Adapting to Rapid Supply Chain Change with Strategic Planning

— 3 minute read

Today's distribution landscape is changing. To meet this challenge, supply chain managers need a strategy to reduce risk and boost efficiency. This strategy requires a situational assessment and a plan for adapting to the evolving environment. This planning process should include a distribution network analysis and built-in flexibility.

Distribution Network Analysis

When properly designed, distribution networks balance many considerations:

  • Inbound transportation costs
  • Distribution operating costs
  • Inventory costs
  • Outbound operating costs
  • Product constraints
  • Customer constraints
  • Various plant costs
  • and more

There are always changes in the various cost elements in the network. But due to the pandemic, companies must re-evaluate the flexibility of their distribution networks. They will need to optimize the cost structure against the changing demand that likely will be a factor over the next several months and even in 2021.

With the current rate of change, a distribution network analysis can be a good investment. When companies test their distribution networks, they boost agility and adaptability. This lets them better respond to changes. Companies who are ready to respond can be competitive while mitigating cost and risk. With the growth in demand fueled by e-commerce, major third party logistics (3PLs) providers have to adapt. They are adding new facilities as they determine they need more distribution locations to fill in their network. With more capacity, these 3PLs provide their customers a way to reallocate their distribution.

Their customers can:

  1. Optimize their distribution network costs
  2. Mitigate carrier risks by allocating their shipping volume over more locations
  3. Respond to increasing customer expectations of both fast and flexible response

Built-in Flexibility for the Fast-Paced Distribution Environment

It is vital to re-think your company's need for supply chain flexibility. Consumer expectations are changing along with technical capabilities. The Internet of Things (IoT) and changes in demand due to the pandemic demand that we weigh the tradeoff between cost and agility. Companies are finding that investing in agility is worth the cost over the long term. Distribution facilities are adapting to provide this facility through omni-channel and shared facilities. In the high-demand world of cold storage, firms are designing and building trend-setting facilities. These refrigerated warehouses will provide flexibility for years to come.

Building designs offer quick-freeze, quick-chill and thaw functionality, along with other multi-temperature capabilities. Temperature is not the only factor. The new facilities also offer flexibility in the form of shorter-term commitments. Companies can configure dry distribution space with flexible ceiling height and flat-floor systems. They can also customize the number of doors to create their own flexible configurations. They can merge perishable and dry product distribution. Though the flexibility can cost more up front, companies recoup that cost in the long term. When market requirements change, they can adapt to accommodate many types of uses.