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Supply chain leaders accelerate network redesign

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This post is sponsored by Burris Logistics

Packaged-goods companies should consider re-evaluating their distribution networks at least once a year, according to a webinar on challenges facing grocery logistics professionals.

The webinar, Delivering Results: Supply Chain Management Challenges and Opportunities in Today’s Environment, was sponsored by Burris Logistics.

“Three out of four companies have done network redesign recently, so if you haven’t, you need to have a very compelling reason as to why not,” said Tim Near, senior advisor at the Boston Consulting Group.

Near cited data from the 2015 Logistics Benchmarking Study by BCG and the Grocery Manufacturers Association, which found that transportation challenges, driven in large part by an acute shortage of truck drivers, were the most commonly cited top-of-mind issue for supply chain leaders (83%). Those concerns were closely followed by network redesign, however, as 72% of supply chain leaders cited that as a significant priority at their companies, up from just 6% in 2012.

Network redesign can involve a wide range of initiatives, according to the BCG/GMA study, including warehouse relocation, route optimization and third-party outsourcing.

Near suggested that supply chain network redesign “needs to be reviewed probably a little bit more frequently than has been customary in the logistics profession — on an annual basis or maybe more.” Geospatial technology has made a more frequent evaluation of distribution networks more feasible, he explained.

“You can really do fantastic work examining vast amounts of data and plotting them effectively to build out the best logistics network,” said Near.

Mergers and acquisitions among grocery suppliers, and changes in the retail landscape driven by shifts in consumer preferences and the growth of digital platforms are among the factors forcing suppliers to focus on network redesign, the presenters said.

Some large suppliers are relocating warehouse inventory to be closer to their retail customers.

“We perceive that there is a responsiveness benefit that will come from that,” said Peter Dawe, partner and managing director at BCG, although he noted it was not yet evident that such moves would yield financial benefits. “Clearly some of the larger companies are making a shift in that direction, and they probably will have some degree of gravity that will push other companies to follow suit, and it will begin to become a retailer expectation.”

Investment in facilities needs to be carefully considered, given the pace of change in today’s environment.

“Traditional investments in bricks and mortar may have a shorter investment horizon than they have in the past, which means you will likely need to be changing your network more frequently, which means a need for a more transient sort of space,” said Near.

Structuring mutually beneficial partnerships will yield improved results for everyone. Companies that excel at operating efficient distribution networks have embraced the formation of strategic, substantive partnerships with others in the supply chain, the presenters said. These partnerships employ rigorous performance management, maintained through intense tracking and monitoring, said Near.

“We have to performance manage [supply chain partnerships] as if the entire chain across the network was our own supply chain network and our own operations,” he said.

Mike Bargmann, supply chain consultant at Collaborative Logistics LLC, addressing the transportation challenges faced by retailers in particular, stressed the importance of selecting partners who share mutually agreed-upon metrics, have compatible technology systems and the right talent.

“The key here is to secure strategic relationships in key lanes with a long-term view,” he said.

The expansion of fresh and prepared foods categories exacerbates the challenges for grocery retailers, Bargmann noted.

“This has created additional costs, with the need for additional infrastructure throughout the supply chain, the need to acquire the required talent to manage the complexity of the these supply chains and the need to manage multiple-temperature deliveries from point of manufacture through point of consumption,” he said.