The last thing that a supply chain planner wants to see is empty shelves in a store, especially when they are responsible for inventory availability. The feeling of despair gets even worse when they receive pictures from their superiors, questioning why one specific item is out of stock in a single store. Worse yet is when out of stocks are publicized on social media or in the news.
Whether it be a shortage of fried chicken at a fast food restaurant, a package that doesn’t arrive within the promised delivery window, or a load to a distributor that ends up one pallet short, this type of attention often falls back on those with the job description of balancing forecasted demand with available supply in order to meet customer expectations. By definition, that seems like a basic requirement, but as companies increasingly rely on their supply chains to be both an avenue for continuous improvement and the mechanism for customer delight, the pressure to do everything right grows.
In reality, navigating supply and demand pitfalls in a multi-echelon network is incredibly complex and requires extensive integration among many stakeholders. Increasingly, the supply chain community looks to partnerships to find solutions for the problems that plague transportation, physical assets and last mile delivery
Our 2017 Future of Supply Chain study says that for last mile, 55% of supply chain respondents are seeking out partnerships, whether it be multi-capability partnerships like 3PL/4PL (41%), or innovative partnerships (14%), including the sharing economy and autonomous vehicles. In addition, another 20% are relying on traditional providers and/or technology, such as FedEx and UPS.
For example, CPG companies concerned about the ability to send a single unit of packaged product to a consumer are finding that outsourced logistics partners now have the capabilities to not only break down products initially shipped in bulk, but also handle inventory management, as well as information and financial flows. CPG and similarly focused peers, like food and beverage and retail, are also looking to the sharing economy where concepts like Deliveroo, and Uber Rush and Uber Eats are taking on the responsibility for getting product to the consumer.
The lure of shared capability development extends to those in process industries, too. Shell’s use of a fourth party logistics (4PL) operation is considered an important part of its supply chain transformation, with its Logistics Management Services supporting “upstream operations, covering production, wells and projects.” Innovative partnerships are also being used to explore new opportunities, such as IBM and Maersk’s pilot of a blockchain solution in the shipment of Schneider Electric goods.
The movement toward partnerships is also supported by a growing proportion of respondents that rely on e-commerce platforms for direct-to-customer fulfilment. The overall percentage remains relatively small at 19% of all 2017 Future of Supply Chain respondents. In comparison, 51% are developing their own capabilities. However, the growth in some consumer centric industries, and again for chemical and industrial companies, may be a leading indicator.When the time comes to evaluate the potential for partnerships within your supply chain, consider the following questions:
- In what ways would your customers say you fail to deliver upon the value proposition? If you’ve already perfected delivery of the value proposition, then you may be more suited to iterative improvement opportunities. However, most organizations can find a few key areas of improvement. Using many commonly used tactics and toolsets, such as cause and effect diagrams or failure modes and effects analysis, your company can quickly dig into these areas to narrow the focus to specific development opportunities.
- Which parts of your supply chain are inefficient, under-utilized, or maxed out? The Theory of Constraints would call each of these scenarios the drumbeat that limits the effectiveness of the entire operation. Inefficient elements may be busy, or hard at work, but they’re wasting valuable resources, whereas the other elements could either conditionally add value if used more, or have simply reached their limits of productivity.
- Who can make us better? The first two questions are introspective, aimed at objectively assessing your supply chain’s faults. This outside-in question puts the comparison of as-is limitations to desired to-be states to the test. Taking this approach moves the evaluation of partnerships away from the pursuit of “shiny objects” – innovations that are buzzworthy, but of undefined opportunity – and towards capabilities that advance the value proposition across the entire supply chain.