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| 1. | Traditional supply-chain strategies were not greatly concerned about transport costs or carbon emissions. |
| 2. | Many companies are now against building huge warehouses because they are damaging to the environment. |
| 3. | Just-in-time, lean manufacturing and low-cost country sourcing are part of the new supply-chain strategy. |
| 4. | Tipping-point analysis argues that goods should always be stored close to the customer. |
| 5. | Products such as soft drinks or paper will continue to be delivered on a just-in-time basis. |
| 6. | Kimberly-Clark is the leader in moving its distribution centres closer to customers. |
| 7. | It is more energy efficient to have big, centralised warehouses rather than small, local ones. |
| 8. | Most ways of reducing carbon emissions in freight transport come at the expense of higher costs. |
| 9. | Shared warehouses and shared deliveries will be the model for the future. |
| 10. | This new model will give improved on-shelf availability. |
| Finding better ways to deliver the goods | ||
| 1 2 3 4 5 6 7 8 9 | by Rod Newing A Increased transport costs due to oil-price rises can change the economics on which supply chains were built. B Traditional strategies were aimed at reducing the amount of | 
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| 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 | money tied up in inventory and the number of warehouses. However, this was often at the expense of increased frequency of deliveries and longer transport distances, and therefore higher emissions. C Strategies, such as just-in-time, lean manufacturing and even low-cost country sourcing, must be re-evaluated in the light of fuel prices. We have entered a new era where different supply-chain strategies are needed to produce high performance, says Past the Tipping Point, a recent report from Accenture and Ilog, a French business-software company. D Jonathan Wright, a supply chain consultant at Accenture, explains that tipping-point analysis is an end-to-end assessment of the supply chain. The aim is to understand at what point inventory should be held further forward in the supply chain to reduce transport costs. E Moving inventory closer to demand lowers transport and emissions at the expense of higher inventory costs. ‘The tipping point occurs at different fuel prices, depending on the type and nature of the product’, he says. ‘The tipping point will be lower with a low-cost bulky product, such as sift drinks or paper. There will always be areas where just-in-time is the right thing to do and others where it is history’. F Kimberly-Clark’s Network of the Future places distribution centres closer to its key customers and markets, reducing the number of delivery trips. Its strategy aims for 70 per cent of products to be made and sold in the same country. In the US alone in 2007, it saved nearly 2.8m miles and 500,000 gallons of fuel. G There is usually a carbon trade-off between more energy-efficient, centralised warehouses and transport costs, but, generally, cost and carbon reduction go together. H Professor Alan McKinnon, Director of the Logistics Research Centre at Scotland’s Heriot-Walt University, has identified nine ways of reducing carbon in freight transport, most of which will also reduce costs. These are: switch from road and air to rail or water; reduce the number of links in supply chains; reduce average journey length; reduce empty running; increase vehicle capacity; reschedule deliveries to off-peak periods; use more fuel-efficient vehicles; and use lower carbon fuels. I Sharing distribution centres and deliveries is a powerful way to reduce cost and carbon footprint. Judy Blackburn, Head of the UK Logistics team at consultancy Kurt Salmon Associates, says that when two competing companies have merged their logistics operations and vehicle deliveries, transport costs have fallen by 15 to 25 per cent, saving 300,000-400,000 tonnes of carbon dioxide. J ‘Current supply-chain designs are primarily aimed at improving on-shelf availability, reducing cost and supporting sound financial figures’, according to The 2016 Future Supply Chain: Serving Consumers in a Sustainable Way, a report by the Global Commerce Initiative of manufacturers and retailers and Capgemini, the consultancy firm. ‘In future, the industry must design for additional parameters, such as reduction in CO2 emissions, reduced energy consumption, and reduced traffic congestion’. K The report forecasts that finished products will be shipped to shared warehouses in which multiple manufacturers store their products. Shared transport will deliver to city hubs and regional consolidation centres. Final distribution to stores, pick-up points and homes will use consolidated deliveries. |
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