For today’s guest columnist we welcome back Norman H. Adriano. Norman has been in supply chain management for more than 25 years. An Industrial Engineer, he has held various executive management positions in multinational and local companies in the Philippines. He is a two-term past President of the Supply Chain Management Association of the Philippines (from 1995 to 1996). He can be reached via firstname.lastname@example.org. — Ed Sanchez, Executive Director
With the proliferation of giant shopping malls all over country, companies, be it food, consumer goods or apparel, must have presence in each mall to reach out to a large client base. To ensure customer loyalty and patronage, their stores must be continuously replenished with stocks in a timely manner. That’s because if a customer cannot find a preferred item in their store, they simply move to the next store. The result: lost sales.
The companies that own the stores in the malls usually have their own logistics team to ensure that their stocks are replenished on time. This team ensures that the right stocks are in the right stores in the right quantities. It must ensure that target service levels are consistently met. Alas, the logistics team is always under constant pressure from the sales or merchandising group to ensure stocks are in the stores. On top of that, there is also constant pressure from management to reduce logistics cost.
The logistics team usually have their own fleet of trucks that make the ‘milk’ runs to their stores in different malls throughout the day. This fleet entails employment of regular staff on the company’s payroll. Depending on the size of the fleet and the stores’ demand for replenishment, companies also resort to contracting with third party truckers in order to meet their replenishment chores, especially during their peak seasons.
The biggest challenge in the above set-up is efficiency, specifically in filling up the truck. We all know that if trucks are not fully utilized, space is wasted and transport costs go up. This is a common occurrence that companies with mall presence always face. They have to always balance cost and service. However, they are forced to send out trucks that are not fully utilized in order to serve their mall stores. Their transport costs go up and there are more trucks on the road polluting our environment.
Thus, mall logistics service was born. The need is there and companies in the transport business are scrambling to fill the need. The solution they are offering is consolidation of stocks of several companies that need to deliver to their stores located in the same mall. Overall, a much lesser number of trucks are used and since those are usually fully utilized, costs are spread around and are usually charged based on the cubic meter space of the boxes transported. (Some transport companies charge based on the declared value of the products). As an added result, there is also less number of trucks on the road as compared to when all the companies deliver their stocks to the malls on their own.
The companies who use the mall logistics service usually enjoy greater efficiency, flexible delivery schedule, higher service levels and reduced transport cost.
In my experience, companies availing of this service for the first time find difficulty in justifying the shift from doing the logistics on their own to outsourcing to a third party transport provider because they do not know their costs and therefore, can’t evaluate or compare costs. But once they overcome this issue, they usually shift to a third party service provider with gladness in their hearts.
Address inquiries and comments to Ed Sanchez at tel. 671-8670, fax 671-4793, cell 0918-914-1689, or email email@example.com. For more information please go to SCMAP website www.scmap.org