Comment: Delivering value for money in the age of the impatient customer
Perhaps the biggest challenge facing the distribution industry today is the rise of the impatient customer. According to a recent report, 50% of customers would abandon a purchase if delivery choices were unsatisfactory. Customers want the goods they have ordered not only as quickly as possible, but also within a specified delivery time. Gone are the days of “your parcel will be delivered between 8am and 8pm within the next five to seven working days.”
Distribution looks easy – just a matter of getting goods from point A to point B – but anyone that knows anything about the industry knows that it is anything but. Take the recent situation with Kentucky Fried Chicken, for example. The complexities of the supply chain have contrived to leave one of the world’s biggest fried chicken outlets without any chicken and many stores closed across the UK.
For many distributors, keeping track of orders-in, orders-out and returns as well as delivering orders accurately and on time is not easy. Combining real-time customer insights and order data may seem like the ideal way to simplify financial management and shipment processing, but it continues to be a major challenge facing all businesses, especially small businesses and start-ups.
Research shows that many small businesses are challenged with calculating accurate costs for customer shipments, based on location and delivery preferences. The research also shows they face difficulties managing shipping with costly legacy systems that require re-entry of information – clearly not a productive use of time.
With all of these external pressures, it’s critical that retailers and distribution companies stay agile and flexible – all without eating into their margin. But how can they simultaneously deliver low cost and high-quality products and an excellent consistent customer experience?
Effective planning and management
Today’s businesses are facing increasingly global and turbulent market forces. The ability to adjust processes, information flow and operations though the supply chain is vital. The deluge of data birthed by the digital age is also proving to be a gift and a curse for many as they struggle to efficiently collect, process and action the data available to them.
Many of the issues often lie with the complexities and constraints of having vital information spread over various technical solutions. Data is often siloed in different software solutions that have not been designed to work together. As a result, time and resource that should be spent on serving customers and growing the business is unnecessarily spent on forcing the integration between these solutions.
The cost and intricacies of implementing and maintaining these integrations have led many organisations to compromise choosing one solution over the other or suffering from more basic functionality through a limited integration. But thanks to ongoing technological developments, many of these issues are being addressed. Organisations of all sizes can now access all the benefits of their data without being hampered by the technology.
For distribution companies, in particular, adopting integrated best-of-breed solutions brings a range of benefits including cost reduction, efficiency gains, better competitive advantage and an improved customer experience.
For example, a recent Forrester study found that distribution companies saw a huge 237% return on investment (ROI) in just four months by implementing effective business management solutions. As well as receiving significant ROI in a short amount of time, services companies also reported strong improvements in financial management, purchasing, inventory and services management, customer service, and sales management.
Technology is evolving
The cloud and IoT is giving companies the power to have the best combination of a variety of solutions without the complexity and cost. IoT, as one example, is introducing opportunities to leverage physical equipment sensors to not only manage the equipment’s function, but also provide the appropriate context in the supply chain and financial operations of the business. This increases the value of creating a connection between the Enterprise Resource Planning (ERP) and Enterprise Asset Management (EAM). The power of IoT potential, complemented by the decreasing complexity of integration through cloud solutions, makes this a much more palatable proposition to enterprises from a cost and complexity standpoint.
The improved accessibility, functionality and integration of these solutions, many of which were previously only available to large enterprises, means smaller distribution businesses and start-ups can now begin to reap the benefits. With minimal investment and resources, distribution companies of all sizes can enjoy rich, integrated functionality to support all core business processes. And these processes can be easily adapted to fit particular company processes, roles and preferences.
By streamlining processes and integrating solutions, distribution companies stand to gain a range of advantages. But particularly, it will free employees from mundane tasks, enabling them to deliver the experience today’s impatient customer demands.
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.”