Why search is at the heart of the modern supply chain
As supply chains become more intelligence-driven and begin to utilise insights to serve customers in new and innovative ways, traditional transaction-led models are no longer cutting it.
65% of shopping begins at the search, according to Gartner. Instead of focusing efforts on converting people at the buy, retailers should look to convert at the point of search. Abandoned shopping carts offer insights into lost sales. Often, the reasons are related to shipping and return policies. This offers an opportunity to directly impact revenue and sales by making more attractive offers that convert abandoned carts into sales.
Amazon has led the way toward two-day and same day shipping, a chase that retailers cannot win if they hope to protect their margins. The irony lies in the fact that fulfilment speed isn’t necessarily what each order requires to satisfy the end consumer. Both B2C and B2Bcustomers frequently make purchases they don’t need to have delivered in one day, and pulling levers between price, shipping time and mode of final delivery can take advantage of this fact to generate new value. Sometimes, it might be preferred to have goods delivered at a later date, or in a particular time window. If my wife’s birthday is a month away, I don’t need her gift delivered tomorrow. In fact, I would prefer to not have it come until a Friday afternoon when I’m working from home and she’s in the office, so that she’s not there when it arrives. If the retailer knows this and offers this among my purchase and delivery options, I am likely to select that later delivery – especially if there’s a price break.
Having access to customer information and POS data is essential in knowing what options might be attractive and determining which deal to serve up as the customer initiates its search. And on the back-end, there’s a complex hairball of specific details that need to be orchestrated to make this possible. To start with, the retailer needs to know the status of all inventory available to ship. With that data in-hand, it can begin to run analytics to predict the arrival of goods based on the customer, inventory, order details, carrier capacity, and other what-if scenario simulations. The retailer can begin to run inventory and route optimisation analysis and match it with consumer demand at the point of purchase or at consumer search, to offer specific options that appeal to the consumer while eliminating the costs and burdens associated with an artificial drive toward next day shipping. The strategy shifts from being all about speed to customer-centric precision – driven by supply chain data and insights.
Theoretically, this makes sense and can change the game for retailers and manufacturers. But execution is not an easy feat. Multiple prerequisites exist:
- Real time & accurate visibility into inventory
- Quality data
- Network connectivity into carriers, 3PLs, suppliers and trading partners
- Live connectivity and collaboration
Each company in a supply chain tends to operate its own enterprise systems, making it a challenge to see and collaborate from one business to the next. Silos often exist not only from company to company, but from system to system. Multiple ERP, TMS, WMS systems, for example, create layers of hurdles and gaps that hinder the flow of data and visibility. Traditional thinking has been to plug these gaps with portals where suppliers and trading partners can exchange documents and collaborate. This approach has enabled commerce to “get-by” in many ways, making up for data latency and lack of true visibility by padding inventory and adding buffer stock in key locations to fulfil demand. But as supply chains aim to wring out buffer stock and become more efficient, we’ve hit a wall in terms of execution capabilities. The vision of optimising inventory and transportation routes to make customer-specific offers based on confident predictive intelligence simply cannot exist when relying on an enterprise-centric technology backbone. The hub and spoke ecosystem was built for yesterday’s environment. In today’s world supply chains must operate as a single cohesive network that lives, breaths and executes around the customer.
To successfully deliver on this vision, trading partners have to be connected on a single network where all parties are plugged into the same system, interacting and executing on the same information. There is no duplication or passing information from one system or party to another; there’s only one set of data that everyone sees. AI and machine learning offer a world of opportunities to enhance business and optimise performance. But the value is limited without access to quality data that can be acted upon. A network of clean and accurate data becomes a digital foundation for predictive and prescriptive analytics.
In this single-instance network model, visibility, connectivity and collaboration are delivered to everyone in the supply chain. So, when AI and machine learning are applied, data analytics such as predictive time of arrival can be applied to each node in the network. With this in hand, new opportunities arise to deliver customers multiple options for service based on reliable intelligence. When these analytics are reliable enough to allow retailers to build customer offers around them with confidence, the supply chain becomes a competitive advantage that creates new value streams. Through network connectivity, accurate data and cross-party visibility, a digital foundation is formed that serves as a catalyst to innovation that is built around and tailored to the end customer. This is the very essence of a customer-centric supply chain.
By Bryan Nella, Senior Director of Supply Chain Content & Thought Leadership, Infor Nexus
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”