How responsive is your organization's supply chain management? Is it able to resize itself on-the-fly to account for fluctuations in demand? Or is it required to run at a baseline of operations in order to be able to fulfill sudden increases? Elastic logistics is a method of expanding and contracting logistical capabilities as it is necessary, thereby improving the cost-effectiveness of the supply chain as a whole.
In 2019, it's likely that elastic logistics is going to be at the forefront of many supply chains, and that big data and logistical solutions will be working together to fine-tune and optimize the supply chain as a whole. Here's what you need to know.
What is "Elastic Logistics"?
Elastic logistics is the ability to quickly shrink and expand logistical capabilities to align with a supply chain's demand. Elastic logistics works hand-in-hand with supply chain forecasting, creating an agile infrastructure that can reduce costs and improve efficiency based on the current need of the supply chain. Without elastic logistics, an organization is often required to operate at a less than efficient capacity, to provide for higher volumes of demand as needed.
Elastic logistics is being driven both by big data and also by increased automation. Automation is an agile, flexible way to increase and decrease an organization's logistical infrastructure in both an expedient and cost-effective way. Automated solutions and machines, when available, can be deployed as necessary, and an organization can only implement the resources that it needs. In this way, elastic logistics is the natural evolution of the supply chain with the application of the new technologies—data and machine automation—that have been emerging.
Elastic Logistics Can Minimize Risk and Improve Customer Service
Elastic logistics will provide the most efficient experience for customers while also minimizing risks and costs. By being able to upscale and downscale operations on-the-fly, companies are still able to deliver quickly and on-time. When processes need to expand, they will do so efficiently. Likewise, the organization is not forced to upkeep a baseline during slower times; instead, production can be reduced to compensate.
Through elastic logistics, organizations can better achieve "perfect order deliveries," something that will become increasingly important in 2019. Perfect order fulfillment is one of the most important metrics for any supply chain. With big data, increased automation, and advanced technology, it is becoming easier to achieve perfect order deliveries—which, in turn, are becoming the dominant way that the quality and consistency of a supply chain is evaluated.
In supply chain management, better accuracy leads to more satisfied customers, and more satisfied customers lead to better customer retention. With customer retention being only a fraction of the cost of initial customer acquisition, any money spent on improving customer retention is often a high ROI investment.
Data-Driven Logistics Provide Increased Efficiency and Service Quality
Data-driven logistics are now being used for more accurate predictions, increasing efficiency and service quality. For elastic logistics to adjust based on need, this need must first be identified, predicted, and simulated. Data-driven logistics makes it possible to alter logistics based on behavior patterns, seasonal activity, and other trends.
With big data, organizations can identify patterns that could otherwise go unnoticed by human eyes. Large volumes of data analysis simplify control and enhance visibility, providing an organization with the information it needs to be able to scale their operations upwards and downwards as necessary. The more accurate these simulations and predictions are, the more effective the logistics solution will be.
Likewise, inaccurate data can lead to an organization not being able to scale effectively. If an organization pivots in the wrong direction at the wrong time, it can be difficult for the organization to achieve the streamlined supply chain it needs. Consequently, the organization's elasticity has to be particularly agile: the organization must be able to effectively "turn on a dime," scaling upwards and downwards quickly if unexpected data is introduced or unanticipated patterns are encountered.
When the appropriate controls are put into place, elastic logistics will increase and decrease infrastructure on-the-fly, thereby providing for a more responsive, cost-effective supply chain. As many organizations increasingly need to fine-tune their operations and reduce their costs to remain competitive, elastic logistics is becoming a necessity for modern production.