Rick Holden is the vice president of business development at Riverside Logistics Services in Henrico, Va., a third-party logistics provider that offers transportation and warehouse/distribution services to companies in a variety of industries. He discussed some common logistics challenges and solutions with Aftermarket Business World.
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What do you see as the key logistics challenges that companies face right now?
Right now the key is just finding space to do distribution. Space has gotten tight. As far as supply chain goes, it’s having the right parts in the right place at the right time, and then having space to put those parts in.
The cost of transportation has gone up quite a bit over the past coupe of years, and so has the cost of truck itself, and that’s a huge challenge.
A lot of companies want to distribute through Amazon, where they can get more of a flexible network. Clients want to move smaller orders, but that drives the cost up. It’s the “Amazon Effect.” They want everything in the supply chain. A lot of clients want to just pass paper through – buy something overseas, and then sell it through some network or Amazon. They want that ease of entry but they get sticker shock when they see the cost of doing that.
We have to drive them back to figuring out what they want. If you want efficiency, then you ship larger orders.
What sorts of technology do you think will impact supply chain operations?
I see a lot more need for 3D printing and CNC machines for these smaller orders. In the automotive industry, you might have a 1990 car and have to carry a part for 30 years. That’s crazy. With 3D printers, you can make those widgets as you need them, and that will be more effective.
I see a need to react faster to demand, to change on a dime so you can have one item right when you need it instead of carrying inventory.
Where else can companies make improvements in how they approach logistics?
They have to understand how things will operate down to the unit level, and then bring it back up to the packaging and the right way to sell the item. If your item is worth $10, and it costs $6 or $7 to ship one at a time, that’s 70 percent of the cost. If you can ship in volume, that drives down the cost. A lot of it is driven by what the customer wants. They don’t care if you have to carry inventory. You have to talk to them about how the inventory will turn, and what it’s value is, and what it will cost to ship it.
Are your customers more interested in near-sourcing or re-shoring manufacturing operations?
You have to look at the overall costs. I see more people thinking about re-shoring. Places like China and Indonesia are less attractive now. You have to think about who has the technology to get a facility up and running to make the widget you need. You also have to have the flexibility to changes as things go out of style, and to charge the right price to be competitive.
Companies have to have the intelligence internally to map out multiple scenarios. They may have to change order sizes or other factors multiple times. It really shows you what it costs to move something from the point of origin through to the customer. It can be extremely frustrating for everybody involved.