The international logistics industry is on the cusp of a paradigm shift with regard to the way in which organisations manufacture and ultimately transport goods from one location to another, says logistics company DHL Supply Chain strategy director Warren Brusse.
Historical attitudes toward supply chain management, which tend towards a traditional single-format approach, are gradually being eroded by improved efficiencies and cost savings associated with segmented strategies, explains Brusse.
This shift is even more pronounced in highly informal trade markets and markets, such as Africa, located further away from the manufacturing source.
The segmented supply chain focuses on breaking down monolithic strategies into smaller and more nimble substrategies orientated towards the product and customer, says Brusse.
“It is no longer acceptable to presume that what works for a large wholesaler at an industrial goods level can be appropriated and applied to a network of fast food restaurants servicing the consumer market,” he highlights.
Each wholesaler has its own particular set of requirements and expectations and, to balance market response and cost, organisations must accept that each market and merchandise category requires its own segmented supply chain and requisite planning.
US-based analysts McKinsey & Company say: “The idea that organisations can enhance their supply chains once, and for all circumstances and customers, is a fantasy.”
McKinsey & Company adds that forward-looking companies are preparing for the shift by splintering their traditional supply chains into smaller and more agile ones.
While these new supply chains may rely on the same assets and network resources as those of the past, they use information differently, thereby helping companies to embrace complexity while better serving customers.
The emergence of Africa as a frontier market serves as a primary example, says Brusse.
Expectations and outlooks on the continent differ markedly from those in the more developed regions. The application of a traditional supply chain model to new environments is fundamentally flawed, as Africa requires different strategies to serve the informal and widely dispersed markets, says Brusse.
This market is characterised by border-crossing delays, poor logistics infrastructure, political instability and misalignment, all of which result in longer lead times and higher inventory levels across the supply chain network.
Partnership with experienced supply chain and logistics groups will drive an agile and efficient approach to addressing these concerns at an organisational level.
“Arguably, large organisations have the capacity to create new divisions of supply chain professionals to follow a segmented approach in each market, including product sets and customers. However, the cost and difficulty of implementing this approach with this strategic path could be prohibitive in the long run,” says Brusse.
This is because of the wide diversity of skills and the development of skills required across the disciplines of network, inventory, facility, warehouse layout and flow, fleet configuration, business processes and systems, he adds.
In response, DHL Supply Chain has developed a global supply chain solution design capability to address this need.
By incorporating a logistics management partner into supply chain planning and design, organisations can gain access to world-class skills sets and enhancement systems without the commitment and expense associated with full-time internal resources and systems, explains Brusse.
“No market is immune to change; the strategies and tactics that have proved effective in the past are gradually corroding, giving way to greater efficiency in terms of time and cost.”
He concludes that companies can potentially record significant savings if they can realise the importance of strategic logistics to business.