Chang­ing global sup­ply chain trends and geopo­lit­i­cal events pose big chal­lenges

The Irish Times - Business - - SUPPLY CHAIN MANAGEMENT - SAN­DRA O’CON­NELL

Mod­ern sup­ply chains couldn’t ex­ist with­out the sup­port of a highly so­phis­ti­cated lo­gis­tics sec­tor. From a man in a van to Maersk, it’s the engine that gets the goods from A to B.

Of­ten looked to as a bell­wether for the econ­omy, it’s also a sec­tor that, fit­tingly enough, sees sooner than most what’s com­ing down the tracks in terms of tech­no­log­i­cal ad­vance­ments.

It’s at the front of the queue for the de­vel­op­ment of au­ton­o­mous ve­hi­cles, for ex­am­ple. Driver­less lorry test­ing is well un­der way in many coun­tries, viewed not alone as a so­lu­tion to driver short­ages, but to ra­zor-thin mar­gins too.

Drone de­liv­er­ies will soon be wing­ing their way to a door near you too, with Ama­zon Prime hav­ing gar­nered a head start in this air space, fol­lowed by UPS’s van-top he­li­pads. We’ve al­ready fa­mously seen drone-de­liv­ered pizza, thanks to Domino’s.

Au­to­ma­tion, ro­bot­ics and ar­ti­fi­cial in­tel­li­gence are com­bin­ing to cre­ate In­dus­try 4.0, al­ready in ac­tion in the port of Rot­ter­dam, the first in the world to use au­to­mated guided ve­hi­cles and au­to­mated ter­mi­nals.

Smart wear­ables and aug­mented re­al­ity are al­ready an ac­tual re­al­ity in ware­house pick­ing and pack­ing world­wide.

In­no­va­tions will only take the lo­gis­tics ser­vices sec­tor so far, how­ever. For to­day’s deeply in­te­grated sup­ply chains to op­er­ate ef­fi­ciently, and justin-time, the big chal­lenges re­late to threats to in­ter­na­tional trade, whether as a re­sult of pol­i­tics, dis­rupted trade agree­ments or tar­iffs. All have the po­ten­tial to cause se­ri­ous speed bumps. In Ire­land right now, that means Brexit.

Brexit out­comes

“I’m sure most com­pa­nies have a pre­ferred set of Brexit out­comes but un­til they know what’s go­ing to hap­pen, they have to put any ma­jor strate­gic de­ci­sions on hold. Un­til they know what reg­u­la­tions will im­pact move­ment in and out of the UK, Ire­land, and the rest of the EU, it’s dif­fi­cult to de­ter­mine the best way to move for­ward,” says Bill Rose, the for­mer UCD aca­demic re­cently ap­pointed as­sis­tant pro­fes­sor of sup­ply chain man­age­ment at Iowa State Univer­sity.

Sev­eral fac­tors are dif­fi­cult to pre­dict. “Changes in re­quired doc­u­men­ta­tion, in­spec­tions at the bor­der, the time it takes to move freight across the bor­der, and any num­ber of other con­cerns in­flu­ence strate­gic de­ci­sions such as where to in­vest in ware­hous­ing and pro­duc­tion fa­cil­i­ties, how many peo­ple to em­ploy, and how to move prod­ucts in­ter­na­tion­ally,” he says.

The im­pact will be sig­nif­i­cant across a range of sec­tors, says Paul Davis, sup­ply chain man­age­ment ex­pert at DCU. If UK food, drinks or phar­ma­ceu­ti­cal com­pa­nies re­quire dif­fer­ent la­belling for a pop­u­la­tion of just 4.5 mil­lion, will they bother, he asks. And that’s not to men­tion the risk if stan­dards di­verge.

For con­sumers, prices will rise. So far, lo­gis­tics ser­vices com­pa­nies have re­sponded with talk of in­creased de­mand for ware­house space, but that’s only a short-term ef­fect, not a long-term strate­gic re­sponse, he points out.

“With less choice com­ing in, the sup­ply chain will change too,” says Davis. For a start, if the UK land­bridge be­comes less ef­fi­cient, the im­pact on fresh pro­duce in par­tic­u­lar, will be sig­nif­i­cant.

“In the long term, we are look­ing at less con­sumer choice but from an ex­porter point of view, com­pa­nies here have been very good at man­ag­ing their busi­ness by us­ing the land­bridge. Re­move it and com­pet­i­tive­ness be­comes an is­sue.”

Per­ilous po­si­tion

The risk to the indigenous lo­gis­tics sec­tor is that larger Euro­pean op­er­a­tors de­liv­er­ing here will sim­ply take a back load out, leav­ing the sec­tor in a per­ilous po­si­tion. For a sec­tor that com­prises of very many owner-driv­ers, tak­ing time out to re­spond strate­gi­cally is an is­sue.

“Man­u­fac­tur­ing com­pa­nies will sur­vive. They are used to VAT and tar­iffs – they just ad­just their pric­ing and on they go,” says Davis. “Lo­gis­tics ser­vice providers are al­ready in a com­pet­i­tive mar­ket and will now be vul­ner­a­ble to large Euro­pean op­er­a­tors com­ing in and tak­ing stuff back out more cheaply than they can. That will have a huge im­pact.”

There is, how­ever, an op­por­tu­nity. “If Ire­land is not to be­come a back­wa­ter, it should con­cen­trate on be­com­ing the Sin­ga­pore of Europe. We have at least six deep-wa­ter ports. They could take ships from China and Africa, split and cross-dock them across the coun­try, and send them on to Europe. Rot­ter­dam is get­ting clogged. There is a huge op­por­tu­nity here but it takes vi­sion,” says Davis.

One thing is cer­tain for the lo­gis­tics sec­tor: “Stand­ing still is not the best so­lu­tion.”

PHO­TO­GRAPH: ISTOCK

Driver­less lorry test­ing is well un­der way in many coun­tries.

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