Push vs pull logistics: where are supply chains headed next?
The pandemic changed supply chains irrevocably. A demand-led, pull model of logistics took over from a supply-driven push model — but what happens now?
Push logistics refers to a supply chain model in which suppliers create products based on their own expectations of what the market will require and push them out to customers. This is often done through retailers and distribution centers. Pull logistics, on the other hand, works according to real-time customer demand. When a customer orders an item from an online platform or store, this triggers the supplier to produce it and deliver it directly.
The pandemic has had a disruptive effect on supply chain models, as restrictions in movement made it difficult for vendors to accurately predict or meet customer demand. This has led to excess inventory and out-of-stocks, as well as significant delays in product delivery. What was once an efficient push model is now inadequate; the focus has shifted towards a more agile, customer-driven pull model.
“During the pandemic, we all saw how vulnerable the supply chain actually is," HERE Product Marketing Manager Bjarne Jensen told HERE360. “A lot of companies have been building up stock, but the effects are still being felt with scarcity of some products and parts and uncertain delivery times."
Black swan events such as COVID-19 do not happen frequently, but their effects can be felt for a long time. For a lot of enterprises, gaining visibility into their supply chains and driving operational efficiencies are the best ways to maintain some sort of control. Insights that help businesses understand patterns, plan and prepare are invaluable in times of continuing unpredictability.
Seeing is believing
Letting inventory build up — in contrast to the just-in-time approach that was common pre-pandemic — is one way of mitigating disruption and unpredictability. Storing more goods can be expensive, however, Jensen said.
Some have adopted a multi-supplier strategy to minimize supply chain risks, but the downside is higher costs, and potentially fewer volume discounts, though on the upside it can improve the supply certainty. Getting more visibility into the various stages of your supply chain is helpful in identifying bottlenecks. But it does not come without its challenges.
“End-to-end visibility does not happen overnight," he said. “Supply chains consist of a lot of different players, and tend to be very siloed systems. You need to consolidate all that data into one platform. It is not easy, but it is something to work towards."
One of the challenges is that road transportation consists of 80% of fleet companies that are smaller carriers. These companies prefer not to disclose their exact routes as this could affect the price they can fetch for journeys advertised on freight forwarding platforms, Jensen explained. For larger fleets attempting to operate as efficiently as possible, it may make more sense to share this data with others.
“There are a lot of last-minute requests for transportation in this market," he added. “It is very much a spot market. That adds an extra challenge for visibility since it is so dynamic."
Collecting data about supply chain movements over time can generate insights that help with future planning. Identifying patterns, for example, busy times around holidays or promotions, can help businesses prepare.
How HERE can help
The right tools and solutions can address some of these issues. While nobody can predict exactly when the next black swan event will occur, effective routing and greater visibility will give companies more control over their supply chains.
“At HERE, we are good at solving complex problems," Jensen said. “If you have a fleet of vehicles that are heterogeneous, we can take all those vehicle types into account and tell you how to transport these orders in the most effective way, from a time and cost perspective."
Typically, these companies have been attempting to manage their routing using manual processes.
A planner with a pen and paper, perhaps depending on an Excel spreadsheet and their own knowledge and experience, would historically have figured out the routes themselves, although it might take several hours to complete.
“But in the end, it becomes so complex," Jensen said. “There are so many variables in the equation that you really need to consider. An automated algorithm can factor in all these different variables and come up with the most efficient plan for what you are trying to achieve."
These parameters can include time windows, job requirements or priorities, vehicle capabilities, range and traffic information among others. The greater the number of vehicles and drop-off and pickup points required, the more a fleet will likely benefit from using a tour planning algorithm.
“You need to have a significant number of deliveries or pickups that you need to perform within a day or a week before it makes sense," Jensen clarified.
It also mitigates the risks associated with depending on one person when an automated system takes over. “If you're dependent on a person, something can happen to that plan," he said. “You need to get all this knowledge out of the heads of all of these dispatchers or planners and get it into a system."
There are other benefits to fleet companies undergoing this transition. Routes for many fleets that calculate them manually have to be done at night, when the final orders have been received. But what may take a human hours to complete can be done by a route optimization algorithm almost instantly. It negates the need for working anti-social hours.
Even late orders can be accommodated. The algorithm can add them to the schedule of the driver who can most easily absorb them into his or her route.
“It is possible to get more flexibility, as the routes are not so static anymore," Jensen said. "It also allows companies to offer new services eg, premium return logistics, which from a competitive standpoint is helpful and it can also benefit operational efficiency."
Bringing the benefits
HERE has made bespoke solutions of this kind for companies including METRO.digital and Active Logistics. As well as optimizing routes and improving efficiency, these tools have helped our customers meet sustainability goals by reducing fuel use and emissions.
In many cases, they are able to increase the number of stops on each tour and cut back on time spent idling due to better routes and more accurate ETAs.
“This means that customers are generally more satisfied," Jensen said.
When combined with using sensors and asset tracking technology, optimized routing can make significant improvements to overall visibility and efficiency in the supply chain. Geofencing can help track goods and assets, allowing teams to receive reliable ETA information, which enables them to prepare for cargo arrival and boost operational efficiency.
Making loading and unloading easier as well as improved navigation can make a driver's job easier — and that is significant in times when most regions suffer from driver shortages.
While there are no overnight solutions, location technology can bring incremental gains that add up to significant operational efficiencies and improvements overall.
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