Does the supply chain need re-inventing?

ShippingShipping

The Travels of a Toaster

We often marvel at nature, space and scientific achievements. On a much more mundane level, consider the journey a consumer item makes across the globe before reaching its destination. Your fancy toaster has been designed in England, prototyped and produced in, say, China before being loaded into a container and shipped across the oceans to a UK port. Many months after origination, the goods clear customs and are then transported to a wholesalers warehouse. Online retailers purchase the stock which is then moved again to a smaller fulfilment warehouse. You buy the item through the retailers website and any one of 20+ UK carriers will collect the parcel and deliver to your door, no doubt taking in a number of hubs, sorters and depots along the way. That toaster sure feels travel sick by the time it goes into action on your sideboard!

So, in this ‘supply chain’ we have the following parties doing their stuff (abridged list):

– Product designer
– Manufacturer
– Shipping Agent (China)
– Shipping Line
– HMRC
– Transport Company (UK)
– Wholesaler
– Retailer
– Carrier

China has effectively exported deflation over the past 20 years; low labour and production costs have kept a lid on consumer prices. Unlike our parents, we think nothing of buying a TV and throwing it in the skip after a couple of years in favour of the latest model. However, like all developing economies, costs of living are on the rise and this will inevitably place upwards pressure on prices.

In my opinion, the process of ‘re-shoring’ will be limited, so perhaps we need to reinvent the supply chain to control costs. Companies like DHL have tried, with modest success, to ship goods direct to consumer ex-China. However airfreight is limited and not cheap, not forgetting that goods still need to clear UK customs on arrival. All this extends delivery times at a time when some outfits are offering same day delivery. Perhaps this is the point where an enlightened carrier with a national delivery infrastructure can change the way we do business. Rather than cascading the stock down the chain from ship to container to large warehouse and then small warehouse, how about goods being permanently warehoused at port and then delivered direct to the consumer? This ‘virtual stock’ approach would generate significant service revenues for the provider (e.g. storage, pick/pack) in addition to carriage, cut out thousands of miles of travel and save the planet!

In my experience, Carriers tend to operate on a ‘silo’ basis. They are preoccupied by volume, networks and operational issues. However, it really wouldn’t be impossible for a IT-driven operation to extend the proposition to include fulfilment, doubling turnover almost overnight. Retailers of ubiquitous goods usually operate on fine margins, so even a 5-10% reduction in landed costs would potentially offset the increase in production costs. Our consumer society needs feeding, but retailers and the supply chain will need to respond to the challenge.

Just a thought!

by leet on 10/10/2014

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