Just as the logistics industry is settling down after a period of radical change it is about to be shaken up all over again. Professor James Cooper, director of the Cranfield Centre for Logistics and Transportation, thinks we are about to see another paradigm shift in the industry.
Until the 1970s the distribution industry was based on what economists call 'production push'. The logistics manager responded to the requirements of production schedules, which were designed to maximise the operational performance at the factory. 'Products were, in effect, pushed down through distribution channels to the customer,' says Cooper.
In the 1980s there was a dramatic change to what is known as 'demand pull', which is perhaps best seen at work in supermarket chains. With production push the manufacturer of a product sold in the stores would forecast what the total demand might be over a period and guess how it might be broken down geographically.With 'demand pull' it is the customer who activates the supply chain. Sales of products in supermarkets are logged by bar-code scanners and passed to a computer, the product is then called down from production in response to requirements. Instead of warehouses holding stock, they become places where goods are transshipped, moved from the manufacturer's vehicles on to the supermarket's vehicle and out again.
The lead times between production of the goods and sales becomes shorter. That puts more pressure on transport to respond quickly.
The 'demand pull' approach has dominated logistics thinking in the 1980s and '90s. According to Cooper, the next stage is 'flexible fulfilment'.
Customers are increasingly demanding customised products and are going to demand customised services, including delivery.
Companies such as Sony are gearing up to retailer-specific products, and in other sectors, says Cooper, it is even closer to consumer-specific products. 'We're already there in motor manufacturing - buyers can specify their options in an almost infinite number of combinations - and the trend is spreading to other sectors as well.' But customised goods lead to customised delivery and that requires more widespread use of sophisticated IT, like tracking and trailing systems to say exactly where an item is in the chain. 'With a pallet load of goods it doesn't really matter who gets which product from an undifferentiated set of goods on the pallet, but when you customise goods it does. What we're trying to do is respond ever more precisely to the exact needs of individuals, not just in terms of matching their product needs but in how they want that product to reach them and that's where the logistics comes in. The increasing complexity that's implicit in customisation makes it quite a demanding task but one that can be achieved through the application of IT to exercise control.'.