The challenges posed by Supply Chain 4.0 require businesses to adopt flexible and agile solutions. Itโs why the concept of elastic logistics has come to the fore in recent years, particularly in the aftermath of the peak COVID-19 pandemic months. Logistic systems need to be more elastic to remain competitive due to unstable production demands and new communication channels with customers.
In this post we discuss elastic logistics in more depth to help you gain an understanding of how it is helping companies to streamline their logistic operations, and whether it could be a good fit for your operation.
What is elastic logistics?
Elastic logistics is an increasingly popular method being implemented by businesses to enable them to respond to changing market demands. This means either upscaling or downscaling accordingly, so operations can react in near real-time based on predicted events currently happening in the market place.
In real terms this ensures the warehouse will have the right level of products and support mechanisms in place to serve demand. This avoids costly situations such as overstocking which can affect throughput, or out-of-stock events that can impact strategy and brand reputation with the end customer.
For elastic logistics to work successfully the facility must have a warehouse management system (WMS) or a manufacturing execution system (MES) to provide the logistics manager with the right information. This will enable precise analysis and predictions based on historical sales and future growth predictions to predict probably future demand requirements.
Over the past few years elastic logistics has grown in popularity, especially within the retail sector, as the need to respond to seasonal demand is commonplace. Ecommerce firms are increasingly investigating the possibilities it has to offer in light of the past 12 months and the surge in growth many experienced.
What are the key parts of elastic logistics?
Elastic logistics enables companies to react without compromising the productivity of their facility long-term and by making the most of their resources. This is supported by:
- Process automation: In order to work efficiently, elastic logistics need scalable storage systems that are flexible enough to quickly adjust to changing inflow and outflow volume. It relies heavily on automated solutions such as pick stations and stacker cranes for pallets that optimise productivity.
- Big data systems: Data plays a fundamental role in any modern warehouse and is equally as essential for elastic logistics. In order to be successfully implemented a WMS has to be in place to analyse data to identify customer trends, optimal stock levels and to spot any inefficiencies in the operation.
- Logistical outsourcing: New shipping and order challenges are posed with fluctuations in product demand, with more reliance than ever now placed onto external logistical companies. Their expertise and resources in this area offer greater visibility over inventory and more flexibility in all stages of the logistical chain.
- Just-in-time: The modern omnichannel sales model dictates that inventory be as lean as possible in order to maximise efficiency. Methods like lean manufacturing and just-in-time play a key role in achieving elastic logistics that can meet product demand forecasts.
Looking at the other side, new trends like reverse logistics have cause some issues with logistical planning and can prove problematic to companies that operate within a rigid structure. Drop shipping is becoming more common in e-commerce, where a customer order is received in the warehouse even if has never previously been stored there. This underlines why flexibility and agility are fundamental to the success of Logistics 4.0.
What are the benefits of elastic logistics?
For changing environments such as Supply Chain 4.0, elastic logistics could be the ideal solution. The main benefits of elastic logistics are:
- Improved new order management: If methods such as just-in-time are adopted, companies stand a much better chance of achieving maximum throughput when it comes to preparing and dispatching orders.
- Storage cost overruns are eliminated: By using a WMS to predict the optimal stock level for each location in the facility and combining this with back-up stock, you can prevent overstocking or out-of-stock events occurring.
- More warehouse flexibility: The implementation of a WMS and automated tools will support the scalability of the warehouse, whether it is scaling up or down. This makes it easier to manage fluctuations in SKU demand without having to significantly alter logistical planning.
- Tighter product control: When outsourcing logistics, the WMS will provide real-time management of your inventory. This enables the contracting company to still have in-depth traceability of the goods within the providerโs facility.
Adapting will be key to success
Elastic logistics evolved as a method to cut down on warehousing and labour costs. For omnichannel retail to work it has to rely on strong price points, free and easy return processes and fast deliveries, all of which can only be organised through use of a coordinated supply chain and efficient in-house logistic systems.
One of the main reasons why Amazon were able to deal with the surge in orders during the height of the COVID pandemic is that their warehouses are incredibly high-tech. Not only is automation fully utilised but artificial intelligence and smart devices are too.
At the same time supermarkets initially struggled to adapt to the sudden shift in demand to online shopping. This happened despite steadily increasing their online presence and sales in recent years, and it illustrated that many are still over reliant on outdated processes and systems that need to evolve. You can probably assume that the lesson has been learned and other retailers that were keeping a close eye will look to towards solution like elastic logistics themselves.
It is true that it requires focused effort to ensure innovation is continuously prioritised within any logistic process. Many businesses often only take stock to review their supply chain when faced with a significant problem. However, as is usually the case those with the foresight and bravery to seek out constant transformation will also be the ones who see the biggest results โ and elastic logistics is primed to play a central role in that success.