Dealing with supply chain peaks

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Manufacturers and retailers have developed highly efficient supply chain strategies to meet the needs of their day-to-day business. Some have outsourced to specialist logistics providers while others have retained operations in-house. These typically rely on core fleets and are designed for flexibility to meet the routine seasonal peaks of supply and demand. But what if a business has a peak above and beyond the seasonal norm? It is highly unlikely that any will have the resources to put large amounts of spare capacity, people and infrastructure in place.

Many retailers do most of their business in the two or three months running up to Christmas. Others experience peaks at other times of the year, such as bank holidays, special events or periods of good weather. These can all be planned into the operation to some degree so that production and distribution can cope. A conventional warehousing and distribution model helps because stock can be held in a buffer between producer and retailer or wholesaler.

But this is not about the routine fluctuations that occur during normal delivery cycles. Any reputable transport or distribution operation should be able to cope with those unless they are too lean and have no agility. The peaks that matter are those that add significant workloads that extend beyond the normal routine parameters. A reasonable definition might be that the volume of products or loads to be moved in a given timeframe exceeds the maximum vehicle capacity during the same period.

One Jigsaw customer manufactures consumer goods and has a regular end-of-month promotion. This leads to significant, but largely predictable, additional workloads to help the customer meet its "next day delivery" commitments. Jigsaw manages additional transport using the existing resources within its partner network to coincide with the promotional period. Back-haul operations are organised to ensure the vehicles are full on their return journeys. This is not as easy as it seems because vehicles are inevitably travelling to and from specific parts of the country. Nevertheless, routine transport for other clients which might not be as time-dependent can be managed to ensure resources are utilised across multiple contracts as efficiently as possible.

Careful planning, attention to detail and building relationships are all key to success. Experienced operators review previous peaks to see what does and does not work and assess the impact on services and costs. As Jigsaw has found working with companies in the drinks sector, such as Bacardi and AB InBev, the solution is often to integrate the transport operations of customers, retailers and partners and even to work with other third party service providers. Maintaining close relationships with all parties helps to ensure everyone understands the wider implications and potential impact of change.

This may sound simple but in practice can be extremely difficult to achieve without over-burdening available resources or compromising existing contractual commitments. In simple terms, an extra load or journey added into an existing operation can add significant levels of complexity because of the adjustments required to ensure all loads and journeys are completed. The consequences of adding even more work can present even bigger challenges.

It may be counter-intuitive but larger networks might offer greater flexibility. Adding a new drop or route into a network comprising just ten journeys might represent significant potential for disruption. Adding a new drop, route or depot into a system with hundreds of weekly journeys should be relatively simple and it is probably easier to identify synergies through common routes, compatible loads or complementary flows. This is one of the reasons why large scale managed transport operations can represent an excellent option for customers who need national coverage on a variable basis.

With this sort of supply chain integration the aim is to match inbound and outbound operations. The challenge to the transport management company or 4PL is to align vehicle movements and back office processes to create synergies and economies of scale while providing a scaleable and transparent service for all customers. The objective is always to minimise costs by avoiding unnecessary journeys, partial or empty loads or avoidable waiting time. Vehicles are only productive when they are full and moving. Anything less and they become a costly burden.

There will always be times when peaks are less predictable, such as when bad weather causes the type of disruption that leads to a backlog and additional workloads a day or two later. Many of the processes that enable the flexibility to cope with more predictable peaks will be useful here but may not always provide a perfect solution.

One aspect that is often overlooked is delivery timing. Many customers expect rigidly timed deliveries and want to impose financial penalties if slots are missed. While time of delivery may be critical for some retailers in built-up areas or suppliers of limited-shelf-life products, more often than not this is a luxury that can be eliminated to remove complexity and risk of non-compliance. Is it really necessary to deliver a load of laptops or a pallet of beer precisely at 10am? Similarly, aligning delivery patterns to actual demand can introduce additional synergies. For example, customers might insist on delivering a partial load every day when a full load once a week would make more sense. Removing these types of restriction immediately reduces complexity and encourages greater flexibility that allows operators to plan their schedules more effectively across the board so that cost savings can be enjoyed throughout the supply chain.

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