Transportation in Supply Chains: Finding the Right Balance

In this final instalment of our supply chain series, we focus on transportation.

If you missed the earlier posts, the first covered suppliers and inventory, and the second focused on sustainability. You can also listen to the podcast episodes on Spotify.

The first thing to note about transportation is that it is like a thread connecting multiple points and decisions in your business. If all your inventory is concentrated in one location, managing inventory and transportation will be easier but your cost to serve could be higher if you are serving a whole country from just one location. If you keep your inventory in multiple locations to be closer to customers, well, transportation cost could be lower but holding inventory and maintaining several warehouses will be costlier. The point is, it is a constant struggle to find the right balance. It keeps changing too as your customers and consumer profiles change. So, if you are starting from scratch here is my take on the steps to build the right transportation model for your business 1. Customer location. Analyse your order history in say the last one year, where are the highest number of your customers located?. If you are just starting, where do you anticipate 80% of your customers will be located? 2. Delivery promise. The average first attempt delivery time in the US for online orders is 3.6 days. Since consumers are conditioned to expect that, you kind of have to stay in that range or do better. This varies by country. The point is, assume the norm. Unless, and this is a big unless, you are using delivery promise to differentiate your business. 3. Distribution network. Determine where your warehouses or distribution centres will be located. Obviously as close as possible to your customers the better but it also depends on finding available and affordable warehouse space. 4. Transportation modes. Simulate the mix of transportation modes that meet your delivery promise (s). Depending on the country and the type of goods, trucks, bikes, drones, rail, air and sea could all be included. 5. Don’t forget Sustainability. If using electric or hybrid vehicles is possible for the same cost or marginally higher, then switch. If you can, consolidate shipments to reduce the number of trips and overall transportation emissions. No amount of emissions avoided is too small. 6. Select carriers. Establish strong relationships with multiple carriers to ensure flexibility and reliability. Negotiate contracts to get the best rates You’ll notice that this blog is about Transportation but I touched on customer location, delivery promise and distribution network. That’s because Transportation is a connector That concludes our final post in this supply chain series. Thank you for reading! See you on the next blog! Have questions or comments or want to suggest a topic for the series? Send Juliet Anammah a short email at info@cgandrstrategy.com Disclaimer The content in this blog is intended to provide helpful and informative material on the subjects addressed. It is not intended to be exhaustive on any given subject. The content is offered “ as is, with no guarantees of completeness, accuracy, timeliness, or the results obtained from the use of this information. The author and publisher of this blog disclaim all liability and responsibility for any actions or results arising from the use of the information contained in this article, to the fullest extent permissible by law.