Cross border supply chain needs a pragmatic change in dealing with global service providers
08 Feb 2018 Cross border supply chain needs a pragmatic change in dealing with global service providers
(This article was originally published in Supply Chain Asia – link)
In today’s world, customers are increasingly defining how retailers should structure their supply chain. They can now shop anytime and anywhere, are more ethically and environmentally aware, and expect a more fulfilling experience from the retailers. The job of the retailer, doesn’t end only by making the best product available to the customer, but also in ensuring that the delivery of the product is seamless and hassle free to win customer preference. Hence, retailers are starting to seriously consider how to build a robust and sustainable supply chain model for long term business growth to meet fast evolving consumer demand, while minimizing costs and achieving profitable growth.
Typically, what a retailer does to take care of supply chain is to appoint a leading logistics service provider, who takes care of the entire process of delivery of the product, starting from sourcing to last mile delivery. The service provider, on the other hand, charges the retailer in terms of volume of the consignment and the requirement of added partners to execute various processes within the supply chain. While this process is fine with smaller consignments involving a limited volume of products restricted to geographical proximity, the dependency on a single courier service provider can prove to be quite disastrous if the retailer is looking at larger volume across wider locations.
There are quite a few reasons behind this inference. First of all, dependency on a single courier service provider or adoption of ‘inorganic’ supply chain management can have a huge impact on the cost to the retailer. This is because, typically a courier service provider will charge based on their pay off margins with other players involved in the delivery process and hence automatically inflate the consignment charge. Secondly, post engaging with a courier service provider, the retailer has zero control over the internal processes and dynamics of the supply chain and must be completely dependent on the courier partner. Last but not the least, depending on a single service provider has a high chance of breakdown in the end to end supply chain flow. The enhanced dependency on a single partner means that if any of the processes involved in the logistic management flow suffers, it will invariably have a cascading effect on the overall operation which will lead to cost overrun and chaos.
‘Organic’ supply chain approach
What should an enterprise retailer do to avoid the challenge of high overhead cost and inefficiency in terms of enabling a seamless delivery mechanism? Some of the critical aspects of a retailer’s global supply chain involves domestic shipment, International air freight forwarding, destination custom clearance, destination fulfilment and last mile delivery. Traditionally, in an ‘inorganic’ supply chain model, a single courier service provider is responsible to take care of each function of logistics management. However, in an ‘organic’ approach, retailers can segregate the scope of work and engage with a best in class service provider for each function. By breaking the chain of dependency on a single service provider, retailers can now expect greater assurance and reliability of operation as each function operates independent of each other. Moreover, this approach helps in creating a scalable ecosystem where both the retailer and the service provider get an opportunity to grow their business through large scale consignments. This approach also gives greater visibility and control to the retailers as they now have the exposure to the performance of each and every function. Also, for enterprise retailers, it makes a lot of sense to partner with the best in class service providers in each functionality of the logistic supply chain. It is like having a team of specialists executing their jobs perfectly, rather than depending on a particular individual to wear many hats.
However, there is a caveat in adopting an organic approach to supply chain. A retailer must be really careful in choosing partners. Performance standards should not be compromised while selecting the service provider. All service providers must adhere to uniform bench marking standards and procedures to ensure that the delivery process does not suffer. Moreover, pre-defined Standard Operating Procedures need to be laid out for each function so that the retailer can measure the performance from time to time and eliminate any constraint that affects the functioning of any of the department. A third party omni-channel technology enabler with experience in working with enterprise brand is a better bet to partner with to take care of all these processes.
Enterprise retail brands need to envisage that investing only in delivering better products is just half the job done. The same degree of focus, if not more, is needed to be given on how to provide best in class supply chain service to customers. A sound logistic management goes a long way in the brand building process for enterprise retailers.
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