Economic and logistical crisis: it's time to reassess assets, teams, indicators and the network!

From the beginning of the 2000s, taking advantage of a favorable external scenario, we saw the Brazilian economy grow, expanding its domestic market and increasing the revenues of companies in different sectors. This period of relative economic bonanza seems to have come to an end, with the onset of a severe and prolonged economic crisis, as indicated by all the indicators divulged daily by the press.

In addition to the clear challenge of dealing with a sharp drop in demand, companies also need to “calibrate” their operational structures for this new scenario. It is natural that, in periods of rapid expansion in demand, companies have to make hiring decisions, acquire assets and expand the logistics network with less concern for costs. In the challenging scenario that presents itself, however, it is essential to review some of these choices.

Active

Many companies, faced with the challenge of serving a greater number of customers, with increased volumes and the abundant offer of credit from the BNDES and tax exemptions for the purchase of motor vehicles, increased and modified the profile of their fleets. This movement, apparently adequate to face the challenge of maintaining the level of service and reducing the impact of the increase in freight caused by the growth in demand without a proportional growth in the country's distribution capacity, could mean a loss of fundamental efficiency in the crisis scenario. .

The rising cost of capital, resulting from escalating interest rates, is another critical factor that potentially changes the decision on asset ownership. Furthermore, excess capacity is a dangerous inducer of inefficiencies, as it creates the illusion that short-term plans can be “accommodated” by existing idle capacity, as if replanning had no cost, since the assets are already available. A serious mistake!

Our team

In a scenario of competition for human resources, companies tend to increase the value package to attract and retain their employees, as well as reduce the level of demand in the qualification of their most operational staff. It is also clear that the speed of professional qualification in Brazil has fallen short of what is needed to keep pace with market growth. It is not by chance that we are at the bottom of international rankings of labor productivity, which deteriorated throughout the first decade of the 2000s, the period of greatest growth in the Brazilian economy.

It is natural, in this moment of crisis, that there is some downsizing of the staff in the operations area of ​​the companies, favoring the most qualified and “productive” resources. It will also be possible to observe a “chairs dance” at the executive levels, with a reduction in the benefits and salaries offered. However, instead of simply dismissing their employees, with high labor costs for dismissal and subsequent rehiring, companies should seriously evaluate the possibility of taking advantage of this moment to qualify their staff.

Indicators

Performance indicators are important to measure the performance of the operation and point out the necessary paths and corrections. However, indicators that are suitable for a scenario may not make sense when significant changes occur. For example, in a scenario of expanding demand, the company could measure the percentage of complete orders it manages to fulfill within the timeframe agreed with the customer or, recognizing a serious capacity limitation, the total volume sold or the number of orders. With this, it would communicate to its teams that the important thing is the effectiveness of the process, seeking the maximum of its capacity, even if inefficiently.

With the crisis, the balance between capacity and demand is inverted, and it may not be difficult to fill orders on time with available resources. But does this indicate that everything is ok? Thus, rather than measuring effectiveness, it is more important to measure the efficiency of the fulfillment process, measuring the cost per order or customer served. The word becomes efficiency!

Logistics Mesh

The increase in demand forced many companies to expand their logistics networks, mainly because growth was not uniform in all regions of the country. Historically, demand has always been very concentrated in the Southeast and South regions of Brazil, where companies have built most of their manufacturing and distribution facilities. With the most accentuated growth in the Northeast and Midwest regions, there was a need to open new facilities closer to these customers, who have become representative.

The problem is that the growth of the logistics network often happens organically, without due care in the preparation of projects and guided only by obtaining tax benefits. Obviously, the tax issue should be part of any serious study of the logistics network in Brazil, but the decision should not be case-by-case. Thus, this period of crisis requires a review in the number, size and location of facilities to validate, or change, the decisions taken in the growth scenario. It is likely that changing some structural assumptions of the model can significantly change the optimal solution.

Thus, the crisis inexorably pushes us towards a review of the structure and practices in the logistics area, demanding creative solutions and an even more intense search for increasing the productivity and efficiency of our operations. It's not just time to wait, it's time to act and make good decisions to overcome this moment and build a path of growth!