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GREEN LOGISTICS, CHALLENGE FOR SMEs, SUPPLIER PERFORMANCE AND DEMAND PLANNING-WHAT WILL AND SHOULD HAPPEN IN SUPPLY CHAIN MANAGEMENT

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GREEN LOGISTICS, CHALLENGE FOR SMEs, SUPPLIER PERFORMANCE AND DEMAND PLANNING-WHAT WILL AND SHOULD HAPPEN IN SUPPLY CHAIN MANAGEMENT

More changes are going to happen in supply chain management (SCM). Change is nothing new to SCM. Some of them reflect external factors that will impact it. Some reflect changes that are needed to make supply chains more effective.

Some important ones include:
Green Logistics. Modes of transport used, order and shipment sizes, location of warehouses and more of what are now accepted supply chain practices may be challenged as companies deal with "green". Jeremy Hammant of LCP Consulting in the UK has said, "Going Green" is about more than just reducing packaging or your carbon footprint. It involves making environmentally-wise choices in supply chain design and execution, including managing the reverse supply chain to efficiently manage and remove waste. The key objective of a business is to grow shareholder value, so it would be a brave organization that decided to do everything it could to be green irrespective of costs. However, as fuel costs rise, economic and environmental concerns will converge even more - good, old-fashioned operations management thinking is directly applicable to carbon management. As the cost base changes, projects which would have been unviable in commercial terms in the past will become justifiable. We believe that the most effective way of approaching carbon management is to apply business principles to the environment, not environmental principles to business."

This may be slow to gain significant momentum. Consumers have not demonstrated a strong commitment to pay for green. Also, making and sustaining business changes is a high bar to cross presently. Environmental problems lie outside of their general business, especially outside of their core competencies.

Yet some large companies have begun to assess how green their supply chains are. As the implement changes, they will also drive improvements on their suppliers and service providers. This rippling will continue as suppliers make changes to comply with customers and push their suppliers change.

SME Challenge. Small-medium enterprises (SMEs) are reaching a critical path in their businesses. Leading supply chain practices and processes commonly reside with large retailers and manufacturers. They have and driven various economies of scale. They utilize technologies and have larger staffs of people active in supply chain management.

SMEs are not fighting large competitors on a level playing field. They cannot leverage their volumes into as low of prices. They do not get the same performance from suppliers; as a result. SMEs then have customer service problems because needed products are not available to sale, and they tie up more capital in inventory with fewer turns, all of which have an impact on profits and the ability to grow.

These businesses must change. It is almost a matter of survival, especially in a slow economy. Supply chain management is a key way to drive that change. SMEs have an advantage over their larger competitors. Their smaller size gives them less bureaucracy to change and greater agility to respond.

The question of SMEs will be how to assess, design and implement new supply chain processes. They will look to outside firms to help them. These firms will be supply chain service providers, as compared to logistics service providers that are basically transport or warehouse firms that are not focused on supply chain management as their driver. The logistics firms, including 3PLs, as core commodity service providers, do not see supply chains. They see pallets and containers and trucks. This is a significant problem and issue for SMEs.

To address the issue, a new paradigm will develop to meet this market need and opportunity. The paradigm will be independent supply chain service providers and will work with SMEs on supply chain needs, not on freight. The new supply chain providers will not come from existing, large 3PL or transport, forwarding or warehousing service firms. They will develop from new venues. That is what usually happens with market needs. Existing players focus on their needs and not on customer needs. As a result, new players enter the void.

SUPPLIER PERFORMANCE AND DEMAND PLANNING. These two are aligned. Supplier performance is the foundation of a solid supply chain. Poor and erratic supplier performance cascades through the supply chains of customers. Much effort is expended to band-aid alternative solutions. In the end, it is a source of great waste and inefficiency.

Part of the dilemma though rests with their customers, the retailers, wholesalers and manufacturers. The long lead time with offshore sourcing, comprised much of transit times between and among the various involved parties, creates additional forecasting uncertainties. To mitigate some of the additional time and its resultant uncertainty, companies will streamline processes to remove gaps and redundancies. Then they will add technology to increase visibility to purchase orders and to product moves, including those from their suppliers to their suppliers' suppliers.

Other. There are other changes, many external. The continued pressures on failing or insufficient infrastructures, in the US, China, India and elsewhere will continue to cause problems, disruptions and risks to supply chains as companies deal with either compensating for inadequacies or with building new facilities. Supply chain security and its impact of supply chain velocity will continue. The potential for mergers in ocean shipping and in freight forwarding and 3PL markets continues. Mergers could accelerate during a business slowdown as firms use acquisitions to bolster volumes and revenues. Companies will increase the frequency of sourcing changes, to more dependable suppliers and to lower cost sourcing countries to help improve pricing and their businesses. Supply chains will have to be agile and dynamic to adjust with these changes.

Conclusion. Changes will continue. Some will be at fast rates, making if a challenge to respond properly. Adding to the challenge, some changes will work counter to each other as to their impact and how to respond. All this will require reorganization of supply chains, both global and domestic. Supply chain executives will not be bored.