Find out how logistics play a pivotal role in the supply chain and how such an intricate network can be effectively managed.
This is the first installment of a two-part series discussing how COVID-19 has disproportionally affected supply chain logistics and how tracking and tracing should be used to improve resiliency.
A business’ success hinges on efficient logistics and supply chain management. What once started as the cart behind the retail horse has now become the driver. In fact, according to Digital Commerce 365, 50% of consumers admit that delivery factors such as delivery cost or delays affect their purchasing decisions.
Supply Chain Logistics: Decades Of Influence
Supply chains date back to the beginning of recorded history. The first documented and organized courier service dates to 2400 BCE in Egypt. Since then, supply chains have enabled kingdoms and republics to triumph in war. In modern times, logistics have been critical to the success of companies. Through efficient logistics, businesses can win the profitability war.
Logistics is about more than just moving a product or service. It’s about moving a product or service efficiently, and effectively, and consistently. Effective exchanges cannot occur without efficient movements, and few businesses can capture and maintain customers without consistency. Through consistent operations, efficient and visible product movements, and effective management of customer expectations, companies can create added value throughout the supply chain.
Establishing The Goal: Transparency In Logistics To Create Resiliency In The Supply Chain
The oil and gas industry is plagued with uncertainty along its entire supply and value chains—from production and exploration to refining and transportation. The midstream and downstream sectors in particular face complexities and uncertainties, including strict regulatory requirements, intense safety protocols, fluctuating demand, variable supply, uncertain lead, and delivery times.
On their own, these factors are difficult to resolve. However, oil and gas companies are faced with a barrage of issues making operational decision-making particularly arduous. While companies may not have complete control over all these factors, they can control their logistics.
Logistics are key to maintaining a healthy supply chain that can deliver supplies to production facilities or finished products to customers. Conversely, lack of visibility and transparency into the logistics along the oil and gas supply chain interrupts a company’s network and interferes with its ability to exercise control and make informed decisions.
Struggling Through Complications: Dealing With A Pandemic
The pandemic has highlighted the vulnerabilities of supply chains—gaps in supply chain visibility. Before the pandemic, some organizations had made documented efforts to improve such visibility, but now, these efforts are more than just opportunities—they are necessities. Visibility has become an expectation—a requirement even—rather than a privilege.
Supply chain challenges don’t always indicate product shortages. Amid product abundance, supply chain hurdles still exist. The interconnectedness of the supply chain leaves it vulnerable to compound fractures when threats or other factors permeate even a single step of the logistics process. As an example, a shortage of truck drivers puts stress along the entire supply chain—not merely on the delivery step. When there are no available truck drivers, the warehouses become full. When the warehouses become full, they
can no longer accept new product shipments.
When warehouses cannot accept new product shipments, ships are stuck “in the queue” waiting to dock and offload. The supply chain is left overwhelmed and overworked. In October 2021, the Port of Savannah reported that 80,000 shipping containers were stacked and awaiting a ship that would take them to their final destination or a truck that would transport the containers to a subsequent warehouse. The port had never reported being so full; in fact, the October capacity reflected a 50% increase from the port’s norm.
Even with the hardships of the pandemic, companies must be resilient and battle through to maintain control over their network. Tracking and tracing innovative technologies have illustrated this most clearly. These technologies provide real-time movements to enable suppliers to manage their operations proactively, set actionable and attainable customer expectations and, ultimately, improve customer satisfaction.
Awareness of tracking and tracing technologies has increased over the past two decades. Consequently, such technologies have gained recognition as mechanisms for improved supply chain integration,
planning and control, and overall supply chain management. This recognition has ignited researchers to more deeply consider what it truly means to “digitalize” the supply chain.
Such an understanding includes generating awareness of the role that digitalization has in performance improvement, as well as the risks, challenges, and other threats that companies faced with digitalization may encounter. In simpler words, tracking and tracing are critical components of supply chain management and can only be leveraged to their full potential when a company has undergone digital transformation.
How Do You Achieve Supply Chain Resiliency?
“Knowledge is power,” as Sir Frances Bacon proclaimed in 1597. Companies need to establish the ability to track and trace their assets, as the digital transformation creates a stronger and more resilient supply chain.
Pandemics, storms, labor issues, and a myriad of other external factors can wreak havoc on a carefully constructed supply chain. Therefore, the more complex the business, the more a company must rely on timely visibility and access to accurate information to maintain a proper supply of feedstocks or finished goods and create value across the entire supply chain.
Digital transformation drives tangible results that improve decision-making across the complexity of the supply chain. As General John Pershing declared, “infantry wins battles, logistics wins wars.” Through efficient logistics, businesses can win the profitability war.
The second installment of this series, titled “Supply Chain Visibility: Harnessing Logistics To Drive Value – Part 2,” will outline and discuss four tangible benefits of supply chain visibility that can come only after a company recognizes the urgency and importance of digitalization for an intricate supply chain network.