Supply chain resilience demands flexible space strategies.
Supply chain resilience demands flexible space strategies.
In normal times, manufacturers and retailers would now be setting up the supply, warehousing and transport contracts to ensure the resilience of their supply and distribution chains against a series of ‘known unknowns’. A new Premier League season, Black Friday/Cyber Monday, Christmas, Valentine’s Day, Easter … even if their magnitude is uncertain, the timings, at least, are firmly in the diary.
Or at least they were. Post-COVID, there is no guarantee they will happen at all. Consumers may tighten their purse strings and they may not even notice a Black Friday promotion when distress pricing is ubiquitous. The notorious ‘second wave’ of infection is an ever present threat. ‘Resilience’ is no longer about the ability to meet demand peaks, it is as much about being able to shed, postpone or redirect capacity.
For more thoughtful minds, planning for the unknown is nothing new – many in our field worked through the post 9/11 disruptions, the supply side disruptions of the Icelandic volcano of 2010, the 2011 Japanese tsunami, and the demand impacts of the 2008/9 financial crisis. Organisations such as the Business Continuity Institute have been banging the drum for resilience for many years. COVID 19 is unique only in its scale, but it has exposed the flawed assumption that in a global business world there will always be eager buyers and capable vendors.
There will be other viruses – novel forms are discovered almost daily – there will be natural disasters, from localised flooding to solar activity knocking out power grids, communications, the Internet, GPS. Human actions too may cause huge disruption, from Brexit to geopolitics, with populist protectionism, political unrest and, unnervingly, the rising possibility of State-sponsored hacking.
Those are merely the more likely shocks coming on top of major secular transitions such as online commerce, more ‘conscious’ consumerism, and ‘green agendas’.
Logistics professionals and their industries can control few if any of these risks, but they can and must respond and mitigate. There will be a temptation to postpone the big decisions until it is clear which way the winds are blowing, but that may not be for years, and in stormy weather captains need to maintain headway.
The response begins with having detailed and timely visibility of the supply chain so that impending threats can be acted upon quickly. Having a Plan B, Plan C, and even a Plan D will be essential. Important too, will be having the contacts and relationships to enable mitigation plans to be implemented both promptly and at acceptable cost.
Plans B to Z will almost always affect capacity requirements for warehousing, storage and ancillary operations. A few examples: the long term move to online retailing requires very significantly more storage and picking space than does shop-based sales, but if demand is increasingly both spikey and unpredictable, as it may well be, long term commitments whether to physical assets, or to 3PL contracts, may not be the way to go. At the other end of the scale, the ‘small print’ can be critical. In the early days of COVID, one of our clients found a product had been reclassified as ‘essential’ – they no longer needed 5,000 emergency pallet locations, but things could have gone the other way. There will be many similar instances as the small print of Brexit gets hammered out.
Larger strategic decisions also have logistics implications. ’Homeshoring’ supply is a growing trend. But sourcing closer to home may or may not contribute to supply chain resilience – if the crucial microchip is still single-sourced from a factory in a flood zone there is no real gain. Another common response is to increase safety stocks. However, domestically sourced stocks have to be held somewhere. Again, the implications for warehousing strategies are significant.
Agility and flexibility have always been highly prized supply chain attributes, but with such a preponderance of ‘unknown, unknowns’ a far higher level of responsiveness is now required and that demands a new way of thinking – a whole new set of strategies for flexing warehouse space.
The new thinking should start by considering what the requirements may be, under a range of possible scenarios. Often, these can be grouped together as situations that require a similar class of solution, even if they differ in detail.
Then, analyse what types of solution are practicably suitable and available – new or additional space, automation, changing working practices and so on – given constraints such as capital, cashflow, and the need to maintain business continuity. Important too, is respecting the characteristics of the business, or the relevant part of it, remembering that in this more complex world the company may be running multiple business models that require different approaches. Look at the options for implementing solutions, and the partnerships and relationships required to achieve results in an acceptable timescale – not forgetting, of course, the possible impacts on existing partnerships.
Then continue to develop these relationships and implement solutions whilst keeping abreast of new and emerging developments and options. The new environment is one of constant flux – many opportunities will present themselves, but often only fleetingly so businesses need to know about these and act on them quickly. Bis Henderson offers clients regular ‘clinics’ to review their changing needs and match them to what is or may be available, while access to our constantly updated supplier databases ensures that clients are alerted to opportunities in the areas where they are located, or wish to be located. Alert to opportunities, firms can be proactive in their warehousing strategies, not merely reactive.
Thinking and working this way, partnering with a specialist warehouse space consultancy like Bis Henderson Space is about much more than the tactical location of spare capacity to cover unplanned contingencies – although we do that as well. It is about improving supply chain resilience by creating reasoned strategies and plans for warehousing, distribution and inventory, and using market intelligence to implement them, and if necessary pivot between them, on a continuous basis.
In this way, storage and warehousing operations can live, breath and flex dynamically to support and protect the business, whichever way the winds blow in the ever-changing situation we’re in.
By Steve Purvis, Operations Director at Bis Henderson Space