In an interview with Alan Braithwaite, Chair of the CILTs Freight and Logistics Policy Group, I asked him about the transformation of the logistics industry in the last 40 years and the outlook for the future. He observed there has been seismic change over his career, driven by several factors such as global sourcing and container shipping, the centralisation of supply chain networks, advanced materials handling and information and communications technology. Logistics cost ratios in corporate P&Ls are less than half what they were in the late 60’s.

But that achievement was entirely anchored on carbon. Both the sector and government were slow to absorb the impact of global warming for the sector. Now in 2021, we are facing an entirely different landscape: the zero-carbon imperative, UN Sustainable Development goals and shifts in geopolitics that impact resilience. There are 6 quite different drivers for the next 30 years: carbon and air quality; congestion and liveability; sustainability of materials; consumption channels; supply chain resilience; lot-size-one and digital capabilities. This combination of changes must occur faster and will be more difficult – not least as it will involve government.

There are implications for all these drivers, such as massive investments in energy supply, radical changes in regulation, network re-design, re-shoring and near shoring, a surplus in retail space and fleet mix re-specification. It is an environment of huge dissonance so operators and government may delay and hedge in the face of the many uncertainties.

So how should the logistics industry prepare for transformation and at the same time mitigate risk?

Supply chain strategies will need to change: “plan for capacity and execute to demand’’ will be the mantra. De-coupling supply chains closer to the manufacturing process will be more resilient to volatility.  Digital technologies that reduce set ups and increase variety will be crucial in the new world: ‘’sell-one: make-one: ship-one’’ will be the new world which will be ultimately constrained by the equipment capacity.

This ‘decoupling point’ between lean and agile processes can be used to bring about a radical shift in economies of scale – a lower volume production becomes feasible, enabling a move towards more sustainable production and consumption. Logistics will adapt to this and all the other pressures as it always has.

Source: Foundation for Future Supply Chain, November 23rd, 2021

Author: Julia Swales

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