Monday 21st Aug 2017 - Logistics & Supply Chain

Getting out of the jam

After sitting in yet another traffic jam last week as I headed into my local city centre and then queuing at a full car park for 15 minutes or so for a space to become available, home shopping began to look very attractive indeed.

Driving North on the M1 a few days later in similar stop-start conditions, the nose-to-tail lines of international lorries in both directions looked like the stuff of a logistics manager’s nightmare. I was reminded of a BT seminar on ‘Keeping the supply chain moving in a world facing gridlock’ held way back in 1998 when US futurists were muttering darkly that if the dot-com boom continued, by 2005 every second vehicle in New York City would be a home-delivery truck.

Presenters at that 1998 event included Alan McKinnon, professor of logistics at Heriott-Watt University, who outlined a theoretical model for doubledecking trailers to cut the amount of air being sent the length and breadth of the country in half-empty trucks. Such double-decking, he suggested, would cut the number of delivery trucks by five per cent. Another speaker was consultant David Hindson from Appleton Thorn, who argued that consolidation of manufacturing into fewer production sites was to blame for traffic congestion as more goods had to be carried longer distances. He quoted one study that suggested that while consolidating production could cut manufacturing costs by 70 per cent it would increase distribution costs by 200 per cent.

Six years on
Six years on, manufacturing is still migrating to the lowest cost economies and the need to transport goods ever further distances is as great as ever. Retailers increasingly speak of global supply chains with lead times of nine months or more and, as a result, are implementing slick IT systems to manage collaborative planning and forecasting across multiple time-zones, cultures and languages. As a means of improving demand forecasting for such protracted supply chains, IT is pivotal.

Once finally in the UK those goods fill the noseto- tail lorries on our motorways. As Professor McKinnon pointed out at that long-ago conference, greater collaboration and consolidation are key means of reducing traffic. In the home delivery space (supermarkets excepted) the post – for all its problems and shortcomings -fulfils this consolidation role.

The sharing of delivery resources between businesses is also starting to happen. Companies like Exel and Metapack have been involved in developing remote storerooms for shopping centre tenants whereby one truck delivers product for all shops once or twice a day and the goods are sorted in a common receiving bay, so cutting the numbers of trucks jostling for space in the mall’s service roads. Again, it is an area where IT is helping to streamline the practicalities of managing multiple shipments for multiple sources.

Exel, for example, runs a successful urban freight consolidation depot for the Broadmead shopping centre in Bristol. The facility not only cuts traffic congestion but, by replacing individual store back offices with a remote storage facility, increases selling space.

Changing the manufacturing/distribution balance may also help. Currently we think nothing of loading our shopping trolleys with baby sweetcorn from Thailand, beans from Kenya, or oranges roughy from New Zealand. Global sourcing on this scale makes accurate demand forecasting even more essential. As Scott Langdoc, vp research for retail at AMR Research says: ‘Retailers have to balance using more expensive producers closer to home against the cost of air freight to ensure goods arrive when customers still want to buy them.’ 

With global trade now the norm, the distribution vs manufacturing costs balancing act can only become more complex. Currently China is favourite for low-cost manufacturing but already factories there are moving from areas like Shenzhen, north of Hong Kong, to the remoter provinces where wages are lower still – and transport issues more complex. Looking 10 years ahead, there will no doubt be other low-cost players moving into pole position: parts of Africa, perhaps, Cambodia, or some obscure remnant of the former Soviet Union.

But by then, many more of us will have abandoned the high street and be shopping from home out of necessity.

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