Blog: Is warehousing a modality in Supply Chain management?
By Freek Brilleman, ATIM Solutions
At the CSCMP Edge conference last September, in Anaheim I joined the presentation about the State of Logistics. Next to a lot of findings interesting enough to dive in deeply, I became aware that warehousing can, maybe should be, seen as a modality. Just as road transport, deep sea shipping, rail transport and inland shipping. It gave me a new insight on the speed of logistics, which I gladly want share with you.
Under the pressure of the e-commerce growth, more and more city hubs are created. They are cross docking facilities, to facilitate the transfer i.e. from truck or barge to van. A city hub holds also a safety stock for direct delivery at short notice. And gives opportunity to combine flows from different origins but a single destination in a city.
Another term for warehouses that is much used is fulfilment centre: the last step before delivery to the consumer and the first step of the return process. In respect to delivery and returns, these warehouses became a key modality as are trucks, planes, ships and vans. Since the return process becomes a key challenge, fulfilment centres will grow in importance.
A distinction should be made, however. For e-commerce or direct consumer delivery, the fulfilment warehouses and city hubs are becoming a modality. In b2b supply chains a warehouse is still the location for mid- and long term inventories, to do the balancing act between supply and demand, differences due to seasonality, prices and trade lanes.
Being aware of which type of inventory you have in your warehouse; consumer related or b2b, is essential. If you know the type, you also can figure out the role of the warehouse in your supply chain. A next step in the process then is to forecast the inventory needs at every location. With the growing number of possibilities and speed this becomes more challenging. Not only due to quicker delivery to the consumer, also due to congestion in and around cities, environmental rulings and window times. As a supply chain professional we need to keep into account many more details on many more locations.
Besides forecasting demand, forecasting the need of transport and modality is becoming essential. If we account warehousing as a modality in the supply chain, we are not only planning the goods on trucks, vans, ships or airplanes, we also plan the right transfer location. The further downstream your goods are heading, the more agile you have to become in these locations. In that, warehouse locations become part of your S&OP process, which should be evaluated on regular basis, i.e. 2 to 4 times a year.
This influences the way we are looking at contracts and agreements. Checks of existing agreements have to be done on a more frequent basis. The opposite side is there too. In the Netherlands a rise of the discussion about “boxing” in our landscape is progressing. With boxing is meant that the number of warehouses in the landscape is getting so large that it seems you always see warehouses.
All together the presentation and afterthoughts gave my again an additional perspective on supply chains. In my opinion warehouses can be seen as an additional modality, but only the closer your supply chain is getting towards the final consumer.
Additional levels of detail give rise on new trade-offs, not only on a strategic level. Trade-offs which were strategic, become tactical or even operational. With the growing demand, the need to know where your goods are and how they move to your customers, the demand for technologies and systems to support these new perspectives is also on the rise.