In the automotive industry, in particular, where production is highly time-sensitive, operations must be streamlined to drive productivity and meet demand. Traditional supply chain operations based on a single network can no longer provide the service the industry requires.
The balance between supply and demand is constantly changing and when companies don’t respond, they run the risk of becoming obsolete. Yesterday’s supply chain models are struggling to meet today’s customer demands. And new technologically-minded competitors are constantly emerging, eager to snatch market share from complacent ‘has-beens’. Logistics providers that can’t meet the new expectations around global visibility and speed will be left behind.
Businesses must now be willing to embrace a supply chain based on cooperation and collaboration, rather than siloed, internal operations. This ‘macro-optimisation’ method will give them the speed and flexibility to compete in today’s market by providing access to a range of partners around the world, allowing businesses to locate the resources needed on demand and provide capacity wherever customers need it.
Macro-optimisation involves looking at the opportunities available across multiple networks. To accomplish this, businesses must have access to a global network of other shippers, trading partners, carriers and freight forwarders. A single point for the accumulation of all of the data involved is also necessary, giving companies the ability to manage all transactions and activity in one place.
Speed is keyOne of the main reasons for this change is the ‘Amazon effect’, which has redefined customer expectations about the speed and visibility of goods in transit.
Demand for same-day delivery is growing all the time and that expectation is beginning to tip over into B2B industries like automotive manufacturing. Companies need to adapt to this by modifying their supply chain processes to speed up delivery. This brings major challenges, however, especially when dealing with monthly fluctuations in capacity.
For example, as vehicle manufacturers modernise their operations, opportunities for domestic parts suppliers have increased because businesses want to access materials and products as efficiently as possible – ideally from the same country. Macro-optimisation is a key way for businesses to overcome such obstacles, ensuring that they can access transport and admin support wherever they’re sourcing from.
There is a basic limit to the effectiveness of a traditional micro-optimised model because it is inherently limited to a business’ own orders, rates and carrier capacity. This means there is a finite amount of opportunity for consolidation and backhauls. On average, logistics teams see a 4-10% under-achievement in output from micro-optimisation.
Macro-optimisation, on the other hand, gives companies the tools to deal with that inefficiency, helping them to find new opportunities with partners within the global trade network, and also encourages the sharing of resources for a better return on investment.
Connectivity benefitsTaking a practical example, capacity constraints can be a daily issue for shippers and a lack of available transport can have a major impact on profits and customer satisfaction.
Macro-optimisation can help by enabling shippers to share truck capacity with small shipments that do not require a whole vehicle, or on empty legs of a journey. If one shipper always moves freight by road from A to B but never has a return load, another shipper could use that empty capacity on the return. The two shippers should both save money, compared with the costs of each one contracting separate vehicles for the whole journey, and empty mileage will be reduced, which is good for the truck operator and for the environment.
By connecting together through macro-optimisation, shippers can save time and money by zone skipping and dropping shipments directly into the carrier network at a point that is much closer and more convenient for the customer. If shippers remain locked in their own siloed operations, however, this kind of connectivity is not possible.
Effectively, therefore, macro-optimisation offers businesses new opportunities with partners around the world. This sharing of resources makes for a better return on investment, creating a more efficient process that can meet the demands of today’s competitive market.
Companies that embrace a global trade network model of this kind give themselves access to far higher levels of velocity. The speed and flexibility that macro-optimisation offers are competitive assets for companies using a global trade network.
Embracing the future of supply chain optimisation means businesses must stop thinking micro and start thinking macro.
Mohit Paul is SVP EMEA at cloud-based logistics management software provider, BluJay Solutions