Home' MHD Supply Chain Solutions : MHD May-Jun 2016 Contents A
s 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 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
through the chain include:
1. 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.
2. Stock. The stock itself is expensive, and
depending on the type of product, may
become obsolete if it doesn’t sell.
3. Commercial property prices. Warehouses
and distribution centres are generally very
expensive to build, operate and maintain.
4. 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
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 practices
have shifted how manufacturers and customers
think about goods, but 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 who 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 busi-
nesses, manufacturers and innovative logistics
service providers is fundamental to modern logis-
tics success. The ability to bypass costly ware-
housing 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 to
review expenditure and develop strategic ways
to save money on freight.
Darren Ash is the managing director at
Freight Cost Solutions, an independent freight
auditor that provides cost savings and is
committed to making a positive change in
the freight industry. For more information
call +61 3 9783 3675 or visit www.
“Logistics is about the
movement of product, and
much work is undertaken
on improving the
mechanics of this task.”
CHANGES IN CONSUMER HABITS DEMAND SERIOUS REFORMS IN
AUSTRALIA’S TRANSPORT INFRASTRUCTURE
CHANGES DEMAND REFORM
MHD SUPPLY CHAIN SOLUTIONS — MAY / JUNE 2016
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