One of the buzzwords that has started circulating supply chain publications this year is micrologistics. You may have seen it trickling through your social feeds, or it may be a totally new idea. But one thing is for sure; it’s being piped as the next best network strategy to cater to an ever-changing customer.
So what could possibly be the problem? As with many industries, fads come and go and it is only the truly powerful ideas that stick. So is micrologistics just another buzzword? Or it is really a viable option to enable accelerated product delivery? We explore these questions in this post.
What is it?
Even if you haven’t come across micrologistics as a specific term, if you’re an avid reader of our blog the concept shouldn’t be too foreign to you. Micro + logistics is the aftermath of an information based supply chain, and it’s described as a network approach where warehouses become smaller and more localised.
We’ve covered in our post 6 eCommerce shipping trends that put the customer first, how businesses today are at the whim of a fickle customer. Maybe your product is perfectly suited to them, but are they willing to wait that 6 day shipping estimation? Most likely not when all they need to do is go online and find a supplier that will offer them that same product for half the price and most likely with free shipping.
‘It is no secret that the supply chain of today is vastly different from the supply chain of the past.’ John Santagate, Research Manager – Supply Chain at IDC Manufacturing Insights noted that the power balance has shifted and it’s up to manufacturers to find new ways of gaining a competitive advantage.
So what can businesses do in this incredibly competitive environment? According to many logistics experts the answer is implementing effective ways of satisfying those customer needs. And micrologistics just might be the answer. Let’s take a look at the benefits below.
The first and foremost benefit of considering a network approach is that your distribution centres will be closer to your customer. This will significantly reduce delivery times when quick order fulfilment is no longer seen as just a perk but a requirement.
It might sound like a big investment building centrally located warehouses, however, according to Nukon, regional warehouses save money in the long run because the products spend less time on the road or in the air.
It’s also possible to get better inventory control due to the fact that warehouses are centrally located and the information is siloed. In a large warehouse, it may be difficult to see patterns in buying patterns of customers. However, you’ll find it easier to bring greater variety to a smaller group of customers. And like-wise, you’ll be able to stop stocking products in locations that don’t move the inventory.
One of the biggest challenges that you may have already been thinking of is capital. Not every business has the capital and the resources to set up multiple warehouses in central locations. It does take a lot of capital and a lot of planning to implement a strategy like this. However, it may be a good idea if you’re investing in one large warehouse, to consider 2 smaller ones that a more sporadically laid out.
It’s worth calculating the cost of shipping from a warehouse that is shipping to all your locations, verses the cost of setting up different locations and the money you’ll save on delivery time.
Although that sounds nice in practice, another key consideration is the possible increase in staffing costs. The more distribution centres you have, the more staff you require to man them. If you require a lot of staff in key areas, it’s important to ensure they are working as productively as possible. And yes, automation and robotics would most definitely reduce these costs.
Regardless of these cost factors, an estimated 50% of businesses are currently looking into micrologistics to start driving their supply chain strategy. Time will tell how effective it is when delivering products to an ever-changing customer.