistics to work more smoothly.
I think it will depend on the size and the strategy of this company to have multiple versions or not. To fulfill the needs of customer is absolutely necessary, but it will be more important to see if this fits with the firm. If it is a mid-small size company, it might be suggested to work on one logistics system and to utilize it and keep the cost low because the company is not robust enough to invest more on other logistics versions. However, if it is a large company, it will be recommended to build up more logistics system to lower the risk of single logistics and to serve more customers from more perspectives.
I think the performance of the logistics are highly by the performance of variable costs, such as labor cost and overhead costs. It will be more efficient if the company can introduce more advanced equipment, like robots and scan guns in the warehouse, to lower the costs on this part, the company can move the resources to enhance the collaboration with their partners, increase the fulfillment channels, expands their supply chain buffer or strengthen the capabilities to the unexpected risks.
Developing these qualities is what will help these logistics systems remain cost competitive. Supply chain partnerships can help companies create risk sharing agreements that are win-win for both parties. These agreements give an opportunity to both companies to raise profits and reduce costs. Additionally, supply chain diversification is a key feature for minimizing volatility. Having a broad supply chain network can save a company when there are supply chain shortages or an event that affects some of their suppliers. Having multiple versions of logistics systems that synchronize with customer willingness to pay can be a great way to raise profits. However, if customers become aware of this, they aren’t always happy about it and will then resist paying a higher premium just due to their willingness to pay. Performance metrics that look at a combined company approach (not just reducing transportation costs but total inventory costs for example) encourage better supply chain strategies.
Logistics can play a strategical role in today’s entire supply chain and not merely be a participant function. Supply chain companies can enter into partnerships that allow for risk sharing that will mutually benefit all. The logistics company should not simply be judged by the lead times but also intangible factors – safety, ability to create and maintain momentum.
Retailers and distributors can help provide information in advance by having real-time data collection at the point of sale. Having information early will reduce the variability in demand and benefit everyone to plan and schedule replenishments.
Logistics companies at their end should innovate to be more competitive. For example, they can adopt a “truck relay model” – handing the truck to the next driver at designated pit stops along the route. Having handed over the truck, the driver then takes the wheel of another truck to make the return journey so that he is back at his home stop by the end of the day.
Overall there should be close coordination across different echelons of the supply chain, one that is built on trust.
Leading organizations can use advance technologies to rethink their supply chains, enhancing real time understanding of activities within their network. They will work towards designing a supply chain that is both resilient and efficient. Companies will have to consider multiple dimensions for example proximity to customers markets, after sales service to customers and reverse logistics, sources of raw materials and distance to key suppliers, talent availability etc. Constant visibility is the key to synchronize your supply chain. Every individual involved in creating the product and getting that product to the consumer needs to be aware of where the product is and where it will always go next. Setting up and ERP system and SAP where the total cost can be shared by the supply chain is a reasonable venture to explore. Having multiple versions although will boost the company’s profitability, but the willingness of customers to pay should not be a criterion not to be cost efficient. The companies could better plan their logistics with better coordination to provide a top-class service at competitive rates.
The article claims that the key capabilities supply chains will need to be successful are adaptability, resilience, and responsiveness. It’s important that logistics systems weigh the benefits of these capabilities with the costs to implement them into the supply chain. Logistics systems should invest in developing these capabilities, as they will be able to better respond to future changes and better serve customer needs. However, a cost-benefit analysis should be conducted for any major infrastructure commitments to ensure the company is remaining cost competitive. The company should also evaluate how developing these capabilities will impact their brand image and relationships with suppliers and retailers, because these qualitative factors may be difficult to quantify but are equally as important.
I think as technology evolves, logistics systems will have multiple versions that synchronize with customer willingness to pay. This concept is already implemented when consumers purchase goods online and are required to select how fast they want the goods shipped to them. For those that are willing to pay more to receive the good faster, companies usually charge more for shipping. I think these types of willingness to pay selections will continue to be present in logistics systems, but the current focus should be on making the systems more adaptive to the changing environment. In order to encourage shifts towards agility and adaptiveness, performance metrics can be adjusted to become more consumer-focused. By evaluating the systems on metrics that emphasize quality, availability of goods to consumers, and accessibility of goods to consumers, companies can encourage supply chains to implement policies that better serve the consumer. This will allow the logistics systems to better adapt to the changing needs of consumers and the environment.
Logistics systems should deliver the capabilities (supply chain partnerships, flexible fulfillment, supply chain diversification, focus on business continuity) while also remaining cost competitive by investing in the resources needed to develop a partnership to make risk sharing agreements where all parties win something in their favor. Having multiple versions of logistics systems that synchronize with customer willingness to pay can very much raise profits. But I do think customers should be clearly notified of the different options. For example, with shipping, if there is a shipping cost for the product to arrive at its final destination sooner than later compared to the free shipping option. Performance metrics should be adjusted to encourage these strategies by introducing advanced technology/equipment and making the processes more automated. Also the metrics should look into reducing not just one expense area, but multiple overall to encourage better strategies.
For the logistical systems to survive, they must be able to be adaptive and able to adapt to different types of situations. This is because if they just focus on one system centered around one set of circumstances, it won’t matter how much in cost they save, because when the situation changes, it will result in the company going out of business. So, I believe, no matter how much you have to spend to have a system that will be able to adapt to each type of situation, the cost will be made up with the amount that you make from being able to adapt and keep profits rising. This will allow customers to get what they are after at no increase in lead time, but also will not have to adjust to an increase in price. This is because the costs will not get increased because of the company not being able to adjust. With them being able to adjust, they will keep costs low and have a competitive advantage.
There are several options for companies to be able to continue to meet customer demand in situations that require adaptability. The article states the following are the best ways: customer over cost, diversification in manufacturing locations, strategic partnerships, creating sustainable supply chains, and being able to implement backup plans effectively (COOP). Of those mentioned, diversification and partnerships will help keep cost lower. Reshoring or near shoring are more expensive than offshoring. However, as we can currently see the cost of shipping has skyrocketed and that’s if you can even get goods delivered. Having manufacturing option near and far will create better options to meet demand and have a mix of expenses. The near may cost more in labor, but lower transportation cost, while the far will be the opposite. The strategic partnerships can create risk sharing agreements to further reduce cost and increase supply chain profit. Having more suppliers can also help keep options open to help satisfy needs.
If customers are willing to pay a premium for quicker or certain delivery, then the logistics system should be able to satisfy their wants. Some customers may not be willing and in that case, as long as there won’t be a large loss in a customer base or loyalty, then they should wait and the company should not take a loss for those customers.
The metrics should test the ability to adjust and the time it takes to implement backup plans. There should be a team that is dedicated to what-ifs and put a number to it. Consider a situation in which all of production is stopped in China. How long until stock is depleted and how long can we deliver goods from other manufacturing and shipping options. This is just one time metric, but there would need to be more.
Due to the uncertainty during the pandemic, companies start to focus on another supply chain strategy: achieving adaptability, responsiveness, and resilience. However, transforming the supply chain brings associated costs, such as the cost of flexible channels or supply chain diversification. Although the article emphasizes that businesses should focus on customer over cost, affordable cost is still important. First, businesses should perform end-to-end analysis on the supply chain to not only understand where can be changed but also seek whether there exist opportunities to save costs, such as transportation method or integration. Next, measuring the prioritization of changes is also important. Since the benefits of the supply chain transformation is a long-term thing, businesses should find a balance between short-term cost and long-term cost to better manage its asset. The third is that do not eager to “buy” all of the capabilities. Instead, think of the possibility of the partnership first. Businesses should buy in these capabilities after they have enough budgets or at a proper time.
As for facing the customers, I think it might be a good idea to deliver different versions of logistics that synchronize with customer willingness to pay. With various logistics systems, businesses can provide more channels to customers with efficiency and further create long-term customers.
Performance metrics are also an issue needed to be discussed. First, resilience is important, so businesses should measure the changes after transformation, including cost or revenue after some disruptions happened. Also, customers satisfaction and relationship stableness between partners are also points that should be focused on.
As mentioned in the risk pooling and warehouse coordination, the manufacturer can provide a contract and buyback policy to encourage retailers to buy more products from them. In that example, the manufacturer added resilience to the logistics process and remained responsive to continuous purchasing requests from the retailer. The revenue pooling contract enables a more competitive cost structure and is hopefully adaptable to any industry.
I think a single version for a logistics system may be enough, but managers can add more customized adjustments that can better meet and synchronize with customers’ needs. The reason for not recommending multiple versions is that the maintenance costs may be too high as compared to the benefits possibly being received from the customers.
The response from different customers and costs and revenues as a total should be considered as part of the performance metrics. By doing so, the industry is more likely to reduce the double marginalization problem and encourage a coordinated strategy at the same time.
According to the article, the key capabilities required for the success of the supply chain are adaptability, resilience and responsiveness. Indeed, because the current logistics market is highly competitive, if the company is to be able to make stable profits, then the company should make changes in accordance with market demand. A good example is Amazon. They bought the right to use an aircraft company in an airport in Kansas to use in their logistics system. Because they can see the benefits in the long-term plan. This step of Amazon has improved the key capabilities of their supply chain, but their service costs have not increased. The improvement of this ability can also meet the needs of more customers and increase the dependence of Prime members on Amazon.
I think logistics systems should have multiple versions that synchronize with customer willingness to pay. I feel that with the development of technology, such synchronization is necessary and necessary. Because this can not only improve the responsiveness of the supply chain, but also help logistics companies better serve the different needs of customers.
The great use of supply chain knowledge is to turn the supply chain into a profit-center from a cost center. To reach the goal of being cost-competitive, the company needs to find out what is unnecessary to add value for the whole process and then remove those activities that are unable to create value for the business. At the very beginning of the renovation, I believe a certain amount of investment is needed, which will increase the cost and decrease the cost competitiveness for a while.
It is worthy to build a system that can gain market insights by all means. Different perspectives to understand customer willingness to pay can provide a company with more opportunities to explore the markets and set up different pricing policies to attract new customers. But the company needs to be careful to understand which version is not useful to the analysis and thus should be ignored.
Performance metric needs to reflect the difference between the projected and actual market level. The smaller the difference is, the better the system works.
Logistics is not merely the movement of goods but is an important part of supply chain planning. In the article, it has been mentioned that capabilities help in better responding to situations. Companies can have a partnership that helps in sharing risk thus making the system more coordinated, planning movement in such a way there must be less backhaul (deadheading), investing in infrastructure through a more quantitative approach especially by making partnership investments.
In my view, the logistics system should work to provide multiple versions depending on willingness to pay. The different customer has a different priority for a delivery time such a system will provide a better chance to serve different customers based on service they need.
How’s the supply chain model has changed from being more cost-focused to a more customer-focused approach. Metrics like quality, delivery lead time, customer satisfaction, availability can encourage such strategies. Implementing these strategies will ultimately help in more customer satisfaction.
As mentioned in article, during Covid-19 pandemic many company faced lots of challenges because of limited movement of raw material and goods, resulting in huge financial losses to company because of delay in delivery. To counter these challenges, nowadays companies are focusing on making their supply chain more resilient and responsive to any situation.
From my point of view, companies can leverage advancing technology to capture consumer demand to make accurate forecasting, here retailers and distributors plays a crucial role in capturing consumer demand and share the forecasting with whole supply chain network, accurate forecasting will help whole supply chain to achieve better customer service level and timely replenishment of Inventory.
Obviously, multiple versions of logistics systems will help company to better synchronise with customer demand, such as Amazon is doing right now, they are providing 1 Day delivery to customer who are willing to pay higher price or have prime subscription, learning from Amazon Model other companies should also develop their multiple versions of logistics systems according to customer willingness to pay.
Monitoring of performance metrics that help to optimise the overall supply chain such as Inventory, Labour and Transport Cost, On-Time Delivery, Lead Time and Forecasting Error.
Covid-19 had a strong impact on the supply chain across all the industries, it has pointed out the inefficiencies and emphasized the importance of a resilient supply chain. To survive in this competitive world companies should organize their supply chain to react to the external factors in no time.
As the external environment is neither controlled nor predicted, companies should have multiple strategies in place based on their target market and consumer behavior using 4 C Framework. Developing and evaluating multiple Supply chain structures (Chain Structure), Building strategic relations with the partners, dual sourcing (Coordination), optimizing the supply chain network to minimize the cost and maximize the capacity (Capacity planning) and assessing the KPI to stay competitive in the market.
Performance metrics should not be stable but has to be changed in accordance with the circumstances and company priorities. Framing metrics are important as the performance of the company is evaluated using these indicators.
The pandemic exposed how vulnerable the cost-based structure is for global logistics. As we usher into a new reality where resilience is the keyword, logistic operations need to adapt and optimize resiliency and cost-effectiveness. That is possible by introducing flexible offerings driven by the needs of consumers and businesses. The article rightly points out that modern logistic systems should be responsive and not reactive. There is a need to build adaptability and resilience through different means such as supply chain partnerships or flexible fulfillment channels. The ability to become future-proof and disruption prof will bring in a competitive advantage for businesses.
Logistics systems should deliver these capabilities while also remaining cost competitive by aligning the goals of their upstream and downstream partners with their own. Though this can take a lot of work and negotiation, it has the potential to make everyone more profitable and work together as though they’re one company.
Logistics systems having multiple versions that synchronize with customer willingness to pay could be a smart idea. This captures the market not willing to spend as much, but it can also cannibalize some customers who would be willing to pay more but settle for paying less. An analysis on customer willingness to pay would need to be done to determine if this is a wise business decision or not.
Performance metrics can be adjusted to address upstream and downstream relationship quality, fulfillment flexibility, and customer satisfaction in order to encourage such strategies.
COVID-19 has proved to be a black swan event that finally forced many companies, and entire industries, to rethink and transform their global supply chain model. It has exposed the vulnerabilities of many organizations.
The challenge for companies will be to make their supply chains more resilient without weakening their competitiveness. To meet that challenge, managers should first understand their vulnerabilities and then consider a number of steps.
One such step could be to diversify a company’s supply base – This will address the heavy dependence on one medium or high-risk source. US-China trade war has motivated few firms to shift to a “ China plus one” strategy of spreading production between China and a Southeast Asian country. This will also ensure that the company remains cost-competitive as labor cost is low in Southeast Asia.
Additionally, the adoption of technology in form of automation can also help a company mitigate supply chain risks while ensuring that it remains cost-competitive. Robotic palletizers, which can sharply reduce the need for labor in preparing products for shipping, will pay for themselves quickly, as will automated optical inspection systems for quality control.
Further, Supply chain metrics should be re-defined by establishing specific parameters which can be used to quantify and define supply chain innovations. By collecting, curating, and analyzing key supply chain metrics (SCM) a company will be able to spot inefficiencies within their ecosystem while capitalizing on their current strengths and establish goals that will help further innovation to compete in the post-pandemic world.
I think that logistics system should have multiple versions that sync with willingness to pay, primarily because without the customer, the chain is meaningless. The customer is the stakeholder that delivers value and creates needs in the overall economy. Syncing supply chains with customer needs assists in determining price points and demand levels, and therefore reducing overall sales forecast errors. Companies can enter into risk-sharing agreements, through insurance companies or even consignment deals to ensure that risk is strategically shared among all gaining parties. Logistics companies should offer more differentiation metrics, rather than just catering to price. This would increase customer stickiness and create loyalty in a price driven industry.
In terms of cost competition, I believe that due to frequency of demand, some larger companies can choose to charter their own carriers or fleet, and start filling their unmet capacities with other companies to ensure that all costs are being met.
To ensure coordination, integration of digital supply chains is essential. Development of integrated and end to end information flow is essential, and metrics should be based on expected outcome vs. actual outcome. KPIs should not be binary, rather need to be visualized with all given inputs, such as reasoning behind KPI and nature of business. Not all businesses and supply chains are the same. Tailored KPIs must exist.
While adaptability, responsiveness and resilience is being looked from the lens of diversifying risks and ensuring business continuity, it is seen that dual sourcing was existent in the first place to address this. Pure cost based competitive advantages have led to flooding of sourcing activities from a single nation and the best interests has caused introspection of such decisions. As companies move manufacturing to closer geographical regions, this also benefits organizations in the long term as and when the cost of emissions and sustainability is added to balance sheets. Ensuring the next decade of action by UN, initiatives such as Value Balancing alliance with Big 4 accounting firms where the organizations are evaluating methods to add the costs of sustainability to business operations will again accelerate decisions to move supply lines closer. And the risk of disasters will assist in deciding to keep certain supply lines far from region of operations for business continuity. These both factors will be critical to gaining cost competitiveness i.e., optimizing the logistics costs against the sustainability costs involved in operations, and further drive decisions for supply chain partnerships, flexible fulfillment, supply chain diversification.
According to the article, it believes that adaptability, responsiveness, and resilience are key requirements in ensuring that the logistics system is successful. This can be achieved through supply chain partnerships, flexible fulfillment, supply chain diversification and a focus on business continuity. One business model that other companies can replicate is Amazon. Amazon purchases its own modes of transportation like trucks and airplane fleets to be more competitive amongst others. I think logistics systems should have multiple versions that synchronize with a customer’s willingness to pay. For example, Amazon’s goal is to understand each customer’s purchasing habit. This performance metric should adjust based on purchasing habits of customer habits.
Logistics systems may not deliver all those capabilities all the time and continue to be cost-competitive. As companies attempt to determine how to fit all those capabilities and remain cost-competitive, companies need to have a trade-off between the four options. The likely trade-offs are between supply chain diversification and business continuity, and supply chain partnerships, and flexible fulfillment. Supply chain diversification and business continuity may conflict with each other because increased diversification may create coordination roadblocks. When dealing with a single or few providers, it reduces the amount of coordination needed. Supply chain partnerships and flexible fulfillment may conflict because it decreases the flexible fulfillment within a supply chain when you increase partnerships. The coordination within each step of the chain must be aligned in their flexibility capabilities, making it challenging to adjust everyone in the supply chain.
Companies could have multiple versions that synchronize with customer willingness to pay. The critical success with numerous versions for a company is the size of each newly created customer segment. Another consideration is the cost to develop and market each version. Finally, the level of complexity it makes with suppliers and logistics partners. Typically, complexity creates increased cost and risk of error. Each error drives additional unforeseen costs.
The portion of third party logistics be used should be increased to balance the capabilities and cost competitiveness. Third party logistics enable the service level since their profession and focus on logistics. As well, partnerships, flexible fulfillment, supply chain diversification and focus on business continuity are all can be achieved with the help from 3PLs. 3Pl makes their actions more flexible. More than one customers can choose same third party logistics provider. A sharing agreement can be signed among those customers who need logistics service. Capacity sharing, Cost sharing and also risk sharing among those companies are divided. Under such strategy, the metrics can be adjusted to capability of arranging logistics route for several companies for example.
One of the keys for companies to deliver such capabilities while remaining cost competitive is to keep the supply chain sustainability. We have witnessed how the world (including the supply chain management of businesses) has been changed overnight, due to the outbreak of pandemic. For companies who could not respond to such rapid changes quickly, the overall cost increased and they might be losing their market share. Several strategies could be taken to sustain a more stable supply chain and remain companies’ competitiveness. For example, companies could have multiple suppliers in different locations to sparse the overall risks of supply shortage. And they could also build up a long-term partnership with both the upstream suppliers and the downstream retailers to stabilize the supply chain. In a short term, the cost could be increased by applying such strategies, because companies are not cooperating only with suppliers with the lowest manufacturing costs, but partnering with other suppliers as well. However, in the long term, such strategies allow companies to have more capability to deal with uncertain events in the macroeconomic environment, with a more wholesome supply chain keeping the product cost stable.
Achieving adaptability, responsiveness, and resilience while also remaining cost competitive, the next general supply chain requires more effective coordination. Retailers could increase the service level to maximize the profit of the entire supply chain It is necessary to understand each stakeholder’s needs and challenges, creating equitable profit-sharing and balanced risk sharing agreements between different entities.
Flexible fulfillment channels plays a role in synchronize with customer willingness to pay. However, flexible fulfillment arose from the need to have a supply chain elastic enough to prepare and dispatch an order from any distribution center or even from a physical store. Although greater flexibility in order fulfillment and the supply chain raises the cost of preparing and transporting an order, it also brings some advantages including increased sales, customer loyalty, improved responsiveness and Logistics flexibility and scalability.
Supply chain surplus is the difference between user value and supply chain cost. User value covers the value-added products and services provided by supply chain service providers. However, the rate of return of the supply chain is certainly different in different periods and environments. “Lack of automobile chips”, “shipping shutdown” and other events have subverted many concepts of traditional supply chain management and made “uncertainty” become an element that has to be considered in supply chain design. Therefore, the high cost of market transactions is the decisive factor of enterprise vertical integration. Economic policy uncertainty increases the risk of supply chain disruption and transaction costs, thus promoting the vertical integration of enterprises. Logistics departments need a method of analyzing and controlling demand predictability and demand deviation. For example, any supply chain processes such as big data analysis of customers, dealers, orders, and supply relationships are dynamically checked to ensure that they operate in a lean and efficient manner. On the other hand, invest in new processes and technologies. Think about how the extended logistics network between enterprises can better align with internal business processes and invest in processes and technologies that can help in this regard.
The economy condition and market could change a lot in short time, making some companies go bankrupt, not to mention other factors like unpredictable pandemic (COVID-19 is the best case) and international political relationship. I would say in this competitive world, company can utilize the portfolio strategy, such as vertical or horizontal integration to expand business and at the same time reduce the cost with the benefit of reaching economics of scale. Another one is to build partnership with other companies, or their upstream and downstream units, this kind of risk share agreement could even optimize the total supply chain and eliminate double marginalization.
Besides, they need to be open-minded to adopting innovative technology. An example is RPA, robotic process automation, which can replace human being to do some routine and time-consuming and low-value tasks. It is a digital workforce, helping company focus one more strategic and value-added direction and improve efficiency.
The logistics can give competitive advantage by reducing costs and creating value for the end customer by offering differentiated services using the concept of supply chain, information technology and management tools such as Logistics Activities Based Costing and the Balanced Scorecard , so there is a constant improvement of the performance of each member and the entire supply chain.
From the onset, performance metrics should primarily focus on customer satisfaction; businesses exist to make money (profits) true but, such “must” derive from providing a certain level of satisfaction to customers who pay for that. Otherwise, there could be serious problems to deal with or such format might not be sustainable. Of course, for the organization seek, all the usual marquis metrics (ROI, Costs…) remain relevant and important however, these need to be adjusted and balanced to ensure customer satisfaction while producing attractive returns for shareholders and company ownership.
Two of the pilar objectives of logistics is responsiveness and efficiency unfortunately, there are situations where these two may clash with each other and one might take priority over the other. Delivering these capabilities requires some level of flexibility from logistics systems, and more importantly, collaboration with diverse partners within the chain structure. Sometimes, collaboration might need to be extended to clientele, especially when they are showing willingness to pay for costs. These collaborations should be designed to promote and operate on a “win-win” basis, where improvements are benefiting the entire chain structure and efficiency savings are shared among partners, including customers (sometimes with lower prices). Some of these collaborations may result in integration (vertical and horizontal) of some (more or less) entities, depending on the situation and objectives. If success can be achieved with multiple versions, which can synchronize with customers willingness to pay, then logistics systems should consider operating with multiple systems to ensure greater customer satisfaction.
Covid had created great uncertainty in the field of the supply chain, from manufacturers to consumers. For example, during the pandemic, most of the restaurants closed and caused a sharp decrease in food demands while the demands of the household surged. We all learned a lesson that only those companies with great adaptability, responsiveness, and resilience can survive in the world of uncertainty. To be able to adapt to win, the players in the logistics systems must do some investment to synchronize the information with customers’ demands and also with the partners. Forming partnership strategies that allow more information sharing can surely be helpful. Furthermore, leveraging technology and the e-commerce business model can allow companies to gain useful information to make decisions promptly. Companies can also consider having multiple versions of products with different prices and services according to customers’ willingness to pay. For example, for those who need the products within a short period of time, the companies can charge them more because these customers are usually willing to pay more for the urgent demands. The performance metrics should not only depend on cost and margin. Customer-oriented KPI, such as customer satisfaction/loyalty, adaptability to customers’ needs, should also be taken into consideration. To transform the company to become more adaptive to uncertainty from cost-down/margin-oriented business strategy, the companies will usually suffer from increased costs. However, in the long run, the company will surely benefit from the investments which can help the business to thrive in the long run.
The COVID -19 pandemic has shown us that how an inflexible system not accounting for uncertainty can lead to even bigger problems. Rigid systems, just optimizing for cost and quantity were the one that suffered the most. This has exposed most of the system not accounting for these variances.
To account for these variances/risk without weakening the logistics system and still being competitive is a tough challenge but one that a company must take to adapt and overcome challenges like covid. In the following paragraph I will discuss through some of the steps that can be incorporated to mitigate challenges like covid.
First, diversifying various elements of the supply chain. This will reduce the risk of supply chain breaking. For example a raw material procurement can be made from multiple source so that even if one closes or stops working the system will not fail as others can pitch in to fulfill the demand. The big idea should be that not all the eggs should be in one basket
Second, technology to optimize and simulate risk to understand the exposure of the logistics system. Using technology a system can be made more resilient to human error and dependency. However, a hybrid system should be used so that the supply chain is not just dependent on one.
Continuous improvement of the system by collecting right data can help greatly in preparing for uncertainty.
It is true that certain customer would like to insure their goods and thus logistics system should be made resilient for these types of customer who are willing to pay more.
The article talks about how the above-mentioned capabilities like diversification, partnerships and flexible fulfilment are important in building a more robust resilient and responsive supply chain. However, the companies should try and focus on their customers preferences and react accordingly. In areas where the lead time is not as important as the product itself the companies should try to focus on the revenue assurance approach rather than cost saving. Building partnerships with the suppliers and transportation agencies in form of risk sharing agreements is an important aspect of cost saving and realizing full potential profit. Having these agreements in place will not only decrease the risk for the parties involved but also increases the coordination between them resulting in an efficient supply chain. These are the things that make a company competitive in todays market.
The companies should try to build out multiple versions of chain depending on the willingness to pay as mentioned earlier in cases where a product is preferred over the lead time having a different supply chain which focuses on the quality of the service is important in maintaining the customer satisfaction. Moreover, building different versions of chains can also be paired with supply diversification in order to build a more efficient chain overall
With an increase in customer centric strategies the companies should focus on the metrics like customer satisfaction, delivery lead time , quality of service and responsiveness should be used in analyzing a supply chain.
During the past year, there had been significant changes in the supply chain of various industries. This is mainly due to the uncertainty and the panic caused by the virus. Companies that are flexible in fulfillment can ride this wave. To achieve this flexibility companies should shift gears between cost-based logistics systems to requirements-based systems to ensure providing the basic needs which further increases customer loyalty in troubling times. In times of uncertainty, companies should have a cost-benefit analysis in place which will declare the impact of shifting the gear from cost to requirement. Companies can be cost-competitive by adapting to the latest technological advancements for warehousing which would reduce costs and thereby placing them in a competitive position. Different customers perceive the usefulness of a product differently, having multiple versions to cater to these customer segments will be beneficial for the companies. With these changes, companies need to shift from a revenue mindset to estimating the qualitative benefits like customer satisfaction into account to evaluate the overall performance.
Looking from supply chain perspective logistics plays a strategic role within your organization. We can enter into agreements with other parties(companies) that could potentially reduce our risk by having diversified portfolio. Understanding the market, you are serving and where your customers are positioned, it can benefit you long term in reducing cost. So, if you have customers that are willing to pay extra cost for last mile delivery than you should be investing in technologies such that will help you expedite it faster. Choosing which one to adapt can be a challenging and costly option. These systems should be focused on the customer(consumer), where identifying different types can help you predict buyers’ behavior to satisfy demand (high service level). I am not sure, but if you can have multiple systems integrated within maybe you can have a competitive advantage over other competitors.
Metrics can be re-defined to some parameters where you are focusing on innovations. Monitoring and analyzing established parameters can be used in making KPIs. I think KPI metric is very beneficial in raising red flags and ensuring you are updating your logistics on a review period basis.
Companies will need to adapt to these changes in supply chains on a case-to-case basis, and as such, the methods they should use to maintain their supply chains should reflect that. Global issues, such as the ongoing pandemic, climate chain, and constraints in shipping, all make it useful to coordinate with suppliers to ensure timely movement of goods and to maintain prices. Searching for alternative suppliers can also provide extra flexibility to the supply chain, reducing the risk of shortages.
In addition, new technologies are an excellent way to improve planning and obtain more accurate information on shipments, both through enhanced communications and through better predictive algorithms.
While multiple supply chains would be an excellent way to ensure redundancy in the system, the benefits provided must still be measured against the margins being provided. Customer satisfaction is important, especially for long-term growth, but trying to do everything to secure supply chains may cost more than it benefits. That said, expansion and toughening of supply chains is still necessary in the current economic climate. Companies will need to look at their supply chains, determine areas of risk, and see what they can do to adjust accordingly.
Just like the articles said, the lessons learned from COVID-19: adaptability, resilience, and responsiveness are antidote for the volatility and uncertainty. Instead of short-term thinking for quick wins, placing emphasis on partnerships, diversification, center of customer, and the value of COOP. However, setting up a new business strategic for the post pandemic time, it doesn’t mean that all the firm should have to follow certain pattern in order to smooth out the uncertainty and volatility. Firm should evaluate its value of organization and its asset in order to make sure that their strategic planning could best support their capabilities. To be more specific, having multiple logistics system versions should depend on the firm sizing/type/demand. For the company like Amazon, it is necessary to have multiple logistics versions in preparation of uncertainty.
For the performance metric adjustment, again, it also should depend on the industry and the company different dimensions. But it is sure that more customer-oriented performance metric should be considered.
Even though, information flow between companies is dangerous, is also a key stone. It is demonstrated that Walmart shares information to their suppliers. In this competitive reality, when there is a lack of information, companies may lose some millions in sales.
Applying the concept of “invisible hand” introduced by Adam Smith, when supply and demand find equilibrium naturally, oversupply and shortages are avoided. However sharing information can find that equilibrium faster than the invisible hand. Working together and make agreements matter, still when companies have a self-interest. Alliances help in synchronizing supply chain management supply and demand, with this, production costs and prices (profitability) might be more competitive. And here is the key, the metrics that should be on the table when negotiating win-win strategies, are profitability, market share, lead times, and capacity of response.
The article mentioned that the next generation supply chains would emphasize strategic planning, not only profitability. They will forego short-term or quick wins. This requires logistics to be more adaptable, responsive, and resilient. Logistics face many unknown risks, especially global logistics, such as the current shortage of containers and port labor. How to adapt to the issue and provide a feasible solution is the most important. However, it is costly, so logistic companies should build strategic partnerships between shippers and 3PLs to share the risk and profit. Also, customer obsession should be more critical than cost because prioritizing customers can create long-term customer advantage.
I think logistic systems should have multiple versions to satisfy different requirements, such as FedEx’s services. Customers could choose a different delivery speed according to how much they would like to pay. When shifting to a more adaptive and responsive system, the service level and service quality should weigh more in assessing the performance, not only cost-profit metrics.
Having a flexible supply chain is always an advantage. But increasing flexibility impacts the costs incurred. Based on the customer requirement different chain structures could be used. For example, there might be some areas where the consumers are not cost sensitive but demand quality of service. In these areas the chain should be very efficient, and quality of service should be high, even though the costs might go up. Since the customers are not cost-sensitive here, they can levy some part of the increased costs on them. This flexibility would increase customer satisfaction across customer segments.
Apart from the difference in willingness to pay, different products might have different supply chain which are more suited or efficient for that product. Companies can be flexible and at the same time reduce costs and lead time by leveraging latest technology in warehouses like unmanned operations in warehouse by using robots for picking, moving, and loading. The past few months have seen significant changes in the supply chain due to the pandemic and lack of flexibility in supply chain would have made it difficult for companies to the fast-changing demand and restrictions. Overall, the companies should move from a revenue mindset to a more qualitative approach where they are concerned about the customer satisfaction. This will help them in long run since it increases customer loyalty and in difficult times like the pandemic, this loyalty plays a crucial role.
As described in the article, adaptability, responsiveness, and resilience are the key features of logistics systems, enabling “adapting to winning”. Implementing these features into the logistics system is not cheap, therefore, it is important to analyze the benefits of these features before starting to implement them. Adapting to these key features can help the logistics system to serve the customer demand in a better way, but it is also important to analyze the potential costs of implementing these features because the companies should ensure that they are remaining cost competitive while improving their logistics systems. Companies can ensure that logistics systems deliver all these capabilities while remaining cost competitive by doing a cost-benefit analysis. So, that would help them to analyze how these capabilities are going to affect their business and how it will assist them to serve the customer needs in a better way.
I think logistics systems should have multiple versions that synchronize with customer willingness to pay. Especially we can observe it when we do online shopping. For example, if the customer wants to add a 3-year protection plan to the purchased product, he/she can pay an extra amount to receive that service. Also, if the customers want to get the purchased product as soon as possible, again, they will pay more, or they will purchase monthly membership in order to benefit from free shipping for all purchases (such as Amazon Prime).
Performance metrics are useful in encouraging such strategies by helping companies to focus on customer needs. If the companies analyze the performance metrics such as the inventory levels of the products that are highly demanded by the customers, delivery times of these products to customers, or responsiveness of the company to the customer demands (how quickly the logistics system produce and deliver the products that are demanded by the customers), that would help them to better serve the customer needs, increase the customer satisfaction levels, and help the logistics system to effectively implement “adapting to winning” strategy.
From more recent changes in industries during and after the pandemics, we can see that adaptiveness, responsiveness, and resilience are keys for a good supply chain to sustain business and deal with fluctuations.
I believe that for businesses to achieve supply chain partnerships, flexible fulfillment, supply chain diversification, and a focus on business continuity while keeping cost-competitive, different entities within the supply chain should share risk and information with each other and work towards having better partnerships and transparency of the supply chain.
Having multiple versions of logistics systems that synchronize with customer willingness to pay can be helpful in terms of achieving better flexibility, but it requires large investments and time is required to observe the strategy’s cost-effectiveness.
I believe that because the main purpose of the strategies is to better suit customers’ demands, customer satisfaction should be the main performance metric for the strategies. Other than that, businesses should consider other performance metrics such as fulfillment rate and time of delivery.
Competition leads to the survival of the fittest. Logistics is a highly competitive industry with companies looking for new avenues to increase volumes as margins squeeze continuously.
From the 4 C framework, the chain structure itself can be used to the advantage of the industry. Can logistics company share their excess capacity with competitors for a small margin? Creating such partnerships will diversify the supply chain across the industry.
Coordination contacts can be signed between various players to divide their geographic strongholds and offer competitive rates not only to their direct customers but also to other competing logistics companies. Such coordination contracts will increase the overall pie of profits. Agreement to divide such excess profits can do wonders for logistics companies.
With covid, logistics companies are now developing resilience by offering multiple pricing options to their clients and continuing to generate business even with direct temporary losses. The trucking companies can instead use the body of the trucks to carry advertisements for other companies and cover the losses using this stream of business. The decisions made should be from the optimal global level of the company making profits and not necessarily from the direct goods delivery.
The performance metrics such as average delivery per driver, the average distance traveled per delivery, average deliveries completed, average deadheads can be performance metrics to measure the success of such strategies.
Two ways to ensure these qualities but keeping cost competitiveness at the same time in long term. First, analyze past industry trend and products demand variation. Basically, you want to make sure that you are able to forecast the future industry so that you can prepare yourself for what is coming. Analyzing the past pattern can at least give you some idea of what the industry trend will be like in the future.
Second, you want to have long-term partners that will always treat you as their priority. Long-team partners can offer more profits for you as they know you will be a stable customer for them. Also, in event of emergencies, like industry changes, sudden demand, etc, you can respond faster as your suppliers will adjust their efficiencies based on your demand or request.
Having multiple versions is always a good idea as different version of logistics system can serve different customers. But keep in mind that it is necessary to keep them at a certain amount as more versions create complexity and also will lower the product volume associate with the system. With different version, the performance metrics should be based on customer satisfaction and operation efficiencies as those can be measured directly and those characteristics shows the competitiveness of a logistics system.
The key is to realize the economies of scale by including more entities in the current logistics system. As the scale of logistics grows, there will be more ways for these logistics companies to find ways to justify the high setting cost of the complex information system.
My thoughts on how the logistics systems would remain cost competitive while delivering these capabilities would be to first spread their risks such that these additional capabilities do not carry so much risk that they can easily affect the standing of the companies. They could enter into agreements with other segments of the same industry to provide situations where they provide cost competitive services to consumers and still remain profitable in business. Offering multiple versions to try and cater to most of the customer base could be a possible option as these will cover the highest paying and the lowest paying customers with services equal to their pay. Having dynamic performance metrics depending on which aspect you choose to categorize them from could be the most fair way to rate them all as having only one aspect such as quality of service or cost of service could mislead with huge errors.
I believe Covid made companies realize the importance of the Supply Chain and its impact on the business. Forced agreements during this period of time has potentially reduced risk and improved dynamics. Flexibility and adaptability have become one of the most important competitive advantage and in this case logistics and partnerships to have an end-to-end supply chain was the key to remain cost competitive. There should be multiple versions, customer-oriented business will always prevail in difficult times, so identifying buyers’ preferences and behavior is a must. Identifying KPIs to develop strategies and analyzing performance should also be implemented to have a sense of the overall supply chain and to adjust constantly.
I think it is hard for the companies to be flexible. Since all the methods are focusing to reduce cost and be “lean” as possible, there is very little scenario planning which makes the companies ready to be flexible in time of need. I think instead of focusing too much on cost reduction, the focus should be on bringing more revenue and have saving on rainy days. It is against practice to keep more than certain percentage cash on the account because that money can be used for something else. However, in situations like covid, a company that has cash it can be more flexible than their competitors.
Other note, if the company could have clear communication within its company and fleet, that should give them an advantage.
The pandemic exposed all of the aspects of companies’ supply chains that need to be improved. The logistics systems need to form strategic partnerships to share risk and still remain competitive. From the partnerships, they can improve their coordination and expand their pie. Also, diversifying their operations in different countries would also help them remain competitive as the shipping cost and reliability from China has increased significantly. It will also allow their lead time to decrease. They should also develop logistics scorecards to keep track of the data and use that to adjust their strategies and who they work with in the future.
Having systems in place that synchronize with the willingness of the customer to pay could be helpful. It allows to understand customer reactions and behavior to products. Some customers will be more price sensitive. Before making a decision in the business we must know if this will be a profitable decision and if it will help capture a bigger part of the market. having risk sharing agreements in place will allow a better relationship with upstream/downstream allies.
According to the article, strategic planning would be a key emphasis in supply chain management in the post-pandemic era. To deliver those capabilities while also remaining cost competitive, logistics systems should be aligned with common goals, risk-sharing agreements, efficient and effective communication, and real-time data transmission for the parties involved. Having multiple versions of logistic systems would help companies synchronize with customer willingness to pay and that has been implemented in e-commerce nowadays. Take shipping as an instance, customers can select more expensive options if they want to have the goods delivered sooner. To encourage such strategies, performance metrics should focus on the parameters of customer satisfaction, including but not limited to delivery lead time, pricing, service quality, and responsiveness.
As the article mentions factors such as flexibility, diversification and business continuity are key to make the supply chain a more competitive process. Logistics systems can deliver these capabilities while remaining cost competitive by being able to coordinate among all of the links of the supply chain. Communication is key for this implementation as all entities need to be in sync while having everyone’s best interest in mind. Outside entities also need to be regularly evaluated to make sure that there are no weak links that can cause huge losses. For example, suppliers should be evaluated and there should always be a backup suppliers that is ready to step in case of an unforeseen event. Logistics systems should have multiple versions that are developed around the customers as they are the main client and the ones bringing in revenues; it is only normal to have many plans for many different groups of people. With that in mind, performance metrics should be adjusted for the customer and this will encourage responsiveness, flexibility and adaptability. Metrics should include quality, rate of stockouts, accessibility and alternatives for the best experience of the customers.
Businesses are becoming more inclined towards customer centricity than optimizing costs since covid-19 pandemic. Therefore, its important to put customer first and costs secondary for any supply chain system to stay competent. All the stakeholders in the supply chain should be well coordinated by maintaining transparency in demand information across the supply chain leading to pareto improvements within supply chain.
Moreover, the companies should diversify their supply chain operations at multiple locations to build a more robust chain in case of any pandemic situations. This will ensure businesses don’t fall into the same situation as that of covid–19 pandemic where major supply chain systems operating from china were shutdown cutting of supply of essential items to meet customer demands. Also, businesses can near shore their operations close to US to enable easy movement of goods.
Multiple versions of logistics systems based on customer willingness to pay can be implemented. The customers can be divided into multiple segments based on factors like delivery speed, delivery charges etc. This will help to cater to multiple types of customers.
Supply chains should be a direct representation of the product need and the customers willingness to pay. These two criteria do not necessarily have to coincide, for example a supply focused around medical devices should be designed to ensure adaptability, short lead times, and guaranteed quality. While supply chains for things like basketballs should focus more on cost minimization and inventory management. For a supply chain in which it is paramount to guarantee on-time performance, a larger safety stock or inventory level should be maintained by the entire supply chain. By spreading the inventory across the supply chain you can combat the potential negative effects of demand volatility by spreading your inventory. By doing so, you can react to sudden increases in demand through an initial inventory of finished goods, while simultaneously increasing production to match the heightened demand.