May 17, 2020
How to Build a Risk-Proof Supply Chain
The recent airspace closures as the volcano in Iceland continues to spew ash has served to highlight the importance of a strong and functional logistic...
The recent airspace closures as the volcano in Iceland continues to spew ash has served to highlight the importance of a strong and functional logistics network, particularly at a time of financial uncertainty. The oil spill in the Gulf of Mexico also has the potential to create some logistical problems. With so many potential risks directly affecting the movement of goods, the pressure is on companies to invest in logistics operations that can withstand almost any incident.
Those companies with resilient supply chains are not only less likely to fall apart in the event of an unexpected disruption, but there are cost savings to be had too.
General Mills, the U.S.-based marketer of food brands including Cheerios, Betty Crocker and Old El Paso, was recognized for its logistics operations by the R&FF Logistics Leadership Awards back in 2002. Its award recognized the strength of its logistics network, particularly after the acquisition of The Pillsbury Co in November 2001. Warehouses and carriers were quick to acknowledge and applaud what was considered a pro-active approach by General Mills to maintain its logistics, even during the integration of The Pillsbury Co.
Tim Coats, Vice President, Logistics & Strategy, and Gary Petersen, Director of Transportation, were responsible for the success of the company’s logistics strategy throughout this period. Petersen puts its subsequent success down to having a handle on the supply chain basics. “Leadership in transportation and warehousing areas at General Mills require excellent execution of the basics,” he told the R&FF. “We ensure that we are delivering well on the basics by carefully monitoring our own performance and that of our providers.”
He explained that its approach has been one of building long-term relationships with providers. “We have been successful in this area through partnership collaboration and information sharing,” added Petersen. “Carriers and warehouse operators can help us by understanding our business and challenging us to modify our business processes if they see them as inefficient.”
RESPONDING TO RISK
Likewise, it is vital that companies have a supply chain that can respond quickly to any situation. Paul Martyn, VP of BravoSolution, a sourcing solutions company, is well aware of the qualities that organizations are looking for in their logistics operations.
“Most clients look at their logistics partners as being companies they want to work more closely with around factors like quality, service levels and reliability,” he explains. “In today’s market, one thing that factors quite prominently is risk management.
“I think having a collection of tools and a nimble infrastructure to respond to some of the diversity of these risks is also another important part; being able to have multiple options and multiple networks that you can quickly reconfigure based on changing demand.”
COLLABORATION IS KEY
Collaboration, as Petersen mentioned, is also a key requisite when it comes to building a reliable logistics network. At the Multimodal exhibition in Birmingham, England, at the end of April, a Shippers’ Voice seminar found that most manufacturers and retailers were willing to collaborate with a direct competitor in their supply chain. In fact, 94 percent of respondents voiced their approval and, of those, 65 percent said cost was the main driver for considering collaboration.
Joel Ray, a director with Transport Intelligence who presented the results of the survey to delegates, said: “About 40 percent had already done so in the past, and most saw transport, rather than warehousing, as the main area with potential for collaboration.”
What Martyn has noticed is that green issues are becoming far more prominent in the design of logistics networks, citing recyclable content and carbon footprints as increasingly important factors in companies’ supply chains. Many organizations are putting the pressure on logistics providers, verifying their green credentials before partnering with them.
SUPPLY CHAIN VALUE
In an industry where businesses’ and consumers’ reliance on the movement of goods is more important than ever, the strength of logistics networks is a priority; whether that’s through collaboration, the right tools, the adoption of green logistics, or simply basic logistics in place by which to operate a reliable service, companies need to take a pro-active approach and place more emphasis on this essential component of business.
Martyn recognizes that although cost is being factored into the supply chain, this is becoming less of an issue for companies. “I think what we’re seeing from a trend perspective is that while total cost of ownership is still a very prominent factor,” he explains, “what we’re also seeing clients migrate towards is total value management.”