It has long been said that ignoring history dooms us to repeat it. It is certainly true in the logistics and warehousing industry. If logistics and warehousing managers fail to understand that is going on behind every disruption to their supply chains, these disruptions must continue, and must continue to occur in an unpredictable fashion. If we do not use that knowledge effectively, and disseminate it holistically, we are doomed to the kind of disconnected planning that cannot address or even predict mismatches in supply and demand. Such mismatches are not just inefficient at the logistics and warehousing level; they often produce roll-on problems for every aspect of the business.
Another problem is that many of us spend all of our time fire-fighting and have precious little time to analyse the lessons of the past, let alone use them to systematically plan for the future. An integrated set of logistics and warehousing planning and execution procedures must often be adopted all at once. As that is itself a disruptive process, many logistics managers attempt to implement the changeover during the next inevitable disruption, minimising actual downtime.
Logistics and Warehousing Visibility
Improving your logistics and warehousing operations must begin with supply chain visibility. If you don’t have a clear picture what is happening along your supply chain, your planning will by necessity be based on expected norms, not observed current realities. This often means that managers can only react manually to disruptions and other unexpected changes. It goes without saying that manual adjustments are not generally efficient or desirable.
Gaining visibility on your supply chain allows a greater degree of forecasting, as you have current and relevant information to base your demand forecasts on in the first place. Of course, early standalone visibility systems failed to prosper, showing us that visibility alone is not enough. Visibility solutions for logistics and warehousing operations must be integrated to your planning and execution processes. This allows you to position your inventory to take better advantage of more predicted sales, and enables a logistics manager to react to disruptions almost immediately. This is what produces real value for the company. A closed loop process for visibility, planning and execution produces much more efficient and profitable supply chains which also allow improved customer service.
Logistics and warehousing visibility has two basic subdivisions: supply side, which consists mostly of real time information of changes and disruptions to the supply chain, and demand side, concerned more with matching inventory with demand efficiently. Together, they allow a continuous process of learning and therefore better iterative planning.
Logistics and warehousing visibility efforts have traditionally focused on disruptions to supply or inventory. I’ll not downplay the importance of those subjects, but this approach doesn’t help us learn from the past. We need demand-side visibility to do that. Clear knowledge of day to day sales figures gives a better ability to forecast because it includes an understanding of what is going on ‘on the ground’ or on the sales floor. It makes planning systems better able to form plans and to adjust them with greater accuracy. It lets you manage labour, inventory and transportation to suit forecasted demand, rather than observed demand..
Iterative Planning for Logistics and Warehousing Managers
Yesterday’s planning systems fail to respond to the current market’s fast changes in demand or flighty, digitally-enabled customers. Analytics can add a degree of feedback to your planning system, yet analytic techniques are rarely fast enough to handle daily shifts in demand and is insufficiently connected to execution systems to make significant impact.
Iterative planning methods are what is really needed in this situation. An iterative system is continuously and rapidly adjustable. It takes the sales visibility we’ve developed and uses it to forecast demand. With that constantly iterative forecast, a logistics and warehousing manager can make inventory plans, and pass them rapidly to execution. Execution processes can use this real-time visibility to adjust all but instantly to any supply chain disruptions, and pass the changes back to planning so to inform the next iteration of the plan. This allows every type of plan to improve continuously in terms of accuracy and make more reliable, more actionable forecasts.
Logistics and warehousing visibility can be used to inform iterative systems, but you must take special care to differentiate actual important information from the red herrings. After all, ‘garbage in garbage out’. Predictions based on bad data lead to poor decisions. The spike in demand you may see due to a promotion is probably important, while a spike of unknown cause or related to something beyond your control and unlikely to repeat is probably not.
An iterative planning system must filter this kind of irrelevant information and background noise before it can provide truly actionable visibility, which you need before iterative planning systems can react profitably to shifts, disruptions, and similar changes by adjusting your logistics and warehousing strategy.
Creating a good iterative planning system relying on real time supply side and demand side visibility isn’t easy. You’ll need a command and control system to monitor and control the action, as well as directing execution throughout your network in order to keep orders filled and to meet your service commitments. Such decisions have to be based on time specific, location specific allocation and inventory visibility. They also rely on accurate data on transportation cost and availability of labour. Your C&C process needs to factor in product lifecycle and rotation, and inventory balancing principles as well.
Because the rest of the process is iterative and based on real time visibility, the strategy decisions it drives need to be iterative as well. This execution stage is where you realise the profit from the entire system. Iterative execution should assure efficiency and constantly improving customer service
Change is nonstop in today’s markets. If your planning systems lack visibility either up- or downstream, it can’t possibly react quickly enough. Visibility combined with iterative planning and execution ensures optimal decision making and improved profitability.