LOGISTIC MODELS FOR CONSUMER CHALLENGES

Our purchase decisions can be based on two variables: Price and time. The more expensive the item is, the more time we can wait (for exclusivity). But, sometimes we are willing to pay more, to have our purchase delivered immediately. How could companies in today’s world face the challenge of unpredictable consumers? In this article, we explain the 4 logistic models to meet the challenge of unpredictable consumers.

For example, we are going to buy a bed. What do you expect when you buy the bed? Take it immediately? That the company delivers it to you the next day and puts it together? That the company asks the supplier the foundation of your choice to provide it armed in your house in another month? We agree that everything depends on the brand, exclusivity and price we are buying: The more exclusive, the more patience we will have. However, the general trend is that we, as consumers have less and less endurance. Aided by our friend the Smartphone, in 2 clicks we know in which store the product is available and at what price.

THE IDEAL LOGISTIC MODEL

Logistic models establish the relationship that companies have with their environment. That is, it describes what customers expect from companies when they place an order. For example, in the event of a purchase need, the item may be available at the inn. It could also be assembled at the time of the order; it would mean waiting a few minutes or hours. It could be sent directly from the CD to the customer’s address, with a delivery time of one day. Finally, it may need to be purchased at that time from the supplier, with a delivery time of one week.

The differentiation of all the previous scenarios is known as the Push / Pull point. This point divides the entire distribution chain into two parts: The customer’s request directs a piece of the string (to the right of the push/pull point). The demand forecast leads the other part (to the left of the push/pull point). By definition, the

Various ideal logistic models can be found in the literature. In these, the Push / Pull point can be positioned in the different links of the distribution chain. However, 4 logistic models are characterized by being the most important or general:

The four most critical logistic models

1) Produce against Stock

When we have this logistics model, the company is prepared to meet the customer’s purchase needs immediately. In this case, the company makes available to the final customer a series of inventory of the final product. Also having a certain amount of work in progress and components and semi-finished products, in addition to raw materials. How much you have of each of them depends exclusively on time invested in the production process and the delivery time of your supplier.

In general, in these types of environments, there are few final products and these are standard. This would otherwise complicate the production process and lead to more and more inventory of raw materials, parts and pieces. An example of this logistic model would be a furniture store: The list of items it provides is limited, and it always has a small inventory of products at different stages of its production process.

2) Serve from Stock

Most of the time, this logistic model is applied in buying and selling companies, of the type wholesalers and retailers. They do not usually carry out their operations of the production, except perhaps one or another process of packing or unpacking.

Unlike the previous model, companies that adopt this model usually have many different products. They also base their business profile on being able to supply a wide variety of products to consumers immediately. A clear example of this would be supermarkets: They do not really manufacture any of the products they sell, but instead buy them and then make them available to the end customer.

3) Assemble on Order

In this case, with a small number of components, companies can offer a wide range of products. These are prepared based on the request for an order of the final customer. This customer no longer intends to have the product available at the time of ordering. In this case, he knows that he will have to wait for the assembly of the different parts according to his requirements.

An example of this logistics model would be the one adopted by computer companies. They have available a wide range of components such as motherboards, hard drives, video cards, etc. These can then be assembled according to the specific needs of each of its buyers. In these companies, you will not find an available stock of finished products. In this case, the focus will be on having the right amount of components and raw materials.

4) Produce on Order

Companies that adopt the logistic model of producing on-demand, usually have raw materials and semi-finished products in inventory. When they receive an order from their customers, they proceed to its elaboration and later dispatch. So, in this case, the delivery time is usually equivalent to the total term of the production process plus the dispatch.

A clear example of this logistic model would be the master recipe area in pharmaceutical companies. There, customers come with a specific prescription, which must be produced according to the components and quantities indicated by the doctor. The client knows that he must wait at least a couple of days. This so that the recipe is produced and then dispatched to the place of withdrawal.

The four logistic models described above tell us about how stock levels should be distributed in terms of their composition, but not their quantity. The inventory required for each company depends on the inventory strategy to follow, which will indicate how orders should be made both in time and number.

Could you recognize what logistics model your company follows, according to the composition of your inventory?

Do you think it is the right logistic model for her?

At what stage of the supply chain would you mark the Push / Pull point?

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