World Trade - December 2008 - (Page 35)

ing with a company right now that has 28 distribution centers around U.S. and we’re recommending a reduction to 22. Those additional six don’t add any value in terms of cost reduction or service improvement. This typiﬁes what’s going on throughout the sector. The history of the recent past has been for companies to increase DCs through construction or as they acquire companies or get a piece of business. There hasn’t necessarily been a lot of optimization planning nor thought about where you hit diminishing returns. That’s why companies need to look at their supply chain every two or three years and do an optimization. Do you see this as a normative situation all over the country? Absolutely. What has led to this over-capacity? Scope creep! It’s a classic problem where companies grow and when they’re profitable they make deci“It used to be when you put a sions without thinking them through. Most companies distribution network in place it don’t have the algorithms to solve these supply chain could last three to ﬁve years. problems, they get a pencil and a piece of paper and get Today, companies have to look some transportation costs and make a decision. They don’t at it more continually, have dynamic software built in for their industry or for at least every two years.” their company that they can use on a regular basis. Why this change in the approach of companies to supply chain? nothing, by adding 100 stores a year to the network they would have outgrown it. We’re now saying to them, ‘As far as we can tell, as long as the supply chain continues to ﬂow through and it’s more of a cross-dock, consolidation operation, and as long as you have better visibility on the in-bound coming from Asia and can sort it into containers coming from Asia so that it goes directly from the port to the store, then you have increased the life of their existing brick-and-mortar distribution network indeﬁnitely.’ The new model is ‘ﬂow through.’ The distribution center will serve as more of a cross-dock for the product that has to serve that particular network of stores within 500 miles. A lot of containers will go directly to stores without touching that dock, the DC will largely have to be a consolidation area for domestic supply that has to be married to that. It used to be when you put a distribution network in place it could last three to ﬁve years. We used to say, ‘you don’t have to look at this every year, you can look at it every ﬁve years.’ Today, companies have to look at it more continually, at least every two years. Out-sourcing will continue. As long as space is available, companies don’t have to invest in brick-and-mortar. We’re working with a company right now, for example, who asked us, ‘Can you engineer a solution that can move our product (sporting goods from Asia)?’ Their infrastructure was being stressed as they opened new retail stores. They asked us, ‘Can you re-engineer our network so product ﬂows in-bound from Asia through our domestic network to our 700 retail stores, so that when it hits our distribution network it ﬂows through rather than is stored for a period of time or ever hits a dock?’ Our assignment was, thus, to get the DCs as much as possible out of the mix. Our solution was not getting rid of the DCs per se, but rather expanding the role of the brick-and-mortar, giving it a ‘new life.’ What is the DC doing in this network that is different? To switch subjects, World Trade has been talking a lot about the new model of the enterprise where the supply chain occupies a centric position, where the supply chain is a core strategic tool and not ‘just about’ logistics anymore. What do you think will happen with this trend? Whatever we say about ‘supply chain,’ I think for the most part we still haven’t moved beyond integrated logistics. I don’t believe anyone can manage a ‘total supply chain.’ It’s too big. What you can do is manage parts of it to get the greatest impact. Some companies are doing a better job at breaking down silos and integrating certain functions, but I’ve yet to see a company that has entirely broken down the existing silos necessary to manage their internal and supply chains. So you’re not looking for major managerial changes around supply chain in the near future? The life of the existing network was driven by how many retail stores it had to support. If the company changed Not in a meaningful way. I don’t think we’ve made a signiﬁcant shift to breaking down the silos and integrating the supply chain. Some companies have done a better job, like Dell. But guess what, they’re going more from a ‘pull’ to a ‘push.’ As I talk to large companies, they continue to struggle with integrating their supply chain. Part of the problem WWW.WORLDTRADEMAG.COM 35 http://WWW.WORLDTRADEMAG.COM

Table of Contents Feed for the Digital Edition of World Trade - December 2008

World Trade - December 2008 Contents The Promise of Peril The Current Reality with IP in China Supply Chain Watch Tradewinds Performance Partners: Awards of Excellence Managing With Mobility What 2009 Bodes for the Supply Chain Small Business Takes to Export Green is Here for Good Fast Fashion

World Trade - December 2008

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