Why the Basics Are Still Key To Supply Chain Success

Sometimes we see things that beggar belief. We double-take, recheck and engage our other senses to confirm what we've seen. We scratch our heads and ask ourselves "what were they thinking?". Well, let me share with you a Christmas story that made me do just that. 

Our household was one of the many that contributed to the near 800,000,000 (yes, 800 million!) parcels delivered in Australia during 2019. December saw deliveries from several different companies arrive on our doorstep and I was left astounded by the waste. This is just one example of what we saw, but it wasn't alone. 

My wife ordered a book from an online store in the USA. When it arrived, she didn't know what it was as the box was so much bigger than what she thought she had ordered. 

This is what we received. The two small books in this large box delivered from the US. The box was 30 times larger than needed! 

 Delivery Packaging Example

To make matters worse, after placing the first order, my wife discovered she had only ordered 1 of 2 parts. So, we placed a second order about 15 minutes later. This additional book was delivered separately in a box that was nearly 10 times larger than it needed to be.

As supply chain consultants we, unfortunately, see this kind of thing more often than you'd expect. Yes, this Christmas tale is a radical example, but we regularly see shipments compromising mostly of air, inappropriate packaging and trouble with consolidating orders.

The good news is these are all very fixable issues if you know what to do (the easy part), how to get it done (a little more complex) and can help those who have to do it (the most difficult). This is hard work and seldom done well. It's also a significant reason so many supply chain initiatives can fall short of expectation.

Why should your supply chain be interested in getting these fundamentals right? These components could determine the success or failure of your business.

To go back to the example, not only was the box 30 times larger than required, but the cost to ship this from the USA was also 30 times more than it should have been. If this is happening 100 times a day, that’s nearly $250,000 every year that is wasted. If it's happening a thousand times a day, then we are talking millions!

The typical approach to controlling freight costs is through securing better rates. While small gains in rates may be achievable, the big opportunities lie in the operation itself - that is, understanding the freight profile. dimensions and then aligning everything to meet the service objectives.

A successful business would not allow tax arrangements to become out of control or operate with excessive banking costs. Yet, so many businesses have supply chains that are a long way from optimised and killing profits. The answer is rarely to do it cheaper, and almost always, to do it smarter.

Blockchain, AI, automation and drones will all have their place in time, but many opportunities exist today just by focussing on the fundamentals. Getting the basics right will make your business stronger and nimbler in the long run.

For more information contact us

Delivering Results

Prological provides unbiased advice providing our clients with customised and sustainable, best-practice solutions.

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