June 2023 - omlogistics

What is the impact of global trade tariffs on logistics & SCM?

Global trade tariffs refer to taxes imposed on goods and services that are traded between different countries. So, what is the impact of global trade tariffs on logistics & SCM? They are levied by governments to regulate international trade and to protect domestic industries. Tariffs are applied to imports or exports depending on a country’s specific trade policies. The trade policies may vary from country-to-country. When tariffs increase, businesses generally have different options to work upon or to absorb the higher cost. For instance, companies increase prices to pass it on to customers or rework the supply chain to avoid the higher tariffs. There are advantages and disadvantages to each. The purpose of implementing tariffs may vary from country to country. Some countries use tariffs as a means of protecting domestic industries from foreign competition by making imported goods more expensive. It aims to safeguard domestic jobs, promote local production, and ensure the growth and stability of key Industries. Tariffs can also be employed for strategic reasons, such as negotiating better trade terms with other countries. In certain cases, countries may impose retaliatory tariffs in response to trade disputes or unfair practices by their trading partners. These retaliatory measures are intended to exert pressure and encourage negotiation or resolution. It’s crucial to note that tariffs can have both positive and negative effects. They may generate revenue for the government & assists to protect domestic industries. Also, it can lead to higher prices for imported goods, reduced consumer choices and potential trade tensions between nations. The impact of tariffs on global trade and economies can be complex and can vary depending on the specific circumstances and policies of each country involved.

Global trade tariffs can have significant effects on logistics and supply chain management. So, what is the impact of Global Trade tariffs on logistics & SCM? Here are some key impacts:

1) Increased Costs:-

Tariffs impose additional costs on imported goods, making them more expensive for consumers. This directly affects supply chain costs as companies need to pay higher prices for raw materials or finished goods. Increased costs can disrupt existing supply chain networks and require businesses to re-evaluate their sourcing strategies.

2) Supply Chain Disruption:-

Tariffs can disrupt established supply chains by creating barriers to trade. When tariffs are imposed on certain goods, it can limit or restrict imports and exports, leading to delays, shortages, and increased lead times. Companies may need to reassess their sourcing strategies, find new suppliers or production locations, and reroute logistics networks to navigate the changing trade landscape.

3) Inventory Management Challenges:-

Tariffs can result in fluctuations in demand and supply dynamics, making inventory management more challenging. Companies may need to stockpile certain goods before tariffs are implemented or adjust inventory levels based on anticipated changes in demand patterns. Managing inventory effectively becomes crucial to mitigate the impact of tariffs on supply chain operations.

The Impact of Global Trade Tarrifs on logistics

4) Trade Redirection:-

Tariffs can lead to trade diversion, where importers and exporters shift their focus to countries or regions not affected by tariffs. This redirection of trade flows can require companies to reevaluate their supply chain networks and logistics operations. New trade routes may need to be established, and transportation modes may need to be adjusted to accommodate the changing trade patterns.

5) Innovation and Localization:-

Tariffs can incentivize companies to innovate and localize their supply chains. To minimize the impact of tariffs, companies may explore options such as nearshoring or reshoring, where production is moved closer to the target market. This shift can result in the development of new logistics networks, partnerships, and supply chain strategies to optimize operations in the face of tariffs.

6) Supplier and Customer Relationships:-

Tariffs can strain relationships with suppliers and customers. Suppliers may pass on tariff costs to their buyers, leading to price negotiations and potential disputes. Customers may seek alternative sources to avoid higher prices, potentially impacting existing supplier relationships. Maintaining effective communication and collaboration with suppliers and customers becomes vital in navigating the challenges posed by tariffs.

7) Regulatory Compliance:-

Tariffs often come with complex regulatory requirements and documentation processes. Increased customs procedures and compliance obligations can add administrative burden and complexity to logistics and supply chain operations. Companies may need to invest in additional resources and technology to ensure compliance with the new regulations and streamline their customs processes.

In summary, global trade tariffs can significantly impact logistics and supply chain management by increasing costs, disrupting supply chains, redirecting trade flows, challenging inventory management, introducing regulatory compliance requirements, affecting relationships with suppliers and customers, and encouraging innovation and localization efforts. Adaptability, flexibility, and proactive planning are key for businesses to navigate these challenges effectively.

What are the best Inventory forecasting techniques & why?

Inventory forecasting is a method which helps in predicting inventory levels for future time period. Inventory forecasting techniques helps in keeping track of sales and demand so that companies can better manage their future purchases. Inventory forecasting is a great inventory management tool that can help you increase your company’s revenue and decrease nonessential costs. Inventory demand forecasting is a method of predicting the demands for the customers for an inventory item over a defined period of time. Forecasting demand in advance always helps keep enough product available while not wasting valuable storage space on undesired products. Accurate inventory demand forecasting helps a company to hold the correct amount of stock, less chances of under-stocking and helps in maintaining optimum inventory control. Inventory forecasting techniques methods are used by businesses to estimate the demand for their products or services in order to optimize inventory levels and avoid stockouts or overstocking.

Some common inventory forecasting techniques used by businesses.

1. Market Research and Customer Surveys :-

Market research and customer surveys are the most essential tools for businesses to gain insights into their target market, understand customer preferences and behaviour’s to make informed decisions. Gathering information directly from customers through surveys, interviews and focus groups can provide valuable insights for forecasting. Understanding customer preferences, buying behaviour’s and upcoming trends can help businesses make more accurate predictions for future.

2. Seasonal Demand Forecasting :-

Seasonal demand forecasting is the process of predicting future demand patterns for a product or service based on historical data that exhibit recurring patterns or seasonal variations. It is particularly relevant for businesses that experience predictable fluctuations in demand throughout the year, such as retail, tourism, agriculture and seasonal industries. It helps to know the regular patterns of demand that repeat at fixed intervals, such as holidays or specific times of the year. Its helps to anticipate and plan for the variations in demand, ensuring that appropriate inventory levels, resources, and production capacities are in place to meet customer needs during peak periods and avoid excess inventory during low-demand periods.

3. Demand Planning Software :-

Many businesses use specialized software like enterprise resource planning (ERP) system which has in-built forecasting capabilities. These tools often combine historical data, customer insights and market trends to generate accurate demand forecasts.

4. Time Series Analysis :-

This technique involves analyzing historical sales data to identify patterns, trends, and seasonality. It uses statistical models such as moving averages, exponential smoothing or autoregressive integrated moving average (ARIMA) to forecast future demand.

5. Collaborative Forecasting :-

This technique includes involving key stakeholders, such as suppliers, distributors or retailers, in the forecasting process. By sharing information and collaborating with partners, businesses can improve the accuracy of their forecasts and reduce uncertainties.

6. Simulation and Scenario Analysis :-

By using simulation techniques, Businesses can create multiple scenarios and test different demand and inventory levels to evaluate their impact on performance metrics. This approach helps in understanding the risks and uncertainties associated with various forecasting outcomes.

7. ABC Analysis :-

ABC analysis categorizes products based on their value and contribution to overall sales. It helps prioritize inventory management efforts by focusing on high-value items that contribute the most to revenue and profit.

8. Lead Time Analysis :-

Lead time refers to the time it takes for an order to be delivered after it is placed. Analyzing lead times can help businesses estimate the time required to replenish inventory and factor it into the forecasting process.

9. Sales and Marketing Input :-

Sales and marketing teams play a crucial role in providing input for demand forecasting. Their insights regarding upcoming promotions, new product launches, or changes in customer behaviour can be incorporated into the forecasting process.

It’s important to note that no single technique guarantees 100% accuracy and a combination of approaches is often used to achieve the best results. Additionally, businesses should regularly review and update their forecasts based on real-time data and market changes to adapt their inventory management strategies accordingly.

5 common Supply Chain Challenges for businesses & how to overcome them?

In this blog we will discuss some common supply chain challenges for Businesses which are seen quite often. Supply chain refers to the interconnected network of organizations, individuals, activities, data and resources involved in the production, distribution and delivery of goods or services from the point of origin to the point of consumption. It encompasses all the steps and processes required to transform raw materials into finished products and deliver them to the end customer. The supply chain includes various entities such as suppliers, manufacturers, wholesalers, retailers, transportation providers, warehouses and customers. It involves the flow of materials, information and funds across these different stages.

Supply chain management faces various supply chain problems that can impact the efficiency and effectiveness of the entire process. Here are few supply chain challenges for Business:

1. Demand volatility: Fluctuating customer demand can create challenges in accurately forecasting and planning inventory levels. Sudden shifts in demand patterns can lead to stockouts or excess inventory, both of which can impact customer satisfaction and profitability.

2. Supply chain visibility: Achieving end-to-end visibility across the entire supply chain remains a significant challenge. Limited visibility can hinder proactive decision-making, increase response times, and make it difficult to identify and resolve issues quickly.

3. Inventory management: Balancing inventory levels to meet customer demands while minimizing costs is a perpetual challenge. Overstocking ties up capital and increases holding costs while understocking can lead to missed sales opportunities and dissatisfied customers.

4. Supplier management: Managing relationships with suppliers, ensuring quality standards, and addressing potential disruptions in the supply chain require effective supplier management. Maintaining strong partnerships and contingency plans can help mitigate risks & maintain a reliable supply.

5. Globalization and geopolitical uncertainties: As supply chains become more Globalized, geopolitical uncertainties, trade conflicts, and regulatory changes can impact sourcing strategies, logistics and overall supply chain stability.

How to overcome Supply Chain Challenges for Businesses-:

Overcoming supply chain challenges in 2023 requires a combination of proactive planning, technological advancements, and adaptive strategies. Here are some key steps to help you navigate and overcome these challenges:

1. Enhance visibility and transparency: Improve visibility across your supply chain by implementing advanced tracking technologies such as IoT (Internet of Things) devices, sensors, and real-time analytics. This will provide you with real-time data on inventory levels, demand patterns, and potential disruptions, allowing you to make proactive decisions.

2. Diversify suppliers and logistics partners: Reduce dependence on a single supplier or logistics provider by diversifying your network. This strategy helps mitigate the risk of disruptions caused by geopolitical, environmental, or economic factors. Identify alternative suppliers and logistics partners in different regions to ensure a resilient and flexible supply chain.

3. Strengthen supplier relationships: Collaborate closely with your suppliers and build strong relationships based on trust and open communication. Engage in regular dialogue to understand their capabilities, challenges, and potential risks. Developing partnerships will foster mutual support and enable better risk management.

4. Embrace advanced technologies: Leverage emerging technologies to optimize your supply chain operations. Implement automation, robotics, and artificial intelligence (AI) to streamline processes, improve efficiency, and reduce costs. AI-powered forecasting models can enhance demand planning accuracy, reducing the risk of stockouts or excess inventory.

5. Implement risk management strategies: Identify potential risks to your supply chain, such as natural disasters, geopolitical events, or regulatory changes, and develop risk management strategies accordingly. This may involve creating contingency plans, safety stock, or alternative sourcing options to mitigate disruptions.

6. Foster collaboration within the supply chain: Encourage collaboration and information sharing among stakeholders in your supply chain network. This can be achieved through the adoption of supply chain platforms that facilitate data exchange, coordination, and collaboration among suppliers, manufacturers, distributors, and retailers.

7. Monitor and adapt to regulatory changes: Stay up-to-date with evolving regulations and compliance requirements that impact your supply chain operations. This includes customs regulations, trade policies, labor laws, and environmental regulations. Adapting quickly to regulatory changes will help you avoid disruptions and maintain compliance.

8. Invest in talent development: Build a skilled workforce that understands the complexities of modern supply chains. Invest in training programs to develop expertise in data analytics, supply chain management, and emerging technologies. Empower your employees to drive innovation and adapt to changing market dynamics.

9. Continuously evaluate and optimize: Regularly review your supply chain performance, measure key performance indicators (KPIs), and conduct post-mortem analyses after any disruptions or challenges. Identify areas for improvement and implement changes to optimize your supply chain continuously.

10. Prioritize sustainability and ethical practices: Consumers and stakeholders increasingly value sustainable and ethical practices. Implement environmentally friendly initiatives, such as reducing waste, optimizing transportation routes, and using eco-friendly packaging. Adhering to ethical sourcing and fair trade principles will also enhance your reputation and strengthen customer loyalty.

The specific challenges and solutions will vary depending on company’s infrastructure, geographic location and individual circumstances. It’s crucial to stay agile, monitor market trends and be prepared for adapting different strategies as and when needed.

The Influence of Electric Vehicles on Logistics Industry in India

In the current scenario, increasing the use of electric vehicles in logistics is an important step toward reducing carbon emissions & maintaining a more sustainable transportation system. The use of Battery Vehicles in logistics is gaining momentum in India due to conducive government policies and increasing awareness among people & key stakeholders. E-Vehicles are gaining significant attention in the logistics industry due to their potential to reduce harmful gas emissions & improving air quality.

Electric automobiles offer several important benefits in logistics. Here are some important benefits of EV’s in logistics:

1. Environmental Sustainability: EV’s produce zero emissions resulting in lesser pollution as compared to conventional vehicles. This is particularly significant in urban areas where logistics operations often contribute to air quality issues. By switching to EV’s logistics companies can contribute to a cleaner and healthier environment. Also, they are more energy-efficient as compared to diesel/petrol engine vehicles. Non-engine vehicles are supposed to survive for longer periods of time & are expected to play a crucial role in logistics in the future.

2. Cost Savings: While the upfront cost of EVs may be higher than that of engine vehicles but they offer significant long-term cost savings. They have lower operating costs due to the lower cost of electricity compared to fuels.

3. Noise Reduction: EV’s produce less noise as compared to traditional vehicles. in urban logistics, where noise pollution is a big concern. They offer a silent alternative & lead to improved working conditions for drivers with less noise impact on residential areas.

4. Government Incentives: Many governments around the world are offering various incentives in the form of grants, subsidies, tax benefits, etc. Logistics companies are taking advantage of these incentives which is helping to accelerate the use of more and more electric fleets.

5. Brand Reputation: Adopting EVs in logistics demonstrates a commitment to sustainability and environmental responsibility. This can enhance the brand reputation of logistics companies, attracting environmentally conscious customers and partners. It also aligns with the growing consumer demand for eco-friendly products and services.

6. Fast Charging Infrastructure: The advancement of high-speed and ultra-fast charging technologies is improving the practicality and convenience of EVs. Faster charging stations, such as DC fast chargers and ultra-fast chargers, are being deployed along major highways and in urban areas. These chargers can provide significant ranges in a short amount of time, making long-distance travel more feasible and reducing charging wait times for EV owners. The increase in fast charging infrastructure is an important trend in the development of electric vehicles (EVs) and their widespread adoption. As the market share of electric vehicles continues to expand, there is a rising demand for convenient and efficient charging solutions. In India, with the help of Government’s proactive approach the charging infrastructure is getting better day-by-day resulting in enhancement of public charging infrastructure.

Electric Vehicles Charging Infrastructure

7. Alliances and Joint-ventures: Association between automakers, utilities, charging network operators, and government entities is crucial for the expansion of charging infrastructure. These partnerships help streamline the installation process, ensure the exchange of relevant information with the help of software among different charging networks, and leverage the expertise of various stakeholders to address infrastructure challenges effectively.

These changing trends are strengthening the development of better EV infrastructure, making E-Vehicles more convenient and appealing to a wider range of consumers. The future of electric vehicles in the supply chain is encouraging. Also, technology is getting better day by day, and charging infrastructure is improving. EVs are expected to become a mainstream choice for transportation and logistics, driving the transformation toward a greener and more efficient supply chain.

What is Multimodal Transportation and its benefits?

Multimodal transportation refers to the movement of goods or people using multiple modes of transportation, such as combining road, rail, air, water or pipeline systems. It involves the seamless integration of different transportation modes to optimize efficiency, cost-effectiveness and sustainability in the overall transportation process.

Here are some important factors and benefits of multimodal Logistics:

1. Integration of Transportation Modes: Multimodal transportation combines various modes of transport, such as trucks, trains, ships, and planes, to leverage their respective strengths. By utilizing different modes, it allows for efficient movement of goods and passengers, especially for long-distance or international journeys.

2. Increased Efficiency: Multimodal transport aims to maximize efficiency by selecting the most appropriate mode of transport for each leg of the journey. For example, utilizing trucks for local pickup and delivery, trains for long-haul transportation, and ships for overseas shipping. This optimization helps reduce transit times, minimize congestion, and lower costs.

3. Improved Reliability: Multimodal logistics offers increased reliability by mitigating risks associated with a single mode of transport. If one mode encounters disruptions such as bad weather, strikes, or infrastructure issues, goods or passengers can be seamlessly shifted to an alternative mode to maintain the flow of transportation.

4. Cost Savings: By selecting the most cost-effective mode of transportation for each leg of the journey, multimodal transport can help reduce overall transportation costs. For example, using trains for long distances is often more economical than relying solely on trucks for the entire journey.

5. Environmental Sustainability: It promotes sustainability by optimizing the use of different transportation modes. By shifting some transportation from road to rail or water, it can reduce greenhouse gas emissions, energy consumption, and overall environmental impact.

6. Global Trade Facilitation: It plays a crucial role in facilitating international trade by connecting different regions and countries efficiently. It enables the movement of goods across various transportation networks, including ports, airports, rail terminals, and distribution centers, streamlining the supply chain.

7. Flexibility and Scalability: Multimodal transportation provides flexibility and scalability in response to changing market demands. It allows for adjustments in transportation routes, modes, and capacities based on factors like volume fluctuations, seasonal variations, or changing customer preferences.

Overall, multimodal transportation offers a comprehensive and efficient solution for the movement of goods and people, leveraging the strengths of various transportation modes to optimize efficiency, reliability, and sustainability in the global transportation system.

Here are some common examples of multimodal transport and the modes of transport involved:

1. Road-Rail: Goods are transported by trucks to a rail terminal, where they are loaded onto trains for long-distance transportation. At the destination, the goods are unloaded from the train, kept in warehouse and transported to the final location by trucks again.

2. Road-Sea: Goods are transported by trucks to a seaport, where they are loaded onto ships for overseas transportation. Upon arrival at the destination port, the goods are unloaded from the ship and transported to the final destination by trucks.

3. Road-Air: Goods are transported by trucks to an airport, where they are loaded onto airplanes for air transportation. At the destination airport, the goods are unloaded from the plane and transported to the final location by trucks.

4. Rail-Road-Sea: Goods are transported by trains to an inland container depot (ICD), where they are loaded onto shipping containers. The containers are then transported by trucks to a seaport for loading onto ships. At the destination port, the containers are unloaded from the ship and transported to the final destination by trucks or trains.

5. Rail-Road-Air: Goods are transported by trains to an airport, where they are loaded onto airplanes for air transportation. At the destination airport, the goods are unloaded from the plane and transported to the final location by trains.

Multimodal transport offers several advantages including cost savings, reduced transit times, improved efficiency, and enhanced security. It allows for the optimization of different modes of transport based on their strengths, leading to a more seamless and integrated supply chain.

Most effective measures to reduce inventory cost in 2023

Inventory cost refers to the expenses associated with acquiring, storing, and maintaining inventory within a business. It includes various components, such as the cost of purchasing or producing inventory, carrying costs, and any other costs related to inventory management. Reducing inventory costs in logistics is a common objective for many businesses as it can improve cash flow and increase overall profitability. Here are several strategies you can implement to reduce it :

Demand forecasting :- Accurate demand forecasting helps you anticipate customer demand and avoid excessive stock. Analyze historical data, market trends and customer behaviour to make informed predictions about future demand.
Supplier management :- Establish strong relationships with reliable suppliers who can provide competitive pricing, favorable terms, and timely deliveries. Negotiate better pricing, volume discounts and explore options for consignment or vendor-managed inventory (VMI) arrangements.
Just-in-time (JIT) inventory: Adopt the JIT approach to minimize inventory carrying costs. Order and receive inventory only when needed, reducing the need for excessive stockpiling and associated holding costs.

Just-in-Time

4) Optimize order quantities: Use economic order quantity (EOQ) calculations to determine the ideal order quantity that minimizes total inventory cost. Consider factors such as carrying costs, ordering costs and stock-out costs when calculating EOQ.

5) Inventory classification: Implement an ABC analysis to categorize your inventory based on value or sales volume. Focus on optimizing the management of high-value items or fast-moving products while considering alternative approaches for low-value or slow-moving items.

6) Efficient storage and layout: Organize your warehouse or storage area to maximize space utilization. Implement efficient storage systems such as vertical racking, labeling, and inventory tracking technologies to minimize the risk of overstocking or lost inventory.

7) Regular inventory audits: Conduct regular inventory audits to identify and address issues such as stock obsolescence, shrinkage, or inaccuracies. Implement robust inventory control systems, such as barcode scanning or radio-frequency identification (RFID), to improve accuracy and visibility.

8) Collaboration and partnerships: Explore partnerships or collaborative relationships with suppliers, distributors, or retailers to streamline inventory management. Sharing sales data, forecasts and inventory information can help reduce stock-outs and improve overall supply chain efficiency.

9) Just-in-case inventory: Review and optimize safety stock levels by considering lead times, demand variability and supplier reliability. Avoid excessive safety stock that can tie up capital and increase carrying costs.

10) Continuous improvement: Regularly evaluate and refine your inventory management processes. Look for opportunities to eliminate waste, reduce lead times, and improve overall efficiency. Embrace technologies such as inventory management software, demand planning tools and automated order processing systems.

By implementing these strategies, you can effectively reduce holding cost while maintaining adequate stock levels to meet customer demand. Keep in mind that the optimal approach may vary depending on your industry, business model, and specific circumstances.

The primary elements of inventory cost are as follows: –

1) Purchase Cost :- This is the direct cost of acquiring inventory from suppliers or manufacturers. It includes the price of the goods, transportation costs, import duties & any other expenses directly attributable to the purchase.

2) Carrying Costs :- These are the expenses incurred to store and maintain inventory. Carrying costs typically include warehousing expenses (e.g., rent, utilities, insurance), security, inventory tracking systems and labour costs associated with handling and managing inventory.

3) Holding Costs :-Holding costs are the expenses incurred due to keeping inventory on hand for an extended period. This can include costs related to obsolescence, deterioration, damage or theft of inventory. It may also encompass the opportunity cost of tying up capital in inventory rather than investing it elsewhere.

4) Ordering Costs :- Ordering costs are the expenses associated with placing and receiving orders for inventory. This includes activities such as order processing, paperwork, communication and transportation costs for inbound shipments.

5) Stockout Costs :- These costs arise when inventory is insufficient to meet customer demand. Stockout costs may include lost sales, customer dissatisfaction, rush orders, expedited shipping charges and potential damage to the business’s reputation.

6) Financing Costs :- Financing costs are applicable if the business uses loans or other forms of financing to acquire inventory. These costs include interest payments and fees associated with borrowing money to purchase inventory.

Calculating inventory cost accurately is crucial for businesses to understand the financial impact of their inventory management. By analyzing this cost, a company can make informed decisions regarding pricing, purchasing, reordering and inventory control strategies to optimize profitability and maintain adequate stock levels.

Month: June 2023