What’s more important for a supply chain: profitability or sustainability?
Corporate goals may prescribe the answer, but the final result depends on logistics agility, and that presents a big problem for many companies.The need for agility is widely understood, and Gartner reports 89% of supply chain leaders planned to build more agile supply chains. So far, so good, but the first hint of trouble appears when 60% admit their supply chains are designed for cost-efficiency instead of resilience.
That implies more than half of the companies must redesign their operating model before logistics agility is possible. That’s a risky proposition.
According to McKinsey, 70% of transformation projects fail, and this statistic was published in 2019 before lockdowns ignited the supply chain wildfire. With business risks now hitting historical highs, adjusting the failure rate to 80% wouldn’t be a stretch.
Now for the good news. You can dramatically reduce the risk of project failure if you take the right approach when transitioning to agile logistics, and this post tells you how.
Agile Logistics Creates Agile Supply Chains
Solutions that we come up with are dictated by our perspective, so the best solutions come from the best perspective. The best approach for creating an agile supply chain is to view the supply chain as a collaborative logistics process. What does that mean?
Supply chains are ultimately concerned with delivering the right thing to the right place at the right time. That's also the definition of logistics, so they can be treated as one and the same, and that will help you connect transportation, logistics execution, and supply chain strategy. You'll begin seeing the supply chain differently and may want to realign processes. This is how supply chain agility materializes organically.
Supply chain agility means all of the processes involved adjust in concert as conditions change without sacrificing profitability or sustainability. This cannot happen unless the processes are aligned and properly integrated. The most effective way to achieve this is to view planning, procurement, and consumption of resources as a single logistics process.
Most companies will discover they need to revise their supply chain model before agility is possible. Throwing digital twins, AI, cloud solutions, and robots at a process built around a flawed model may improve efficiency and responsiveness, but it will not lead to a fully optimized, agile business.
Lean Logistics Produces Sustainable Profits
Agile logistics follow lean principles, striving for maximum efficiency by minimizing waste. It’s more economical, and consuming fewer resources means producing fewer byproducts like GHG emissions. Less time and energy are expended, maximizing profits and sustainability.
Beware of the Agility Gap
Bolting on newer technology will increase efficiency and agility, but that won’t matter in the long run. The 20% that properly redesign their operating model will achieve far higher performance than the rest, creating an agility gap.
The gap will widen as the competitive advantage compounds across the network. As the benchmark for sustainability and profits rises, it will usher the beginning of the end for many companies. It will be like Amazon becoming your company’s direct competitor.
The agility gap will likely emerge faster than most realize and may catch competitors off guard. This scenario is easily avoided now for companies that follow Amazon’s example.
Focus on Transportation Like Amazon
Transportation is at the core of the supply chain, and this strategic position favors high-impact solutions. Transportation is the most dynamic, fragmented operational theatre in the supply chain, and it's full of waste. This is why lean logistics produces staggering gains and it’s a big reason for Amazon’s success.
Amazon built a supply chain around transportation, and this made it the de facto model for logistics agility. It enables a scalable, agile process that maximizes sustainability and profitability:
- Transportation is the core of the supply chain; every enterprise process ultimately connects to shipping or receiving, transferring problems and benefits along with these connections.
- Transportation is the physical link between trading partners, transferring problems and efficiencies as shipments move through the chain. Agile shipping and receiving processes can prevent disruptions that ripple through a supply chain.
Sustainability and Transportation
Why focus sustainability efforts on transportation? Transportation is second only to the energy sector for CO2 emissions and greenhouse gas (GHG) production, responsible for one-fifth of global CO2 emissions. Additionally, CO2 emissions from transportation have increased 1.9% annually since 2000 – mainly from globalization and increased demand for consumer goods.
The International Transport Forum reports international freight is responsible for about 30% of all transport-related CO2 emissions and accounts for more than 7% of global GHG emissions.
Dynamic Routing is the Optimal Starting Point
An agile vehicle routing solution for optimizing transportation, like flexis ProfiTOUR, provides a starting point for transforming a supply chain into a more agile logistics process.
ProfiTOUR is highly configurable for a wide range of challenges, and it’s proven effective in multiple industry niches. For example, a leading furniture manufacturer in Europe uses ProfiTOUR to optimize in-house transportation operations.
The savings from automation and better decision-making is dramatic. A foundation for agile logistics is implemented that creates a flexible operation. ProfiTOUR automatically optimizes sustainability and profitability, so corporate goals are achieved.
- Route planning automation reduced labor costs by 60%.
- Delivery routes with multiple stops are optimized to minimize miles driven, reducing fuel expenses, GHG emissions, and driver labor.
- Routes ensure precise pickup and delivery windows are met, eliminating driver wait times reducing emissions and labor costs.
- Vehicles loading is automated and sequenced according to the optimized route, minimizing dock time and increasing productivity.
- Pickups can be mingled with delivery routes, maximizing equipment utilization and eliminating additional trips.
- Driver labor and customer satisfaction are increased.
- ProfiTOUR’s routing algorithms consider the emissions profile for each vehicle in a fleet and the traffic patterns of each route.
- Changing traffic and weather can also be monitored in real-time so ProfiTOUR can dynamically adjust routes enroute for the optimal outcome.
Conclusion
An agile logistics process can maximize sustainability and profitability. The lowest risk, most effective path begins with optimizing transportation. Dynamic vehicle routing is an ideal starting point for the transition to agile logistics.
What’s more important for a supply chain: profitability or sustainability? You decide and either way, the answer is agile logistics.
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