Changing supply chains and distribution models
There are a variety of different supply chain and distribution models that firms can adopt.
3 minutes to read
The rise of e-commerce has led to considerable change at the consumption end of supply chains, with more costs and additional (last-mile) facilities allocated to this part of the supply chain to raise service levels and reduce delivery times. However, rising costs and delays at the production end of the supply chain are driving a rethink on the locations of these facilities and the transport connections linking them to the rest of the supply chain.
The distribution of goods may shift, with networks perhaps rerouting or diversifying away from certain pinch points. Increasing road congestion, fluctuating fuel costs, HGV-driver shortages and environmental impacts of road freight make alternative transport modes such as rail or waterborne freight appealing. Changing transport modes may necessitate relocating distribution or fulfilment functions.
Co-location
A vertical integration supply chain strategy; whereby a firm looks to gain control over different elements of the supply chain, may incorporate some consolidation. This could involve co-location of manufacturing, assembly, distribution or fulfilment elements.
Industrial land and units are increasingly being used by firms for a diverse mix of business functions. While supply chain security and speed may be an important driver for co-locations, new technologies such as additive manufacturing are making it possible. The ability to 3D print prototypes can dramatically reduce the time it takes a manufacturer to bring ideas to market and reduce transportation and storage costs, with the ability to send blueprints digitally instead of shipping goods. It can enable firms to unite the product development and manufacturing elements of production. With less reliance on low cost labour or large production spaces, the cost and time involved with shipping goods around the globe and holding large quantities of domestic stock may no longer stack up.
Bringing together research and development or engineering elements alongside distribution can mean a greater need for highly skilled labour and for high quality auxiliary office space along with a good amenity offering. As requirements for labour and facilities and amenities change, the ideal locations are also likely to shift. With proximity to skilled labour perhaps being more important relative to distribution-led factors.
Port-centric supply chains
Port-centric supply chains can reduce the number of handling stages during storage and distribution and improve the environmental resilience of a supply chain. Prior to the containerisation of freight and the development of intermodal logistics, logistics and distribution systems focused in and around the port areas. A port-centric model may incorporate storage, distribution as well as manufacturing and production facilities. It may focus on inbound or outbound logistics (imports or exports), or both.
Both Covid-19 and new post-Brexit trading regulations have led to congestion and delays at ports. Using ports, either close to the origin or destination of the cargo can reduce the number of legs in the journey and mean fewer road miles are consumed, thus removing carbon from the supply chain and reducing the risk of disruption caused by congestion.
Congestion and delays at ports can have extremely detrimental impacts on food supply chains. The agribulk industry often uses port-centric models. For example, there are three large grain processing facilities (including Europe’s largest grain corn mill), which are fed by conveyor from Liverpool’s grain terminal. Compagnie Fruitière, a supplier (and ripener) of bananas to the UK market, leased a 69,718 sq ft ripening facility at London Gateway’s Logistics Park (2020). The facility is adjacent to London Gateway’s deep-sea container port, with an international rail terminal on site providing multi-modal integration. Highly connected, port-centric distribution enables food suppliers to maximise speed, efficiency and product shelf life.
It’s not just food supply chains using effective port-centric warehouse operations. UK clothing company Barbour, based in South Shields, uses the coastal feeder container service from Felixstowe to South Shields. Each container shipped saves around 600 road miles per container, reducing CO2 emissions.