A great deal already has been written about the impact of the pandemic, fully socializing jargon such as “new normal,” “next normal,” “unprecedented disruption,” etc. Changes in our lives, economies and supply chains are ubiquitous and well embedded now. It’s time to focus on how we innovate and optimize our businesses and operations in this permanently altered world.
Challenges drive dramatic shifts in supply chain and logistics
Across many of our industries, conventional wisdom about best practices for supply chain operations and logistical networks is being challenged. There are lively debates about the meaning and prioritization of scale, globalization, outsourcing, and inventory optimization. The pursuit of ever higher efficiency and speed have dominated transformation initiatives for more than forty years, driven in large part by the assumption that raw materials, commodities, warehouse space, transportation capacity and labor will be plentiful and immediately available at stable and often declining cost. This is no longer the case, and for a variety of reasons (environmental and geopolitical to name a couple) prospects for a return to these conditions in the foreseeable future seem unlikely at best.
The accelerated shift of buying behavior in both B2C and B2B markets also is playing a huge role in redefining our landscape. The percentage of purchases made and fulfilled through digital commerce has exploded in the past two years, advancing a pre-pandemic trend by as much as 10 years according to some industry watchers. The now more balanced mix of physical stores and digital channels demands more sophisticated and complex design of supply chain networks, not only to manage commerce and order intake on the front-end, but fulfillment on the back-end as many consumers and businesses choose to buy online but pick-up in store, or even buy in stores and then have goods delivered.
Finally, the growing urgency to address climate change, as well as social and economic inequities, are compelling higher urgency to accelerate sustainability initiatives within logistics networks and elsewhere. Being sustainable no longer is just a matter of corporate citizenship, it is rapidly becoming a critical business imperative in the face of elevated regulation and compliance requirements, as well as increasing demand from customers, investors, and the public around the world.
These dramatic shifts don’t mean well-honed operational practices bringing high-efficiency are completely obsolete now – they aren’t. However, the pursuit of speed and efficiency above all else should give way to more balanced approaches that enable greater agility and resiliency. This is not a continuous improvement exercise, but a matter of survival as greater unpredictability prevails in our markets, continually taxing resources, and challenging forecast accuracy on both the demand and supply sides.
Hallmarks of successful logistics transformation
So, where should organizations start in the next wave of logistics transformation? Within Oracle, we’re seeing many of our clients make meaningful progress in building greater flexibility, resiliency, and sustainability into their operations. Every organization is unique, and one size certainly doesn’t fit all, but we’ve observed at least four common elements associated successful, leadership transformation projects:
- Commitment to disruptive approaches in reshaping logistics networks – Logistics leaders willing to invest boldly in reconfiguring their warehouse and transportation networks, undeterred by sunk costs and incremental thinking, already are seeing big benefits from new, more flexible models. Dealing with today’s uncertainty is driving greater decentralization, enabling in-store fulfillment, and leveraging pop-up warehouses and “micro-fulfillment” centers to increase flexibility. Their transportation networks are more diverse, in many cases aided by connections to digital freight marketplaces.
- Automate, automate, automate – This is not a new idea or trend. However, labor shortages and associated higher costs are elevating the ROI associated with warehouse automation projects, and in some cases will be essential to sustaining an operation. The technology available now extends far beyond supporting massive, highly automated distribution centers and “heavy lifting” uses such as moving pallets. For example, some newer robotic systems can efficiently automate small picking use cases such as in-store fulfillment of grocery orders. Leaders that understand the growing opportunities, use cases and technologies available to automate a wider spectrum of tasks in their operations are achieving compelling results.
- You can’t react quickly if you can’t see around the corner – Enabling end-to-end visibility across the logistics networks, as well as the broader supply chain, no longer can be an aspiration, it must be a necessity. Achieving this objective can be complex and challenging, demanding the collection, consolidation, and standardization of data from diverse sources, as well as the ability to analyze and visualize in real time. Many organizations have learned the hard way this is harder to accomplish when selecting and deploying a myriad of point solutions from multiple providers with multiple data models. Today, many leaders are seeing an easier path to higher visibility by building around a common technical platform and data model. With this approach, leaders are adapting, remodeling, and rerouting their logistics networks as needed to address short-term disruptions and long-term business needs.
- Expand the use of machine learning and predictive analytics – The effectiveness of machine learning models is being proven in an expanding set of use cases across the end-to-end supply chain. In logistics, for example, these technologies are helping optimize warehouse productivity through more efficient picking operations, as well as improving both the sustainability performance and delivery reliability of transportation networks. Leaders are looking for opportunities to pilot new use cases and moving quickly into production when they see clear value.
The past two years have been challenging across our industries and around the world. There is no question that every industry now functions in a different environment with different economic conditions. Leaders that don’t over-analyze the recent past, and instead recognize permanent changes and act boldly to develop new models, processes and use cases, will steer their organizations toward greater prosperity in the coming years.