What is in this article?:
Consistently reducing and optimizing costs without increasing logistics risk can only be achieved by intelligently combining industry-specific analytics frameworks, the right technology tools and logistics processes engineered for effectiveness as well as greater efficiency.
The graphic illustration of any global logistics operation, with its complex web of vendors, warehouses, distribution centers, service operations, transportation routes and hubs, can reveal an intricate map where individual costs are difficult to separate and understand. In a world where logistical expenses typically comprise up to four to five percent of total costs for a manufacturing firm, the increasing complexity of the global supply chain applies increased pressure on margins.
Enterprises usually implement transformation technology solutions or partner with a third-party provider to manage costs. Yet, many organizations find themselves falling short of their savings goals. Why?
Growth is Good, But...
As supply chains have become more global, the logistics network has been augmented with new routes and locations. Each new link in the supply chain brings its own local complexities regarding the availability of logistics assets, local laws and regulations, and infrastructure, among others.
Other factors offer increased challenges. Finding appropriate service providers, for example, is a more complicated process than it used to be. Plus, manufacturers need to conduct periodic risk assessments to ensure that natural disasters, political developments and other factors beyond their control are not looming as an incipient threat to production and fulfillment.
A Three-Pronged Weapon Against Complexity
Most organizations try to tame complex supply chains by deploying expensive technology tools, hiring consultants for business process re-engineering, or, more recently, deploying exotic analytics frameworks.
Alone, none of these solutions can produce the type of savings needed to outcompete in this new, more complex and more competitive economy. What is required is a smart mix of process, analytics and technology to simplify the logistics networks, mitigate logistics risk and optimize the associated costs. We call this a three-pronged holistic approach: