The green mile

Green MileThe present changes in the logistics market are caused not only by the previous slumps in the economy, but also by the new green principles the world is embracing. Climate protection is one of the most pressing global challenges we are facing today. This is caused by the enormous increase over the past few years in the emission of greenhouse gases, and carbon dioxide (CO₂) in particular.

In recent history good supply chain network design was seen as a very efficient cost-cutting tool. These days the supply chain is used to promote the green image of companies. Changing your supply chain is of course a very effective way of reducing emissions without changing your production infrastructure.

Many companies are starting to invest in sustainable networks. The green way of thinking has been widely adopted, and with the advent of Chief Sustainability Officers it has even managed to penetrate as far as the Board Room. This means that the supply chain of these businesses will change in the near future to become greener than ever before. The whole market is trying to keep the customers satisfied, even though the customers haven’t a clue where they would like their green ideas to take them.

This creates a new problem, which is how to reevaluate your supply chain in these new times!?

The market has already shown that green initiatives are more profitable. Is the market also ready for green supply chains in which incentives can be part of a logistics contract, for example Global contracts allowing flexible use of the inventory locations and customs solutions? Such new contracts will only be possible if the governments around the globe are willing to be more flexible with regards to sharing tax incomes generated by these contracts.

Governments will not be easily convinced to adapt their strict tax regulations to the greener terms demanded by today’s world. In the end it will be us “the people” alone who have the power to change things. We currently have the voting power to demand such new regulations, and this means that we need a new tax model for the years to come.

Is there an impact of 3D printing on the service management supply chain?

3D-Printed-PartsSometimes you need to reflect new innovations to common sense. I have tried to do that for 3D printing and the service management industry. It is maybe better known as Customer Service.

Most companies must manufacture parts, store them, inventory them, and transport them to the appropriate location in the field at the right time. The biggest challenge here is to what level you want to satisfy your customers when they need you the most. Some companies do a better job than others, but in general spare parts management eats up a lot of resources in field service.

“3-D printing can make a lot of problems go away!” is the new talk of the town.

Well… that so?

Most spare parts will most likely be controlled by the manufacturer to ensure “certified” part replacement. As, in some cases a spare part might be more beneficial for all if it’s printed by a local supplier.

Furthermore, you are able to keep obsolete spare parts in a digital warehouse and they can be printed on demand in a local network of suppliers for your customers. Especially with many new product introductions by companies a solid strategy to keep the possible new obsolete SKU inventory low (raw material for 3D printing), but availability will go to higher level.

3-D printing spare parts on demand eliminates the need to forecast the volume of certain parts required, to make them, and store them!

But most of all it compresses the supply chain, enabling 3-D-printed parts anywhere, any time and at any quantity. It will force a shift in product innovation from physical manufacturing to demand manufacturing with new objects and new materials.

In the future, this should reduce and condense inventory management.

Just take a look at a field service van, calculate the cost of parts onboard “just in case” and multiply it by the fleet to get an idea of the capital tied up in spare parts.

Ok, that sums it up for me! This is interesting business!!

To learn more on 3D printing and the latest trends and developments, check my Podcast on:

Future trends

There are a lot of new opportunities for value added logistics and services as the final processing of the product moves increasingly closer to the customer. Investors will adapt their views to the new warehouse standard as almost every user will have these requirements. It will also mean that leases will initially become longer, as the industry is not one to embrace change, but flexibility can be achieved with larger contracts. These large contracts will be the first steps on the path to sustainable supply chain networks. Logistics real estate represents centers of gravity in the supply chain that in themselves are inflexible. Nonetheless, the unpredictability of customer spending patterns will force companies to think in new business models.

So what would a new supply chain look like for a company using the CDC-RDC model? The main factor for deciding the location network strategy is the question to what extent the working capital should be allowed to determine the supply chain. In the old version of the lease contracts, companies needed to determine how much iron inventory would be needed for every DC to provide the market with the right customer service level. The duration of the lease would be based on this, as occupancy levels are always very important to ensure a smooth operation. If large European lease contracts were to allow operations to be scaling up or down within the CDC-RDC network, this would mean that the supply chain design could be based on a reduced iron inventory and a larger customer base. This makes it easier to minimize the storage costs in relation to the financial costs of the working capital.

The inbound side of the supply chain will undergo some minor changes in the near future. For example, a large number of tri-modal infrastructural solutions have been created to promote sustainable transport. Green incentives will result in an increasing number of companies using these transport modes. It is therefore important for investors to be present in these regions, since the new flexible business model will have a major advantage for the choice of location for the CDC. This choice will remain very stable if the outbound logistics strategy is based on a flexible choice of location for the RDCs.
At the RDC level it will not only become very important to be able to scale operations up or down in terms of square meters. Flexibility will also be needed in terms of human resources and equipment. This will make it possible to establish a very sustainable way of working for the future, which in turn will mean a new definition of flexible networks.

The market is ready for new initiatives, but will we decide to take the long road to victory, or is it to be short-term benefits once more?