FedEx talks supply chain logistics
Written by the FedEx Team
Imagine it’s the holiday season. Inside one of New York’s busiest shopping malls, an ATM stops working. The manufacturer dispatches a repair technician. She diagnoses a malfunctioning high-tech part that’s too valuable to be stocked in every field tech’s vehicle. Meanwhile, the manufacturer has a service agreement with the bank that its ATMs won’t be out of service for more than four hours.
That’s where FedEx SupplyChain comes in. Through its FedEx Critical Inventory Logistics® solution, the provider excels at offering what a growing number of today’s high-tech, life-science, medical device and avionics companies say they need: supply chain solutions that not only support the timely movement of finished goods, but also allow them to manage cost, time and their customers’ service expectations. Services that add value while goods are at rest, not just while in motion. Solutions that start with the sourcing of parts and extend all the way to post-sale returns and repair of finished products.
FedEx Critical Inventory Logistics matches the delivery requirement of each customer order with the optimum inventory stocking location and the appropriate FedEx transportation service. Central to the solution is the network of Global Distribution Centers that FedEx SupplyChain maintains in strategic locations around the world. The company also operates forward stocking locations – including many that are open 24 hours a day – at FedEx Office, FedEx Express, FedEx Trade Networks and other provider facilities worldwide, where customers’ most critical inventory can be positioned for rapid order fulfillment and delivery. Many of these stocking facilities are near hospitals, business centers and other strategic locations – enabling customers’ field representatives to pick up critical parts or devices on a moment’s notice or ship them using the many FedEx and non-FedEx transportation options available. The use of regional and forward stocking locations also allows customers to keep supplies accessible to support an increasingly mobile workforce.
Just as importantly, FedEx SupplyChain provides customers with real-time global visibility from a single integrated, flexible IT framework. Customers worldwide can track the status of their orders, shipments and inventory levels by logging into a web application on fedex.com – no matter where an order was placed or where it will be delivered. For added flexibility, order placement and status messaging are also available through electronic data interchange (EDI) and delivered in a common global message format. FedEx SupplyChain also operates a common warehouse management system, enabling more consistency in capabilities and experience around the world.
In the case of the out-of-order ATM in New York, the field tech simply types a parts order into her mobile device. The order data digitally flows to the nearest FedExCritical Inventory Logistics facility with the part in stock. In as little as 30 minutes, the part is ready either for pickup by the field tech or for delivery to the shopping mall. The cash machine is back online and outstanding customer experience is delivered.
“Increasingly, customers are asking us to help them re-engineer their supply chains to drive market penetration and top-line revenue,” remarked Craig Simon, president and CEO of FedEx SupplyChain. “Through FedEx Critical Inventory Logistics, we’re able to deliver solutions that generate more revenue, reduce the cost of goods sold and improve asset efficiency.”
Take the ATM manufacturer. When one of its units goes down, the customer risks financial penalties if it fails to repair a machine within deadlines spelled out in service-level agreements. With its old manual inventory management process, the manufacturer needed to stock higher levels of spare parts in order to avoid those penalties. Now, with FedEx Critical Inventory Logistics, the company can avoid service-failure penalties and dramatically reduce inventory-carrying costs. Plus, the company’s sales force is empowered to meet or exceed the requirements of even the most demanding new customers.
“As the global economy continues to climb steadily out of recession and into growth mode, it’s no longer enough for transportation integrators to just focus on helping customers lower their shipping costs,” added Simon. “It’s imperative to develop more sophisticated capabilities that enable them to exact even more value from supply chains that span the globe. That continues to be our goal.”
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector