Efficient logistics is necessary for the functioning of companies offering physical products or services.
Necessary but not sufficient, as I have written in the article – Logistics is not everything. Consequently, when working on the development of a company, it is necessary to take into account the interaction of all functions. Including Supply Chain and Logistics.
However, unlike the organizations mentioned in the previous article, in most enterprises, the role of Logistics is underestimated rather than overestimated.
According to Korn Ferry’s research, Boards of Directors include people from sales, marketing, and finance. Logisticians still do not have adequate representation.
So how do you strike the right balance in your company? How to make everyone speak one language?
Wojtek Zaręba, former Director of the Operational Department of Kaufland Polska and former Director of Logistics of the “Dbam o Zdrowie” pharmacy chain, agreed to share his experience on this topic.
However, before I give the floor to Wojtek, I would like you to think about what customers want today. We will start from the end to understand why we need Logistics.
What customers want
— Adam Sobolewski
Contrary to the impression one gets from reading press releases from companies such as Glovo, Deliveroo, Delivery Hero, or Gorillas, not everyone wants everything immediately.
It is true that the q-commerce channel is growing at double-digit rates. However, mainly in the categories of food products and small electronics.
Even if it is technically possible to deliver a washing machine or fridge on the same day, do you as a customer need these types of products so urgently that you will accept the price difference?
Experience shows that 99.5% of the time this is not the case. That is why practically no one offers this type of delivery and if it is offered then it is done for marketing purposes to show that “we can”. In reality, customers do not use it.
In the Logistics of durable products, additional services are more important than speed. We can wait for an oven for 2-3 days, but we want home delivery on a specific date. Preferably with in-home delivery and assembly.
The situation is similar in the telecommunications industry. Many companies that are not primarily associated with Logistics manage very extensive distribution processes.
A few years ago, listening to a speech at the Logistics Manager conference, I experienced a real eureka moment. Cable TV providers and mobile network operators manage hundreds of points of sale.
UPC, Orange, T-Mobile, Cyfrowy Polsat (Digital Polsat) also offer thousands of products. Contrary to appearances, this is not to expand sales opportunities. They must provide customers with equipment that will enable them to use their services.
So we get the opportunity to order a mobile phone with delivery to the indicated address. Or we can rent a digital TV decoder, the return of which will also have to be handled by Logistics at the end of the contract.
Logistics doesn’t always mean the same thing. In the broader perspective of the Supply Chain, the processes of sales and operations planning, risk management, supplier relations, all have common foundations.
On the other hand, the operations inside the warehouse and distribution vary significantly depending on the type of business.
Knowing that ”Logistics doesn’t always mean the same thing”, it is hard to say what effective Logistics means. It certainly can’t be simply showy.
The definition shows that efficient Logistics should be both effective and productive, but also tailored to needs.
Although we can still encounter the belief that Logistics should be cheap and only cheap, it is easy to see that the market already understands and begins to appreciate the importance of good Logistics.
It is difficult to write about Logistics without references to the pandemic times. The pandemic opened the eyes of doubters and proved the importance of Logistics in every company. Do you remember March 2020 and the panic in stores?
There was a sharp sales increase in retail chains by up to 80% overnight. Moments later, physical retail dropped and the e-commerce market exploded. Who was prepared for something like this? Nobody. Was it possible to prepare? It was.
Let’s go back to the first part of the definition of the word efficient. I write about effectiveness and efficiency. How to achieve them? I have my own private definition of Logistics. For me, it is discipline and flexibility. Seemingly, these two words contradict each other, but in relation to Logistics, they create an ideal mix.
Discipline means procedures, instructions and technologies used. Everything that provides us with repeatability, and our customers with constant and high quality of services.
The Mecalux automatic warehouse shown below is an example of solutions that fit into the discipline of the processes that I have in mind.
Source: Mecalux Mini-Load (AS\RS System) Description
On the other hand, flexibility is something that allows us to respond to customer expectations and wishes almost in the online mode. Regardless of whether we are talking about an internal or external client.
It was flexibility combined with discipline that allowed us to implement a drastically increased portfolio of orders in March 2020.
In 1996, when I started my adventure with Logistics and warehousing, the reference point for the quality of Logistics was the 4R principle (Right Product, Right Time, Right Quantity, Right Place).
Today we have the 7R rule. On top of that, you can add the Right Quality, the Right Costs, and the Right Customer, who is the most important element in all this.
This cannot be done without reference to the next two words that define effectiveness. These words are essential and real. The pandemic proved to the doubters the weight and importance of efficient Logistics.
Today, no one who wants to be a major player in the market treats Logistics as a cost and a necessary evil. Logistics is treated as an element of an enterprise that often determines its advantage.
In a way, it forces logisticians to take actions that are to improve our function and make it even more showy. Often these actions also make it effective, which translates into the splendor of our professional life.
Unfortunately, there are also shadows. And one is particularly important. We are chasing a rabbit that we will never catch.
— Wojtek Zaręba
Chasing a rabbit can be fascinating, but the prospect of never catching up with it can cause frustration for many of us. What can we do if we know we won’t catch it?
Do everything you can to shorten the distance as much as possible. The rabbit is supposed to be at your fingertips. This is where strategic investments help us.
Today, most logisticians understand this as the implementation of warehouse automation or even fully automatic warehouses.
However, it is easy to make a very costly mistake in this case. What should we do before a strategic investment? Of course, we should prepare the company’s strategy.
If we have one, it is also worth considering how the planned investments work in practice. Since we usually talk about systems with many dependencies, it is best to use the simulation tools that Adam wrote about in the article – Warehouse reorganization.
If we don’t have a specific strategy… Well, it’s not always as much of a problem as it might seem. The events in 2020 showed us that developing a long-term strategy for a company for 10 years is like reading a crystal ball.
Who would have thought of a global pandemic? Who predicted its scale and impact on the business? Please, not Bill Gates.
A strategic investment, whether it will be warehouse automation or ERP-class systems, is a multi-million dollar expense that should be depreciated in an acceptable time.
As a result, the development of warehouse automation and digitization of processes – these are questions not about “if”, but at most “when”. The world, in its rush forward, begins to behave more and more like an airplane without a pilot.
So it is not entirely clear where it will fly and whether it will land or whether we will become participants in a spectacular catastrophe. How to understand a strategic investment in such a situation? What could it be?
For me personally, such an investment was and still is staff. A team that will prepare the strategy, assess the profitability of the investment and then lead the implementation project.
You “only” have to take care of them. Take care of their knowledge, motivation, creativity. As little or as much. In my opinion, working with people and supervising them is the biggest challenge for every manager.
Note: You can find more about this in previous articles:
— Adam Sobolewski
Efficient logistics is not only about tools and processes. As Wojtek noted, in times of uncertainty and constant change, the best thing we can do is to create a team and give them autonomy in their work.
Commitment and critical approach to conducted processes are the key to efficiency. I don’t know anyone who would be able to predict how Logistics will function in the next 5 years.
The differences in the way the Supply Chain works can be seen both when we analyze what logistics costs should be as well as in the previously mentioned scope of processes and customer expectations.
This is why I share the opinion that effective Logistics is not necessarily showy logistics, but above all it should be efficient and tailored to the needs.
Perhaps an explanation constructed in this way will seem so extensive that it will not explain much. Unfortunately, magical explanations do not exist.
If you are looking for a way to increase the efficiency of Logistics in your organization, you need to formulate the question in a concrete way. You have to identify the problems and then look for solutions.
Both me and Wojtek can help you with this. You can contact me via the form in the Contact tab. Wojtek is available on LinkedIn.
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