The future of fulfilment: top priorities for 2021 and beyond
Analysing response from 300 senior executives in the retail and e-commerce industries with responsibility for logistics and fulfillment operations Blue Yonder has released its second installment of its .
“Retailers are expanding their fulfilment network and footprints in part to address last-mile delivery while meeting the surge in e-commerce orders in the short-term. Equally important, they understand that accurately predicting demand is critical for sustaining revenue growth and advanced, omni-fulfillment capabilities and locations embedded with automation are the key to quick and efficient fulfillment. Having the right supply chain solution to gain that end-to-end visibility will be a key to retailers’ success,” commented Ed Wong, senior vice president, Global Retail Sector, Blue Yonder.
Automation and modern fulfilment
As many organisations turn to automation to enhance their supply chains, and customer experiences, Blue Yonder identifies that it expects to see in the next 12 months, 50% more retailers, plan to fully automate their fulfillment locations in order to address consumer needs. In addition to this, 23% of retail executives expect to have most of their fulfillment locations automated in the same amount of time.
More than any other vertical, Blue Yonder discovered that drug store/health and beauty retailers had the highest amount of organisation with all their fulfillment locations automated (17%). Other key finds include the expectation that pop-up distribution centers (DCs) will double to 26%, with dark stores also doubling to 12%, while micro-fulfilment stores are expected to rise from 15% to 27%.
Repositioning of fulfilment assets and labour
Reflecting on how organisations can meet the needs of customer-driven commerce and increase their fulfilment, Blue Yonder states that “retail executives will need to expand capacity and improve labor productivity,” by improving picking processes and warehouse cost.
In the next 12 months Blue Yonder expects to see A prioritisation of increasing existing capacity (43%) and improved labour productivity (42%).
Other findings discovered by Blue Yonder include more than any other vertical 49% of grocery retailers and 49% of pet care retailers would like to prioritise expanding their existing capacity. While 52% of drug store/health and beauty retailers, as well as 52% of pet care retailers selected improving labour productivity more than any other.
Overall 39% of retail executives want to improve their picking process, whilst 38% want to reduce warehouse/DC costs.
Supply Chain intelligence and visibility
With COVID continuously affecting the ways in which people work, at the top of the list for improvement for retail executives is inventory accuracy and real-time visibility to meet customer demands. Workforce management was also high on the list.
In the next 12 months, Blue Yonder reports that 48% of retail executives will be looking to improve their pricing and promotions to ensure profitability. Meanwhile 38% want to improve their workforce management, 36% are focusing on real-time inventory visibility and orchestration, and assortment management.
In addition to the above priorities, driving higher sales and margins across channels with localised customer insights was also on the list.
Blue Yonder states that these findings come as no surprise when its first report cited that 51% of retailers reported ‘out-of-stocks’ as their biggest fulfillment challenge.
“The pandemic has hyper-accelerated the digitization of retail. Retailers can no longer rely on brand, product and price alone. Fulfillment is now an integral part of a successful end-to-end retail strategy. With uncertainty still looming as we enter 2021, retail executives are needing to quickly re-orient customer-centric strategies to deliver speed and convenience, resulting in a comprehensive review and streamlining of the end-to-end supply chain from planning, inventory placement, fulfillment and routes to market,” commented Omar Akilah, vice president – Commerce, Blue Yonder.
“Retailers who reorient towards a customer-centric supply chain powering commerce will be better equipped to adapt to any environment, respond to spikes and future challenges, while ultimately delivering the right product, at the right price, in the most optimal manner in accordance with customers preferences and needs.”
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.”