Is Your Supply Chain Ready for the Rebound?
October 15, 2009
The Business Ledger
By Josh Johnson, Fidelitone Logistics President
http://www.thebusinessledger.com/Home/Archives/InTheNews/tabid/85/newsid393/839/Default.aspx
According to the National Bureau of Economic Research, the U.S. has been in a recession since December 2007. Including all recessions since World War II, the average length of a recession is 10 months. As we now approach 24 months in the current downturn, history would suggest we are due for an upward change.
We all know our businesses need it, but is your business ready for it? Are your company's supply chain and logistics functions prepared to seamlessly ramp up operations to meet escalating B2B or B2C demands?
Whether in terms of real estate, employees, inventory or other expenditures, a company that has not cut from its operational budget is hard to find.
Lean operations have been necessary to keep many businesses solvent. Running a tight ship has been, and still is, the responsible course of action. However, as we now tread optimistically to the end of the recession, there is nothing more irresponsible than a company not scalable for future growth.
Now is the time to reassess a company's supply chain-the path in which goods travel to the end user-and ensure that the supply chain and logistics functions will not hiccup when an unexpected, yet long-awaited rush of demand floods in.
Companies that can ramp up operations and fulfill orders quickly and accurately will be the ones that emerge from the post-recession climax with the strongest sales growth and increased market share.
As Benjamin Franklin said, "By failing to prepare, you are preparing to fail." This statement goes hand-in-hand when preparing logistics operations for the economy's eventual rebound.
To achieve a scalable supply chain, which in turn leads to an entirely scalable business model, it is necessary to focus on the supply chain's essential components: inventory, technology, warehousing and labor. To achieve scalability, these components must be transferred from fixed costs to a rebound-ready, variable structure.
Inventory
Inventory turn is at the crux of a company's financial health, and since even the best purchasing strategist cannot control demand, accurate inventory forecasting needs to be a top priority.
Inventory forecasting needs to be highly realistic, automated and analytical. The forecasting needs of critical items must be weighted heavier than those of non-critical items. Bulky or slow-moving items need to be forecasted accordingly.
An optimal level of inventory that can fulfill customers' orders, without impeding operational cash flow, is pivotal. No company can afford to leave invoices unfulfilled and hand competitors clients because supply could not satisfy demand.
Technology
As we approach 2010, a company's supply chain is increasingly dependent on the most advanced technologies. Some of the best resources available include Enterprise Resource Planning (ERP) systems: a highly scalable and flexible operating platform that supports a company's back end by linking together various departments and processes into one highly effective system.
An ERP can chart the course for all necessary steps of fulfilling an order throughout the supply chain. It's a logistics road map but with a hefty price tag. Unfortunately, this seven- or eight-figure information technology (IT) investment is not realistic, or a worthwhile use of resources, for many small- and mid-market businesses.
For that reason, Software as a Solution (SaaS) has been one of the fastest growing segments in IT in the last decade. SaaS offers companies a more cost-effective alternative by offering software solutions a la carte.
For instance, a company can pay for the exact services it needs and not have to buy an entire prepackaged software application containing features it may never use.
By design, SaaS delivers software solutions via the Internet, allowing multiple users to share the software licenses, while removing the need for expensive server hardware to be installed at a business.
Warehousing and Labor
No matter how much a company has invested in inventory forecasting and technology, the scalability model falls flat without the necessary warehousing and labor to support the mechanism for growth.
Yet purchasing additional warehouse space and adding to your employee roster is daunting any time, let alone during a recession. The solution is the $120 billion logistics industry.
3PLs create a variable cost infrastructure by giving clients access to employees and space as needed, improving speed to market. Committed supply chain solutions providers keep client bottom line and customer satisfaction the top priority at all times, while delivering space and employees as needed by remaining in tune with market conditions and scalability objectives.
Josh Johnson is President of Fidelitone Logistics, a $350 million supply chain solutions company with more than 20 locations and 600 employees worldwide. Fidelitone provides customized, ROI-driven supply chain solutions for business partners and their clients. For more information, visit www.fidelitone.com.