The themes adopted for this year’s Global Contract Logistics report may at first sight seem diverse and eclectic: innovation, technology, risk, sustainability and ethics. However, together with price, availability and service, each one of these value features has now become fundamental to competitive advantage in the modern supply chain and logistics industry.
These factors now form a complex matrix of values which managers need to take into account when making informed decisions on their production and logistics options.
The industry has moved on considerably over the past decade. The ability to demand – or provide – low-cost and efficient services is no longer sufficient to meet the requirements of customers, consumers or indeed other stakeholders – such as regulatory authorities, non-governmental organisations or even media. Although the days when decisions were made solely on price and service are far from over, there is evidence that at a ‘blue chip’ corporate level at least, other value dimensions (such as ethics, sustainability or risk) have now become front and centre in the outsourced decision-making process.
In terms of value creation, it would also be a mistake to view each of these factors in isolation. Best practice in the supply chain industry requires the development of a holistic management approach which goes to the very core of corporate strategy. For example, an approach which ensures that suppliers comply with ethical labour and environmental policies requires the technology to provide the requisite visibility of supplier practice. This indirectly provides managers with the capabilities to make decisions to mitigate all types of supply chain risk, which consequently has a beneficial impact on the bottom-line. At the same time as this, the company creates a positive culture which can improve employee morale and motivation.
It would be a mistake to see these additional value features as either separate from the business of making profits, or, as many in the industry still do, a ‘necessary evil’ which ultimately provides some sort of marketing benefit but at a cost to efficiency. As this report deals with in some detail, those companies which embrace sustainable environmental practices and ethical behaviour are the ones which will ultimately create the most value. Although there may be short-term costs associated with implementing best practice, for example in green warehousing or by refusing to pay bribes in emerging markets, such an approach will deliver longer-term profitability, not least due to enhanced reputations and the creation of a strong management and employee ethos.
The so-called ‘triple advantage’ of bottom line benefits created through the strategy of ‘people, planet and profits’ is underpinned by innovation and technology. New business models have the potential to reduce levels of inefficiency in the industry, reducing costs, both financial and environmental.
The logistics industry has been pilloried over the years by many manufacturers and retailers for its lack of innovation. Now is the opportunity for logistics companies to show they are not only responsive to developments in the market, but actually driving many of these changes.