As the way we do business rapidly evolves, Australian transport infrastructure is once again under the spotlight. The transition to a direct-to-consumer delivery model is either happening or imminent in a variety of industries, and it’s obvious that massive reforms in our road and rail infrastructure are required to be able to support this shift in the supply chain. As technology and consumers drive this move it is the progressive and proactive organisations that are reviewing their processes and embracing the changes. There are many businesses, however, for which current transportation costs, timeframes and service (amongst other things) are an impediment to change. For nationwide reform to occur, thoughtful consideration must be given to the capability of our road and railway network.
Why the need for changes in supply chain logistics?
In Australia, we are accustomed to a privileged position that sees us take for granted that products will be available to buy. The abundance of goods that are available means we often forget how the products were actually supplied. We expect our apples to be super fresh and the latest iPhone to be available on launch day. The rapid increase in e-commerce means this expectation has further increased and we demand complete availability and home delivery at short notice.
It should be obvious from this shift in behaviour that the supply or logistics system that gets goods from production through provider to consumption also needs to be transformed. The need for cost reduction and increased service efficiencies are also key drivers in this change.
There is a cost imperative to making sure that logistics is carried out efficiently through the most appropriate allocation of resources along the supply chain. The major costs for business throughout the chain include:
- Storage: The elements of logistics are remarkably expensive and holding stock or inventory in warehouses, just in case it is needed, is a highly costly activity.
- Stock: The stock itself is expensive, and depending on the type of product, may become obsolete if it doesn’t sell.
- Commercial property prices: Warehouses and distribution centres are generally very expensive to build, operate and maintain.
- Freight: The fact a business will pay for products to be delivered from the source to its warehouse and then again to ship to the customer is doubling up the miles the product is travelling.
Improved service efficiencies
With the appropriate integration of information technology and systems, supply and demand can be better monitored which means business can provide an enhanced level of service to customers. Higher quality goods can be delivered in a timelier manner direct to customers at the point of demand. Reaction time to spikes in demand can also be radically improved through the use of information dissemination technologies. If operating properly, a good logistics system can therefore both reduce costs and improve service, providing a competitive advantage for the manufacturer, business and customer.
The current transport industry landscape
It is no secret however that the current Australian freight infrastructure is tired and overworked and requires serious improvement. The rail network in particular is old and poorly utilised in this country. Rapidly increasing population and modern business practises have shifted how manufacturers and customers think about goods, and yet the transport industry has not kept up.
Sometimes innovation involves incremental change, and at other times new approaches will cause disruption to existing models of delivery. By harnessing advances in smartphone technology, data collection and the growth of the sharing economy, high-quality, on-demand, point-to-point transport services are able to more intuitively meet the needs of the customers.
Short of any recent significant rail upgrades, emerging and existing providers that are motivated by commercial returns have been delivering services in creative ways that make better use of existing networks. However, there is still an urgent need for transport infrastructure to improve to the point where it can support the new drive from manufacturers to bypass the middleman and go direct to the customer.
Partnerships and integration between businesses, manufacturers and innovative logistics service providers is fundamental to modern logistics success. The ability to bypass costly warehousing and deliver products straight from the source to customers is a necessary ability and one that is increasingly in demand. The ‘reach’ of retail logistics has expanded enormously. Products are sourced from around the world and so the interactions and movements involved in logistics now need to be equally international.
Logistics is about the movement of product, and much work is undertaken on improving the mechanics of this task. A very real need in this country is to consider how our rail and road infrastructure is – or isn’t – supporting the shift in supply chain requirements driven by the changes in consumer buying behaviour.
Finally, businesses are paying huge costs for all elements of the supply chain and have options to work with independent consultants, such as our team at Freight Cost Solutions™, to review your current expenditure and develop strategic ways to save money on freight.
This post originally appeared in MHD Magazine.