Robots, algorithms, automated answering machines, self driving cars and unmanned drones….Are organizations moving closer to the lights out supply chain? Not. Most organizations have learned that keeping a close pulse on their customer’s market trends and utilizing this valuable information to make supply chain decisions can improve the brand growth and ROI. There are certainly technology solutions aiming for a lights out outcome, and market leaders, like Amazon, increasingly investing in automation and testing new solutions; however even from Amazon the prospect of a lights out fulfillment network in decades away.
Supply chain is the new competitive weapon of the business. As consumer closely scrutinize every business decision of their favorite brands, the supply chain ability to be accurate, timely and deliver goods as promised has become more important than ever. Progressive organizations are leveraging their supply chain and creating competitive advantage by building stronger partnerships with their main suppliers, diving deep into last mile delivery solutions, and incorporating the voice of the customer in forecasting and supply planning.
1. Build Strong Partnerships with Key Suppliers
Companies cannot guarantee the integrity of their supply chain or quality of their product being far removed from sourcing and manufacturing processes. The growing expectation of accountability from consumers is pushing companies to become more engaged within their supply chain, build closer relationships with original equipment manufacturers and raw materials providers. Millennials prefer to make procurement deals directly with manufacturers- cutting out distributors. This process helps ensure tight quality controls, improve direct from factory cost savings; it also impacts margins and health of distributors who have thrived in this space. A research study conducted by UPS shows that millennials prefer researching companies online using tech channels that may be less familiar to older buyers. This trend has seen a 20% increase in the past two years and is expected to continue growing over the next 3-5 years, potentially eliminating a percentage of middle market distributors.
As companies shape stronger partnerships in their supply chain and become more informed about their provider’s operations, new opportunities for data sharing, process improvement and collective costs savings will emerge. Currently, supply chain professionals struggle with the types and integrity of data available within and outside of the enterprise. Lack of accurate data sharing and collaborative analysis causes demand forecasting, supply and inventory bullwhip problems. Accurately predicting and communicating demand trends across the entire supply chain will help businesses negotiate year-over-year price reductions in the order of 3%-5%. These are a direct result of setting shared goals with suppliers’ brands trust over time.
Successful organizations need to be connected to their partners to ensure real time sensing of risk, changes in demand, or updates to orders. In supply chain, as in business at large, success is 100% dependent on strong partnerships, the sustained consolidation of the marine shipping industry over the past five years is a clear indication that together we are stronger. Will we start to notice more vertical integration of organizations across varying industries?
2. Dive Deep into The Last Mile
This is the #1 opportunity for the supply chain to interact with the customer, and oftentimes one of the most impactful times in the customer delight process of any purchase. The last mile offers unique opportunities for optimization, and cost savings with a focus on guaranteeing customer happiness and brand loyalty. Many traditional, and online only retailers focus on improving the last mile service with real time order updates, which include reverse logistics, and sometimes even. Consumers expect products to arrive on time and not damaged, with continuous visibility into the delivery status. Some organizations, such as Amazon have gone so far as to ensure the package is pleasant for the consumer to open, while maintaining packaging costs low with their SIOC (ship in own container) program.
Over the past few years, as ecommerce growth has increased, leading companies invested pointedly into research and development for autonomous vehicles to help last mile delivery processes. Other service providers are expanding partnerships outside of the traditional shipping industry to continue improving services and transit times to consumes. For example, FedEx is increasing its partnership with Dollar General (8,000 locations) and Walmart (500 locations); the company is also investing in additional store fronts to continue servicing their most important customer sector, ecommerce SMBs. According to FedEx CMO “the FedEx Office retail locations bring in some of our most profitable small and medium business because [of] the experience they get when they are shipping…and they want the peace of mind of proper packaging.” This illustrates an understanding FedEx of just how important success in the last mile is for all involved.
Last mile delivery is most impactful for the food industry, there are numerous opportunities to learn from innovations in this space. Whether prepared or online grocery, organizations providing these services to consumers must be even more vigilant of last mile services.
3. Listen to the Voice of the Customer
Traditional supply chain solutions were designed to solve problems within the walls of the organization. Globalization forces all businesses, including SMLBs to think globally. Most realize that success with continued growth fully depends on outside factors, some out of our immediate control but some which can be influenced. Analyzing existing or historical data only teams do not get full visibility of their customer trends. This approach delivers sub-optimal supply and demand forecasting models and leads to making decisions on based fragmented information.
Supply chain teams require real time point of sale data, consumer online sentiment, alongside partner driven forecast to assemble the monthly demand and supply planning. To successfully utilize the information organizations must diagnose customer behavior to prescribe the right market segmentation. Customers are getting closer to the supply chain- this is especially noticeable for higher end brands and items, where customers have immediate and direct impact on the well being of the organization, but this is increasingly truer even in highly commoditized consumer goods organizations.
Tracking the brand, the consumers who interact with it, and translating this data into intelligent information that can help drive precise winning decisions. Supply chain needs to work with the data and truly know the customer. Who drives the business? E-commerce companies such as Amazon have huge amounts of customer data that can be used to target specific people and convince them to buy certain things. With mobile apps and loyalty programs, chains such as McDonald’s, Burger King, and Starbucks are attempting to similarly track customers, adjusting options to convince them to spend more. Supply chain teams need to be in the know of all these push/ pull strategies and collaborate cross-functionally to truly understand consumer trends.
So, are we heading towards an era of lights-out supply chain management? No! Supply chains, as most consumer dependent businesses, rely on people to run them successfully. People to build the right supplier partnerships, people who can strengthen the connection between a brand and customer when the product is delivered, and people who can reach into the hearts of consumers and understand what drives them. Lights Out? People in the Supply Chain of Tomorrow.