Logistics can be a tough business. In a world where your Amazon orders arrive the same or next day, customers are demanding more from all their suppliers. That leaves businesses struggling to keep up with customer expectations and forcing them to reevaluate – and reinvent – their distribution networks to become more agile.
Not only is customer satisfaction at stake, but in an uncertain world, logistics costs can easily spiral out of control, threatening the financial bottom line. Striking a profitable balance between customer service and costs is what defines a successful logistics operation.
A good way to grasp the basics of logistics is to use a tried-and-true concept in the supply chain industry: detect, decide, execute.
Logistics managers are at the mercy of uncertainty. Disruptions and random events can hit when they’re least expected. Bad weather, labor disputes, trade wars, and political unrest – to name just a few disturbances – can throw the supply chain out of whack at a moment’s notice.
For logistics operators, detecting such disruptions early is crucial. When shipments are running late or inventories are getting low, they want to know about it sooner than later, giving them more time to fix the problem and minimize its impact.
The good news is, the latest generation of logistics platforms can automate supply chain monitoring and detect untoward events early. For example, Oracle’s global trade management solution can notify managers when trade agreements change, such as when tariffs change from 5% to 30%, or vice versa. In light of the recent tariff wars, this capability could be a game changer.
New technologies can detect supply chain issues in real time. For example, businesses are now outfitting their trucks with IoT sensors to continuously track their movements and even monitor the conditions inside the trailer. If shipments are running late, logistics managers notice it immediately and can quickly figure out what needs to be done. Or if temperatures spike in a truck carrying sensitive medicine or fresh food products, managers can assess the potential damage.
Not every disruption to the supply chain is an emergency. Running late doesn’t matter when the delivery window is generous. But when your truck is on track to miss a departing ocean-container ship, the consequences can be more significant. The same goes with trade agreements: When tariffs are unexpectedly imposed, what can businesses do to minimize the financial impact?
It’s decision time. Do you shift routes, source from a new country, expedite deliveries, or set up new warehouses? All of these options come into play when you’re scrambling to address a supply chain disruption. It behooves organizations to have the tools to deal with a full range of disruptive possibilities.
Here too, cloud-based logistics solutions can help with decision-making. Let’s say you usually ship through the port of Los Angeles, but suddenly a labor dispute shuts it down. Do you shift to Seattle? Oracle’s logistics network modeling cloud solution can simulate the impact of different scenarios, providing an estimate of what the switch would mean for lead times and costs. Of course, it won’t prevent the disruption, but now you have a quick way to understand and quantify the impact, assess the alternatives, and decide how best to work around the disruption.
Other tools can help you optimize your global trading networks. Oracle Transportation Operational Planning Cloud, for example, can analyze the change in shipping costs if you’re thinking about sourcing raw materials or products from a different country.
Want to save money by avoiding high-tariff zones or taking advantage of trade deals that offer cost-saving preferential duties? Next-gen platforms such as Oracle Global Trade Management Cloud can automatically analyze your product master against all the trade agreements in the world and tell you what you’ll save if you switch countries. That’s an onerous task if you’re looking at thousands of products and reading through hundreds of agreements. Now it’s a fast, automatic process.
Remember some disruptions are of your own making. For example, let’s say you want to grow your business by serving customers in new market – or increasing the frequency of deliveries to customers. How about next day delivery? Modern logistics systems can help you decide if you can afford to make these moves and if you have the transportation capacity needed to execute it.
Speaking of execution, this is the part of logistics where the rubber literally meets the road. It’s when you put your decisions into effect – and it’s almost always easier said than done. Why? Mainly because the people doing the actual packing and shipping don’t necessarily work for you. More often than not you need to coordinate execution across multiple third parties, including trucking companies, contact manufacturers, third-party logistics (3PL) providers, and a number of independent warehouse operators.
Given all the uncertainties, it’s no wonder that people in logistics have gained a reputation as firefighters. But if you want to be a high performing company, you don’t want to be a fire fighter but a fire preventer. In other words, it’s better to install smoke detectors than to run around with a fire extinguisher.
When you succeed in building a modern supply chain with robust detection and decision-making capabilities, the execution part of the equation becomes smoother, more predictable – and more profitable. In the consumer goods sector, for example, the savings generated from a lean and efficient supply chain can often mean the difference between making money on a product or not.
Bottom line: when you can do the execution part of logistics right, that’s when your investment in detecting and deciding really pays off.
Is your logistics operation ready for the future? Learn more about integrating your warehouse, transportation, and global trade management on a single cloud platform.