Supply Chain Management and Transportation Expert Kevin Zweier urges supply chain managers to take a hard look at how emerging channels and distribution networks are impacting the true costs of doing business.
The upcoming Supply Chain Outlook Summit will feature 10 different speakers who have their fingers on the pulse of the most important changes impacting supply chain management over the next 2-3 years. At the event, Kevin Zweier will detail the best practices for deconstructing the components of true costs to obtain an accurate calculation and identify simple supply chain opportunities for massive efficiency gains.
As vice president of Chainalytics’ Transportation Practice, Zweier manages the delivery of projects related to the optimization of transportation procurement, fleet modeling, as well as systems and operational assessments. In that role, Zweier has worked with such clients as Anheuser-Busch InBev, The Clorox Company, PepsiCo, and Procter & Gamble. Zweier has helped clients realize savings across multiple logistics categories, including: truckload, LTL, ocean, parcel, freight forwarding, and warehousing over the last two decades.
In this Q&A with Supply Chain Outlook, Zweier discusses the value of understanding the true cost of doing business and how supply chain managers can use that information to best adapt to market shifts.
SCO: Why do supply chain managers need to understand the true cost of doing business?
Zweier: When it comes to omni-channel, basically everything associated with this trend is the opposite of what many supply chain managers are used to. Historically, they have worked to consolidate loads, maximize density, and group orders in a way that yields the best transportation rates and efficiencies. Omni-channel and e-commerce both push these strategies in the opposite direction.
SCO: In what ways, specifically?
Zweier: Mounting pressure is pushing more inventory upstream, driving smaller shipment sizes direct to customers, and calling on manufacturers to process and handle smaller and more frequent orders. All of these add costs and are a far cry from the days of packing an entire full truckload of goods and driving it to Wal-Mart or Target for sale on the retail floor.
SCO: What makes these shifts difficult for supply chain managers?
Zweier: They are relying on outdated per unit costs based on large shipments to distributors and are inadvertently pummeling their own margins. Most companies aren’t set up to accommodate the shift, so they’re having to invest in new software and systems that give them better, near real-time inventory visibility within their networks. Early on, for example, companies approached e-commerce by setting up silo’ed DCs to handle this emerging business channel. They didn’t know where e-commerce was headed, so that’s the approach they took 10 years ago. Fast-forward to 2015 and customers don’t care where the products are shipped from, or how they get there, they just know when they want those items in their homes.
SCO: What do companies have to do now to manage these shifts?
Zweier: To accommodate these increased consumer demands, companies are having to take a more holistic view of where everything is within their total supply chain network and then figure out the best and most efficient way to get those goods allocated, and delivered to their customers. This is easier said than done.
SCO: What benefits typically come when companies do take the time to address these issues?
Zweier: In an omnipotent era where knowing the exact location of goods is more important than ever (think IoT), they gain better near real-time visibility. By doing so, they also gain better downstream cost control over a business trajectory (i.e., omni-channel and D2C) that’s challenging the “regular” way we’ve done business historically. For example, instead of fulfilling an ecommerce order from a DC that’s 500 miles away from the consumer, enhanced visibility gives them the ability to utilize the excess inventory located five miles down the road at a brick-and-mortar location and ship from the backroom. Getting to this optimized state will take time – and will require firms to make an investment in the people, systems, and processes that support this omni-channel effort – but the payoff and reduction of inefficiencies can be significant.