The need to compete more and better never ends for companies or their logistics. Both need to meet the new needs of their customers and, to do so, these four principles are gaining presence, vital to adapt to current scenarios. These four “R” of logistics, proposed by Donald Waters in ‘Global Logistics’, are: Responsiveness (responsiveness), Reliability (reliability), Resilience (resistance) and Relationships (relationships).
The four “R” of logistics
Companies not only have to adapt to new demands, but they have to do it faster and faster. Markets and customers change faster and faster and everything indicates that speed will continue to be a determining factor in the coming years.
In the case of logistics, moreover, it rains as it pours. The tendency to reduce stocks accentuates the need for logistics operators to be able to give quick responses to any need that may arise. The immediate response is no longer limited to exceptional moments, but is part of everyday life.
Customers demand customized solutions, tailor-made logistics suits. And they do so in a scenario in which demand patterns are increasingly uncertain and predictions serve less time and are less reliable. As a result, many organizations try to be guided more by demand in real time than by forecasts.
For a supply chain to be responsive, the key is not to do more things or do them faster, but to eliminate activities that do not add real value. Some symptoms of a lack of response capacity are the presence of duplication in the processes and the existence of tasks designed on paper and designed to also be carried out on paper.
Today’s supply chains face great uncertainties. As we have seen, the increasingly unpredictable demand and the reduction of stocks can cause problems; but also the dependence on all the suppliers and agents involved exposes us more to possible risks and threats to our reliability.
Despite the trend towards their reduction, the existence of safety stocks is a very useful tool to add robustness to our supply chain. At this point there is a significant clash between cost savings, by reducing the amount of merchandise stored, and the increase in our reliability if we decide to increase these stocks.
Another vital aspect for reliability is process review. It has been in this field where techniques such as Six Sigma or Lean Manufacturing have had an important presence. This review of how we do things has allowed companies to not only obtain quality percentages but, more importantly, detect where variability and problems occur.
Supply chains have also grown in their interdependence. Each link in the chain depends on the previous one, which makes it more important than ever to be able to trust that our order will be at the right time in the requested place in order to continue the flow of materials.
Supply chains are increasingly working with less margin for error
Is your logistics chain prepared for the unexpected? This “R” of logistics refers to how strong your logistics are when it comes to taking blows. The growth and internationalization of supply chains, among other factors, make logistics risk higher than ever. Whether it is a provider that fails you many kilometers away, a natural disaster that affects your routes or any other possibility; there will be many times when you have to deal with problems that are difficult to foresee.
Paradoxically, even improvements like Lean and Just in Time systems introduce new potential sources of problems. Supply chains are increasingly working with greater tension, less time, less stock and less margin of error. That is, practically without a network. And this compounds potential resistance problems.
Companies need to identify which are the risks to which they are most exposed, how serious their consequences would be and how to solve them. The measures to limit your logistics risks can be both preventive -measures to take before the problem arises- and palliative -how to act in the event of a problem to minimize the consequences-.
In recent times, companies have started to reduce the number of vendors they work with. This is due to the desire to forge better relationships between client and supplier, which mean greater value creation. This represents a change compared to past models, which looked more at short-term improvement in costs thanks to competition between providers.
In fact, there are more and more client-supplier relationships in which they speak of ‘partners’, of strategic partners. A vision based on both parties gaining and that results in greater benefits for both.
There are several advantages that usually arise from this new style of relationships. The service received often improves, thanks to a greater knowledge of the client’s processes over the years and a deeper understanding of their needs. These priority partners are also the first to receive innovations from their suppliers, and they are even the reason that leads to the development of these innovations. The more customer and supplier are integrated and the more trust there is, the easier it is to be able to save costs, by integrating all logistics processes more easily and having all the information necessary for it.
A classic example of this level of integration is vendor managed inventory (VMI). In this case, it is the supplier who assumes the responsibility of maintaining the supply of product at the different points where it is necessary. And for this it is essential that the client share information on sales, stocks, promotions, predictions, etc. in real time.
These four “R” of logistics show the evolution of customers and their needs, which are transforming logistics. Companies need more agile and adaptable logistics, but at the same time more robust. And, for this, they are willing to establish more meaningful and deep relationships with their logistics providers.