Ways for wholesale and logistics to leverage technology to improve efficiencies

28 October 2013

Dan Hawker

Dan Hawker

Former Head of Tobacco, Wholesale & Retail

Getting materials and products from point A to point B is integral to any manufacturing process, and often a sore spot for hidden waste and inefficiencies.

This ranges from minimising rising transport costs, due in part to fuel increases and road taxes, to increasing logistical efficiency. Being able to strike a perfect balance between the two is nirvana for many companies. And innovation in logistics and wholesale operations is high on many manufacturers’ agenda.

The logistics-anti-innovation myth

A stigma associated with the logistics industry has been a lack of innovation running through its core. It was reactive to customer’s needs rather than proactive.

A well-known example from the logistics service industry is Federal Express' overnight delivery service for documents and parcels. This innovative service created an entirely new market segment that continues to provide significant profits to Federal Express and benefits to customers. But in technological senses, this couldn’t be further from the truth.

American retailer Walmart improved the efficiency of its private fleet by almost 69 percent last year compared to in 2005. All while increasing delivery of cases to 65 million, while driving 28 million fewer miles. How was this achieved?

The heavier loads have minimal impact on its fuel-efficient equipment, which includes an average tractor age of three years and the addition of more than 13,000 skirted trailers. It also adopted ORTEC Vehicle Routing to optimize routes, while using the same company’s Load Building software to optimize its load building. Other users include global retailers such as Tesco and Carrefour and consumer products companies such as Coca-Cola and Proctor & Gamble.

While staying in line with the green agenda, logistics operations have utilised technology to take give added service and make the running of it more efficient. Ultimately, this small but effective move also brings with it agility.

Enhancing the in house setup

So while on the road it is established innovations are happening more in logistics, most UK manufacturers of any scale would have invested in in MRP or ERP systems by now. But it is common for manufacturers to invest in a system which is particularly good for planning manufacturing or is strong in financials.

However, warehouse management is often an afterthought, with manufacturers often still using paper-based picking systems with no or limited automated confirmation processes to track last minute errors. Systems must allow for a common view of stock, and retailers including Aurora, White Stuff and John Lewis are all investing in systems that will support multichannel visibility.

Amazon, the model for customer service innovation which is the envy of all sectors, has set the standard for innovating in its logistics operations. Last year it rolled out its Amazon lockers, offers customers in select locations the option of having their package delivered to an Amazon Locker instead of to their street address. The big logistics firms FedEx, DHL, UPS all missed this as a potential innovation, a small but effective tool towards service enhancement.

Increased supplier communication

In the age of social, web-based communication, retailers are improving supplier communication and transaction processing, helping to cut supply chain costs and bring products to market faster than the competition.

Companies increasing software adoption have seen platforms automate many procedures and relay information about orders to the warehouse, the accounting department and the customer. There are also the added platforms of networks, providing members of logistics chains access to information and applications to support purchase order management, demand forecasting, shipping notices and bar-code label generation.

Another game changing technology to emerge is radio frequency identification (RFID). Its process provides information on a product and its journey through the supply chain. A big innovator this year was Korean tyre manufacturer Kumho Tyres, which in a global first, announced the placing of RFID tags on all Tyre products it manufactures to increase workflow efficiency. It now expects to cut £5.9 million in annual costs in the area of logistics, production and quality control as a result.

What such action proves is that engaging technology will be the big leveller for companies often fighting hard against ever-changing global issues.

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