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Alexander Baal: Managing the peaks and troughs of demand

Wednesday, 20 May 2020 ( #975 )
Alexander Baal
Alexander Baal
Alexander Baal is director of sales operations at Jungheinrich UK.
As governments prepare to lift some of the lockdown measures, it's clear that life and work will not go back to the way they once were. Even as lockdown eases, people will remain risk-averse and many companies will continue to feel the economic pressures brought on by COVID-19 for some time to come. Businesses have therefore needed to find new ways to adapt and cope in order to keep the supply chain going. In particular, those businesses within essential industries such as grocery retailers and the pharmaceutical sector have had to cope with huge surges in demand while also ensuring employees stay safe. While retailers have been used to adapting to forecasted peaks in demand, such as Christmas and Black Friday, the COVID-19 crisis has impacted the economy in a way that no one could have predicted. And as certain lockdown restrictions are likely to remain in place for some time, businesses need to adapt to maintain continuity of service and revenue, not just now but to mitigate against any future pandemic waves that may come our way. Flexibility and cost management Businesses have been seeking ways to respond to the challenges of a 24/7 marketplace for some time, brought about by rising customer expectations. Rental, along with used forklifts, is now seen as a compelling solution for businesses and many are rethinking the way rental can be used to their strategic advantage - providing both short-term cover to manage volatility and supplementing fleets for a longer term to cover base and core requirements. The short-term rental advantage is that with added flexibility, cost control is maintained. With economic pressure on every business, managers are continually evaluating costs. So, while many may be scaling down operations at the moment, the benefit of rental means that they can easily ramp up production again immediately after the lockdown period or once they choose to. Moreover, those businesses that are maintaining production during the COVID-19 crisis - or, in many cases, trying to scale quickly to meet demand, such as those within third-party logistics - rental trucks can be a rapid solution to supplementing their core fleets during peak periods. For lots of businesses, a core fleet is still essential with long-term planning and visibility, but by adding to the fleet with rental trucks they also have the flexibility to quickly adapt to situations such as the one we are in right now. Output-driven solution Organisations are operating in an increasingly commoditised environment. Consumers and businesses expect an 'as a service' model without any long-term commitment, from renting cars for an hour via an app to the transition towards on-demand cloud software. The shift in customer demands is prompting new thinking across manufacturing, distribution and logistics. One of the key innovations within the warehouse and logistics market is a rental model predicated on truck usage. Instead of a fixed-term agreement, this comes down to a 'pay per use' model based on telematics data. So, for a business that may have significantly scaled back operations, they can maintain the trucks on site with a standby fee at a fraction of what they would normally pay. Once they decide to start production again, they have instant availability of their materials handling equipment - no need to wait for any supplier lead times or to take delivery costs. Effectively, they can pause operations when needed and immediately start again when they need to - an output-driven solution that they only pay for when they use it. Conclusion Investment decisions are more business critical than ever before. Businesses are looking for ways to adapt to and thrive amidst changing market conditions, but without long term commitment and risk. Flexibility is, therefore, essential to build into the business model and for warehouse managers to prepare for all eventualities by addressing short- and long-term requirements. As such, businesses must partner with a supplier that can support them during and after these challenging times as they seek to remain competitive and future-proof their operations. Those that think operations will return to the normal they once knew will be sadly mistaken. Now is the time to re-evaluate their processes and adapt to the new normal, or risk failing.