Some thirty years ago, Japanese companies taught their U.S. and European counterparts that keeping a lean inventory helped boost profits.
Today, more demanding consumers, weak economies and shortening production cycles are straining the just-in-time inventory model and putting logistics at the heart of business success.
“Companies have eliminated most of their inventory and diversified their products at the same time,” says Fabrice Mattei, a director at consulting group Vincia in France. “This is putting pressure on the supply chain as consumers, manufacturers and distributers demand faster delivery of more products.”
Part of the success of Spain’s pioneering fashion retailer Zara, for example, is down to the speed with which it can get the latest trends to the stores. Zara offers its customers a new collection every two months, notes Mattei. He also cites the example of French decoration specialist Sia Home Fashion that renews its collection of 5,600 articles every six months. “The production cycle is becoming shorter and stocks are shrinking,” says Mattei. “This creates the need for an increasing number of urgent deliveries.”
Some industries, such as the aeronautical sector, must be especially responsive when delivering spare parts because of the cost of having an aircraft out of service. Mattei estimates that over half the daily shipments of parts in the aeronautical industry are urgent and need to be delivered within 24 hours anywhere in the world.
Other industries, such as the printing sector, are under increasing financial pressure leading them to eliminate stocks of expensive spare parts for their printing presses. Instead, they are demanding 24-hour delivery of these parts from their suppliers, he notes. Sometimes companies may need speedy transport of supplies or parts simply because of poor stock management or forecasting. They may also make seasonal products such as garden furniture whose sales are highly dependent on the weather.
In any event, the more responsive approach companies are taking towards their customers requires a different way of working. Companies must be able to produce low volumes as well as high volumes, Mattei says, since urgent deliveries often involve small amounts of goods.
Companies also increasingly need flexible and skilled employees able to switch between tasks or start and stop working as needed.
“Providing clients with flexibility and choices has become a key selling point,” says Mattei.
“But companies need the right operations and structure to be able to provide that service profitably.”
Customer demands for speed and choice increase the need for urgent deliveries and place the supply chain under strain.