In the old days companies wanted lots of inventory months of inventory meant power the power to meet
consumer demand the power to quickly expand business nowadays.
Unnecessary inventory is seen as a burden as a result warehousing tons of inventory is not seen as practical.
Companies rarely utilize traditional warehouses today.
Companies favor using distribution centers.
What’s the difference.
Believe it or not unlike warehouses that might hold months of inventory distribution centers typically
hold their inventory for less than 48 hours.
Yep for some companies if an item sits in a distribution center for more than 48 hours it’s considered
a logistics failure and for some companies it’s 36 hours or even less.
The most common question people ask is if it’s only going to be there a day or two why even take it
there in the first place.
Let’s look at a really simple scenario five suppliers five retail stores.
Let’s say the 10 sites are geographically scattered.
How many trucks would you need to deliver product from the five suppliers to the five retail stores.
Yep 25 five trucks from supplier one to each of the five stores five trucks from supplier two to the
five stores and so on.
That’s a lot of trucks.
And what’s worse those 25 trucks were probably pretty empty.
Not very efficient supply chain managers hate that.
Now let’s use a distribution center.
Watch what happens.
Five full trucks leave the five suppliers they drop their cargo at the distribution center within 48
hours that cargo gets split up and then consolidated on five outgoing trucks one going to each store
five full trucks in five full trucks out in less than 48 hours.
Stores get what they want.
Truckers have full trucks and product flows quickly through the supply chain.
It’s a supply chain managers dream with only 25 to 50 distribution centers.
Huge chains can quickly move product to up to 3000 retail stores.
So our warehouse is completely gone.
No but even warehouses do more than store product nowadays.
Some pick pack and label products for shipment thousands of orders picked quickly and mostly error free.
That’s Amazon’s specialty.
Just think about how much product goes in and out of the doors of an Amazon facility each day.
Think about the difficulty of bringing items in tracking where they are on the shelves and then finding
the fastest way for employees to pick pack and label them so they can get delivered to your house in
a matter of days.
Still other warehouses specialize in taking back items that are returned to the stores.
These facilities might then recycle or dispose of those items or they may actually repair or refurbish
the broken items.
They may even find new customers for some of the open items that aren’t actually damaged or defective.
Still there are other places that will provide what are called postponement activities.
Suppose you saw wooden chairs but never know if customers will want them white black or red.
Why not send them to the warehouse.
If you provide them the materials and equipment.
Some warehouses will allow you to postpone the final stages of production and packaging.
Think about it.
Instead of committing to inventory that might not be sold.
These facilities allow you to sell all of your inventory the way the customer wants it.
These distribution centers and warehouses are a lot like airports aren’t they.
Airlines can’t take every person from every little city to every destination they use hub airports in
the U.S. those are airports like Chicago Dallas and Atlanta using hubs gives airlines the best chance
to have full airplanes moving in every direction.
Distribution centers and warehouses trying do the same thing.
So next time you take a long trip think about how those inconvenient layovers at hub airports are a
lot like airlines moving their cargo people through distribution centers the things we send the things
we need the things we return.
And even US and the people we love are all part of the world of logistics in basketball taking free
throws is pretty easy.
The free throw line is always in the same spot and so is the basket.
Plus you have time to set yourself before you take the shot with some practice.
Most of us can be fairly good free throw shooters getting baskets during a game could be much more difficult.
Now you’re moving.
You have people getting in your way.
You have teammates with whom you must coordinate.
You must make quick decisions about when to pass when to shoot and even how to shoot.
This sort of describes the differences between the first legs of logistics moving products from suppliers
to manufacturers to distribution centers versus then getting them to the retail stores or even directly
to a customer’s home moving products between a few large stationary suppliers manufacturers and distribution
centers is like shooting free throws.
Never quite easy but the repetition of movements the same is from one shipment to the next.
The economies of scale that can be achieved with large bulk shipments those can be practiced and perfected
on a daily basis.
That all ends at the distribution center though.
Now it’s time to move small shipments to retail stores.
That’s potentially thousands of targets for large retail chains all wanting different items in different
amounts each day.
How about for companies like Amazon.
They are shipping things right to your home or office.
Potentially millions of moving targets each day.
These are the challenges of supply chain managers call the last mile will customers want it now and
buy it at the store.
Will they want it next week and have it shipped to their home.
Or does the customer want it delivered quickly.
Do they want it one day or two day shipping.
Where do they live in a big city or in the suburbs.
Do they live on a farm or in a high rise building.
So many variables so much uncertainty.
This is like playing a fast paced professional basketball game.
A close championship game where any missed shot might lose the game.
Imagine never being able to miss a shot and at the same time Imagine being asked to take more shots
in less time.
This is what supply chain managers at the edge of the last mile are challenged with in today’s fast
moving global economy everyday supply chain managers are using warehouses trucks stores people data
and even robotics to solve the problems of the last mile.
Next time you order something from an online site and you’re pondering standard shipping two day shipping
or overnight shipping and when you wonder should it be shipped to your home in the suburbs or your kid’s
dorm room or the office in the city.
Think about how your decision will impact their supply chains.
Last Mile are you asking them to take a hard shot or an easy shot.