Plug and Play Supply Chain

Connecting Logistics Using Plug-and-Play Supply Chain

There is a renewed interest in streamlining supply chains through two methods: segmentation and standardization. However, these are much different from the practices of the early 2000’s. As the digital revolution continues to infiltrate all industries, with the influences of data analytics, organizations can now create cost-effective, agile supply chains built on intelligent, data-driven decisions around customers, markets, and, importantly, profitability. This emerging model is coined “plug-and-play” (P&P) supply chain by Amazon and DHL, and it is spreading across the globe.

What is a Plug-and-Play Supply Chain?

The P&P supply chain is a rather simple concept that takes segmentation and standardization to the next level. It comprises of a core, standardized set that has easily repeated solutions that can changeable by a standardized, process-proven method that is tailored to unique segments or individual industry market needs. Simply put; a P&P supply chain is much like Legos. The supply chain consists of type blocks that forming a foundation/majority of the blocks. The add-ons are yellow, light blue, and green added on top of the foundation. These alternate colored building blocks are limited in the number of colors and standardized within the specified color.

Why Do We Need Supply Chain Segmentation:

All companies segment their supply chains to an extent. Traditionally, companies base their segmentation on general attributes such as customer type, products, divisions, geographies, and channels.

When companies segment by product and customer, for example, they typically do so based on aggregated characteristics or data. They may segment by revenue or by some form of cost or profit allocation, and they may apply a standard margin. Or they merely segment by region. The real issue it that companies claim to make their decisions on precision, but in reality, there is no exact precision. This results in several different customers purchasing the same items online generating two wildly different profit contributions.

Today’s segmentations attempts at tackling the various profit contributions are made by managing aggregates and averages. Using things such as SKU numbers, distributors are better able to track these discrepancies. Experts insist that once companies start to segment their supply chains, the next logical task should be to standardize them, doing so across people, process, and technology. This includes logistics and whether using a 3PL is a better solution than keeping it in-house. Creating a repeatable supply chain components and solutions that are finely tuned to drive profitability is the real goal of P&P Supply Chains. As companies continue to standardize their various kinds of supply chains, third-party logistics providers, like East Coast Transport, are forced to be on on the forefront of adopting this standardization strategy.