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Supply chain velocity coming to the rescue
The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
In the complex and ever-changing world of modern commerce, supply chains play a central role in ensuring the smooth flow of goods and services from producers to consumers. Amid the many complexities of this supply chain process, the concept of velocity emerges as a critical determinant of success. At the recent CSCMP Edge conference in Atlanta, velocity played center stage at the Business Innovation Awards.
Velocity, in the context of supply chains, refers to the speed at which goods move through the various stages of production, distribution and consumption and the ability to change direction on short notice. It is the heartbeat of an efficient and responsive supply chain. In supply chains, companies need to have both the ability to accelerate or decelerate when needed, but also be able to change direction very quickly. That is how we would describe supply chain velocity and freight plays a huge role in this chain.
At high velocity, a supply chain is characterized by reduced lead times, decreased cycle times, improved inventories and enhanced flexibility. This dynamic approach allows businesses to respond quickly and accurately to changes in demand (source and quantity of demand), seize emerging market opportunities and efficiently manage all supply chain resources.
Velocity is becoming more important for several reasons. In the age of instant gratification, consumers expect products to reach them almost before they order them. As fulfillment methods have become faster and more diversified, forecasting where the customer will need the product becomes more difficult. A high-velocity supply chain ensures that products are available when and where customers need them, leading to improved customer satisfaction and loyalty.
Velocity is the solution to excessive inventory levels. By streamlining processes and reducing lead times, companies can maintain lean inventories without the risk of stockouts. This leads to a cost savings impact on the P&L, as well as a positive impact on the balance sheet.
The concept of velocity is paired with more efficient supply chain processes. When goods move quicker through the supply chain, there’s less room for inefficiencies, such as excess storage costs, obsolescence and overproduction. Rapidly changing market and customer dynamics require businesses to adapt swiftly. A high-velocity supply chain enables companies to adjust their production and distribution strategies in real time, ensuring that they stay competitive and capture emerging trends.
In times of digital transformation, technology serves as the accelerator of velocity in supply chains. But supply chains are hard to digitize and especially transportation remains a human-centric function. As witnessed by recent technology firms filing for bankruptcy or carriers facing cyberattacks, technology cannot solve this alone. Technology working hand in hand with operators can create substantial efficiencies.
Real-time visibility, both in transportation (inventory in motion) and in the warehouse (inventory at rest), creates the connectivity that provides the data on which velocity is constructed. The collected data from visibility enhances data-driven decision-making. With the help of advanced analytics and predictive modeling, companies can anticipate shifts in demand, optimize inventory levels and fine-tune their operations for maximum efficiency.
In the dynamic, disruptive and complex world of supply chain management, velocity emerges as a cornerstone of success. Its ability to drive customer satisfaction, optimize costs and enhance market responsiveness cannot be understated. Technology’s transformative power is propelling supply chain velocity to new heights. Through IoT, real-time visibility, advanced analytics, automation and digital platforms, businesses are poised to accelerate their operations, adapt to changing market dynamics and deliver value to consumers with unprecedented speed.
But let’s not underestimate the importance of the human in this process and the need for organizations to make the right mindset and process changes to allow for true transformation.
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About the author
Bart De Muynck is an industry thought leader with over 30 years of supply chain and logistics experience. He has worked for major international companies, including EY, GE Capital, Penske Logistics and PepsiCo, as well as several tech companies. He also spent eight years as a vice president of research at Gartner and, most recently, served as chief industry officer at project44. He is a member of the Forbes Technology Council and CSCMP’s Executive Inner Circle.
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