SUPPLY CHAIN STANDARD DECEMBER 2008
www.supplychainstandard.com
difficult concept for some marketeers, it is becoming
less so for supply chain operators, and the cost
benefits can be exciting. Furthermore, retailers can
continue to use their own warehouses and
distribution centres and it is only transport capacity
which is being shared, but with the current
emphasis on cost-savings obviously co-opetition has
considerable potential or more collaborative
initiatives in future.
Opportunity
Another opportunity for 3PLs to take cost out of
supply chains is through the provision of co-packing
and co-manufacturing solutions to manufacturers
and retailers directly. Co-packing is provided by DHL
from many facilities in the UK ranging from
promotional to shelf-ready packaging. Frequently
these facilities are where the product is already
stored obviating the need to incur transport costs
and allowing for the stock to remain visible on a
company's systems enhancing availability.
Co-manufacturing services range from handling
in-bound raw materials and enhancing their qualities
prior to factory working into finished goods through
to the packing of tomatoes in the free-trade zone
portside in Southampton prior to dispatch directly to
retailers’ regional distribution centres.
Most retailers work with a number of 3PLs. This
may be partly due to historic reasons reflecting
This review process can bring
forward much broader supply
chain cost reduction
opportunities through
"transformational
outsourcing", through what I
term the "three Rs" approach.
various mergers and acquired divisions retaining a
degree of autonomy or it could be more to do
with risk reduction and ensuring that capacity is
available to meet peak demands. Multiple sourcing
brings benefits but it also adds to administrative
complexity, additional cost and contractual
alignment issues. In the current economic climate
it may well be time to look at some of the
contractual structures.
This review process can bring forward much
broader supply chain cost reduction opportunities
through "transformational outsourcing", through
what I term the "three Rs" approach.
First there is "rationalisation": of supply chain
administration developing strategic partnerships
with a minimum number of 3PLs and other suppliers
and a single logistics team within the business, with
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IN ASSOCIATION WITH DHL EXEL SUPPLY CHAIN
both parties having a clear focus and understanding
of what success looks like.
Secondly, there is "reprocessing": this covers many
of the areas I have already touched upon - such as
process improvement workshops, value chain
assessment and co-opetition. However it is
principally about re-tooling the supply chain and
focusing on operational and organisational
efficiency. When business was brisk and booming,
few retailers had the time or inclination to undertake
detailed analysis of supply chain processes. Now, of
course, it is rather different and time spent
eliminating redundant operations, minimising
product movements or managing peaks and
troughs more effectively, really can add to the
bottom line.
Intensive
Finally, this can involve "restructuring" - and this can
be the capital intensive part which can distract
decision-makers from the day-to-day needs of the
business; network design, infrastructure,
reorganisation, asset utilisation and redundancy.
However, identifying the stresses and strains that a
supply chain can absorb within its current
infrastructure is key to driving flexibility both today
and in the future - especially where many retailers
have multiple supply chains that could be
combined to reduce costs. Not many retailers will
be eager to invest capital in their supply chain in
the present climate, but if they do the analysis and
planning now they will be ready to reap more cost
benefits come the upturn.
Over the past decade retailers have had to cope
with major changes in their markets, channels,
product assortments and sourcing practices. As a
result, supply chains have become more complex
and costly. Today's challenging trading conditions
are refocusing attention on cost-cutting
opportunities. Some will rise to that challenge and
start "thinking the unthinkable" when it comes to
long-established processes and practices which may
be far from efficient. Others will simply hope to sit
tight and weather the storm. I think we all know
which ones will be better placed to meet today's
challenges successfully.
Mark Parsons, development director for Retail and
Consumer at DHL Exel Supply Chain. Mark has had a
varied career across the supply chain, working both in
the UK and overseas, covering roles in consulting with
Accenture, global procurement with Invensys and
change / project management with Electrolux, as well
as running the Value Chain Group and operational roles
in Freight Forwarding, Warehousing and Transport.
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