"Orion aveugle cherchant le soleil" by Nicolas Poussin - Metropolitan Museum of Art Besides the derisory view of the practice known as “channel stuffing”, there are many other commercial practices that create “lumpy” inventory challenges for logistics and transport professionals.
We already touched upon this matter of “lumpiness” in respect of gramophone records (the production run / peak demand issues). However, we can also extract a little more from the new agricultural machinery market scenario in this respect.
It may be self-evident to many, but we were once surprised ourselves to discover just how inflexible complex equipment manufacturers in the agricultural sector professed that it was necessary to be, in respect of their directly translating their long-range forecasts into actual shipping order volumes.
Even so, for a global agricultural manufacturer, if demand was down in one market and had risen in another, we were informed that they were likely to be able to recast their order book if common equipment was being manufactured. They may even have been able to tweak orders and specifications before hard milestones / deadlines during the manufacturing process. But the reality, as we saw it in the agricultural equipment market, was often that the long-range forecast order quantity of units usually actually shipped years later, in spite of severe market demand rise & fall in the intervening period.
A more regularly encountered instance of induced shipping order lumpiness, one that bemuses transport people the world over, is the end-of-month, end-of-quarter, or end-of-financial year shipping push ritual. Be it driven by an enterprise’s regular accounting / budget / earning / reporting practices, or the sales commission incentives put in behind them; or even by multinationals that play pass-the-parcel (of unsold inventory to related / inter-company parties at tax appropriate prices); the facts on the ground are that these periodic shipping pushes-and-pulls have long created extreme lumpiness in logistics and transportation channels.
How we have best responded to all these cited examples of lumpiness in the past is naturally our best leaping-off-point for the design of solutions, when similar lumpy features arise in the on-line commerce age.
And when we say that specific innovative logistical solutions should be crafted from a wide base of understanding, perhaps the Latin may help annotate the proposition: nanos gigantum humeris insidentes (we are but dwarfs standing on the shoulders of giants).
From this point onward, however, we should start talking about the shaping of logistical solutions. The long introduction has already seen some asking us to cut-to-the-chase. Perhaps this reflects a situation where, for many, solutions are simply things that you cut-and-paste; and in their mind that’s the smart thing to do?
One of the saviors for enterprises that have adopted cut-and-paste logistical solutions for their on-line consumer markets (in the tech sector in particular) in recent times, has been the continual shrinkage during the period of the unit sizes of the items they have been shipping. Navigating capacity issues arising with existing transport and logistics channel capacity, even as their shipped unit volumes grew exponentially, was perhaps made a little easier. Still, looking at the e-tailers actual bottom line results, it might hint at the depth of logistical under-performance elsewhere.
Several recent pointers, however, (like computer tablets morphing back into laptops, or smart phones growing-in-size) probably indicate that we are reaching the limits of gaining systemic logistical capacity as a result of the said unit volume shrinkage trend in the sector as-a-whole. Moreover, bulky deliveries also appear to now be a new frontier in the B2B and home delivery markets that will make their mark, as discussed here:
www.bloomberg.com/news/articles/2015-09-25/why-fedex-has-a-delivery-headache-from-trampoline-you-got-online
In the transport sector, this is a turn of events (in respect of individual shipment size growth) that transgresses the haulage capacity issue. Starting from the point of a decade or so ago, when most deliveries entailed a delivery vehicle operated by one man making a delivery to a commercial delivery dock, with available lifting equipment, and being easy offload; to the new scenario - where consumer goods deliveries often require two men, timed arrival appointments, with the need of an on-hand receiver with security access, and perhaps the need of difficult furniture removal styled set-down, and even tech-courier styled equipment assembly or installation, and removal of packaging may also be contemplated.
Even given the prospect of further advances with roll-up LCD panels and knock-down furniture/appliances, we see an altered & more fragmented landscape of logistical features entering into the mainstream discretionary on-line consumer market.
In some ways, however, those operators in the “Third Party Logistics” warehousing and distribution sector will be quietly pleased at this latest turn of events, as the on-line consumer marketer’s physical stock size profile is seen to grow. This isn’t surprising, given that the most commonly heard lament in the 3PL sector in past decades concerned mid-contract physical volume shrinkage, and the consequent offloading of liabilities (like under-utilised warehouse leases and excess staff) onto 3PL contracted vendors.
The 3PL industry sector has generally performed woefully in financial terms in the same three decades that the industry itself grew remarkably. 3PLs continued to grow in spite of poor yields because large transport conglomerates kept chasing top line revenue growth opportunities arising fro their customers' outsourcing & integrated logistical-transport enterprise strategy by making acquisitions/investments despite the past financial performance of the 3PL's. Even so, many 3PLs have folded along the way.
Another common lament heard from 3PL vendors during the period, was that customers that had shifted their focus from the delivery of physical goods to services were demanding unit pricing while increasingly under-delivering on the unit volumes promised. This trend could continue as existing tech conglomerates seek to cross over into the media sector.
The maintenance of satisfactory KPI levels in the 3PL sector often also required out-of-scope IT infrastructure enhancements & investments. These investments are fundamental when seeking to improve logistical solutions and adapt to new channel realities as they emerge. Customers issuing 3PL tenders usually take no account of the need to fund such post contract initiatives & are seldom given the budget to fund cooperative projects; and hence it is unsurprising when 3PL's are not prepared to research, fund, develop, & assume the risks of IT projects if the payback on their side is limited. If this scenario unfolds, an enterprise has locked-in degrading levels of performance, and the identified issues might only be resolved when the next 3PL contract tender is released.
As a result of the above, contracts often fail to deliver either the revenue or yield required to satisfy 3PL vendors’ budgetary expectations. Fights over contract specification have been legend in the sector, and even though there is inherent risk to an enterprise of a collapsing supply chain, as a result of a failed 3PL contract; the 3PL vendor often came out the worse-for-wear.
We already touched upon this matter of “lumpiness” in respect of gramophone records (the production run / peak demand issues). However, we can also extract a little more from the new agricultural machinery market scenario in this respect.
It may be self-evident to many, but we were once surprised ourselves to discover just how inflexible complex equipment manufacturers in the agricultural sector professed that it was necessary to be, in respect of their directly translating their long-range forecasts into actual shipping order volumes.
Even so, for a global agricultural manufacturer, if demand was down in one market and had risen in another, we were informed that they were likely to be able to recast their order book if common equipment was being manufactured. They may even have been able to tweak orders and specifications before hard milestones / deadlines during the manufacturing process. But the reality, as we saw it in the agricultural equipment market, was often that the long-range forecast order quantity of units usually actually shipped years later, in spite of severe market demand rise & fall in the intervening period.
A more regularly encountered instance of induced shipping order lumpiness, one that bemuses transport people the world over, is the end-of-month, end-of-quarter, or end-of-financial year shipping push ritual. Be it driven by an enterprise’s regular accounting / budget / earning / reporting practices, or the sales commission incentives put in behind them; or even by multinationals that play pass-the-parcel (of unsold inventory to related / inter-company parties at tax appropriate prices); the facts on the ground are that these periodic shipping pushes-and-pulls have long created extreme lumpiness in logistics and transportation channels.
How we have best responded to all these cited examples of lumpiness in the past is naturally our best leaping-off-point for the design of solutions, when similar lumpy features arise in the on-line commerce age.
And when we say that specific innovative logistical solutions should be crafted from a wide base of understanding, perhaps the Latin may help annotate the proposition: nanos gigantum humeris insidentes (we are but dwarfs standing on the shoulders of giants).
From this point onward, however, we should start talking about the shaping of logistical solutions. The long introduction has already seen some asking us to cut-to-the-chase. Perhaps this reflects a situation where, for many, solutions are simply things that you cut-and-paste; and in their mind that’s the smart thing to do?
One of the saviors for enterprises that have adopted cut-and-paste logistical solutions for their on-line consumer markets (in the tech sector in particular) in recent times, has been the continual shrinkage during the period of the unit sizes of the items they have been shipping. Navigating capacity issues arising with existing transport and logistics channel capacity, even as their shipped unit volumes grew exponentially, was perhaps made a little easier. Still, looking at the e-tailers actual bottom line results, it might hint at the depth of logistical under-performance elsewhere.
Several recent pointers, however, (like computer tablets morphing back into laptops, or smart phones growing-in-size) probably indicate that we are reaching the limits of gaining systemic logistical capacity as a result of the said unit volume shrinkage trend in the sector as-a-whole. Moreover, bulky deliveries also appear to now be a new frontier in the B2B and home delivery markets that will make their mark, as discussed here:
www.bloomberg.com/news/articles/2015-09-25/why-fedex-has-a-delivery-headache-from-trampoline-you-got-online
In the transport sector, this is a turn of events (in respect of individual shipment size growth) that transgresses the haulage capacity issue. Starting from the point of a decade or so ago, when most deliveries entailed a delivery vehicle operated by one man making a delivery to a commercial delivery dock, with available lifting equipment, and being easy offload; to the new scenario - where consumer goods deliveries often require two men, timed arrival appointments, with the need of an on-hand receiver with security access, and perhaps the need of difficult furniture removal styled set-down, and even tech-courier styled equipment assembly or installation, and removal of packaging may also be contemplated.
Even given the prospect of further advances with roll-up LCD panels and knock-down furniture/appliances, we see an altered & more fragmented landscape of logistical features entering into the mainstream discretionary on-line consumer market.
In some ways, however, those operators in the “Third Party Logistics” warehousing and distribution sector will be quietly pleased at this latest turn of events, as the on-line consumer marketer’s physical stock size profile is seen to grow. This isn’t surprising, given that the most commonly heard lament in the 3PL sector in past decades concerned mid-contract physical volume shrinkage, and the consequent offloading of liabilities (like under-utilised warehouse leases and excess staff) onto 3PL contracted vendors.
The 3PL industry sector has generally performed woefully in financial terms in the same three decades that the industry itself grew remarkably. 3PLs continued to grow in spite of poor yields because large transport conglomerates kept chasing top line revenue growth opportunities arising fro their customers' outsourcing & integrated logistical-transport enterprise strategy by making acquisitions/investments despite the past financial performance of the 3PL's. Even so, many 3PLs have folded along the way.
Another common lament heard from 3PL vendors during the period, was that customers that had shifted their focus from the delivery of physical goods to services were demanding unit pricing while increasingly under-delivering on the unit volumes promised. This trend could continue as existing tech conglomerates seek to cross over into the media sector.
The maintenance of satisfactory KPI levels in the 3PL sector often also required out-of-scope IT infrastructure enhancements & investments. These investments are fundamental when seeking to improve logistical solutions and adapt to new channel realities as they emerge. Customers issuing 3PL tenders usually take no account of the need to fund such post contract initiatives & are seldom given the budget to fund cooperative projects; and hence it is unsurprising when 3PL's are not prepared to research, fund, develop, & assume the risks of IT projects if the payback on their side is limited. If this scenario unfolds, an enterprise has locked-in degrading levels of performance, and the identified issues might only be resolved when the next 3PL contract tender is released.
As a result of the above, contracts often fail to deliver either the revenue or yield required to satisfy 3PL vendors’ budgetary expectations. Fights over contract specification have been legend in the sector, and even though there is inherent risk to an enterprise of a collapsing supply chain, as a result of a failed 3PL contract; the 3PL vendor often came out the worse-for-wear.
Image: Flickr - One Way Stock Another thing about transportation facing trends is that one-thing-often-rolls-over-another which in turn underwrites disruptive potential. The sources for the potential disruption, in contemporary times, as I see them are:
We might also say that we foresee a kitting up at the delivery-face for a prospective increase in the number, and diversity, of delivery channel options made available by the on-line commerce sector. Some of this will be based upon the consumer’s circumstances & demands, some of it upon the time-of-year, and more again derived of the changed physical characteristics of the goods being delivered.
However, we are only speaking here about responding to emerging consumer & B2B demand scenarios for final delivery. As we progress through the series, and remaining mindful of the same scenarios mentioned above, we will head further back towards source to examine solution possibilities for the outbound logistics task.
- The growth of personal consumer goods deliveries to homes or CBD front-of-office by both on-line and bricks-and-mortar based retailers
- An expectation that the existing lumpiness created during holiday seasons by on-line orders, & the consumer’s delivery expectations, will continue to grow
- The need for new home delivery distribution arrangements (like pick-up centres / locked boxes located in parking lots, or nearby public transport hubs)
- An increase in the frequency of deliveries received by on-line B2B purchasers
- Reconfigured delivery driver or staff skills, with more part-time / occasional / out-of-hours workers
- Less delivery vehicle efficiency in overall logistical terms
We might also say that we foresee a kitting up at the delivery-face for a prospective increase in the number, and diversity, of delivery channel options made available by the on-line commerce sector. Some of this will be based upon the consumer’s circumstances & demands, some of it upon the time-of-year, and more again derived of the changed physical characteristics of the goods being delivered.
However, we are only speaking here about responding to emerging consumer & B2B demand scenarios for final delivery. As we progress through the series, and remaining mindful of the same scenarios mentioned above, we will head further back towards source to examine solution possibilities for the outbound logistics task.
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