May 17, 2020

How can the supply chain keep up with evolving retail practices?

Technology
Retail
Mel Tymm
4 min
Shopping bag with food inside
Mel Tymm, Industry Principal, Maginus, discusses how supply chains can keep up with evolving trends in retail.

Direct to consumer, the green agenda, 3P...

Mel Tymm, Industry Principal, Maginus, discusses how supply chains can keep up with evolving trends in retail.

Direct to consumer, the green agenda, 3PLs – the supply chain is going through quite the revolution. It used to be a lot simpler. Manufacturers would supply retailers, who would then resell the goods to consumers – therefore dealing with complaints or queries from the end consumer. Now, thanks to an increasingly competitive landscape, the whole process has changed, meaning the supply chain needs to evolve with it, and fast. 

Consequently, the supply chain is under more scrutiny than ever before. Pressures are now placed upon companies at every stage as manufacturers and retailers look to change their fortunes; meaning changes to traditional processes to ensure operations run as efficiently as possible. Whilst there are a multitude of factors influencing day-to-day operations alongside long-term strategy, there are key drivers which are affecting the supply chain more than ever before. If suppliers are to stay ahead of the game and keep contracts with retailers and manufacturers, these are the biggest pressure points coming in the next 12 months.

It ain’t easy being green

The rise of the conscious consumer means retailers and manufacturers are in the spotlight when it comes to packaging and single-use plastics. In the past few weeks alone, Sainsbury’s has committed to being carbon neutral by 2040, and Nestle to only using recycled plastics. These two initiatives alone will have a considerable knock-on effect, and those along the supply chain, from food manufacturers to logistics companies will increasingly face audits and pressures from those they work with to help those at the top meet their sustainability goals, which are increasingly being driven by the end consumer.

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D2C

Direct to consumer already makes up 16% of all manufacturing sales, and is set to provide a £13 billion boost to the industry over the next five years. However, this cutting out of the middle-man is disrupting the supply chain, with manufacturers now needing to work more closely with suppliers to ensure customers are satisfied and demand is met. This is not without its challenges, and, without doubt has deterred some manufacturers due to the responsibility for every touchpoint along the supply chain. Customer satisfaction relies on a healthy supply chain, so close collaboration will be vital in future operations, with collaborative data sharing, especially electronically likely to become the norm to smooth out issues and drive peak efficiency. 

Warehousing 

Omnichannel retailing has put more pressure than ever on warehousing. Suddenly, consumers are buying across multiple channels yet want the product instantly, meaning distribution hubs need efficient processes to get the goods out the door fast. Coupled with little available, affordable space thanks to stockpiling following Brexit supply concerns, and warehouses are at a crunch-point. This is leading to innovative responses, including mobile warehousing (such as parking a van in a city full of stock, which is then delivered to customers via bike throughout the day), which is helping to provide agility and delight customers simultaneously. Initiatives such as this will continue as supply chains look for innovation to keep pace with UK consumerism.

Opportunity relies on efficacy

To keep pace and prepare for further changes, supply chain companies need to ground their operations in technology – to not only provide agility thanks to insights but also to help deliver data sharing. Advising retailers that X% of sales are coming from specific areas, could help deliver logistics solutions which save both parties money; or if OMS systems flag up that certain customers continually buy items in the wrong size, therefore requiring more information before purchase – cutting costs and environmental impact for both. The importance of the supply chain can never be underestimated, but all areas now need to pull together to keep consumers happy – which means harvesting insights – in whichever form to influence operations and drive successful outcomes. The next five to ten years will see more evolutions in line with consumer trends, especially as AI, machine learning and automation advances comes to the fore with regard to logistics; but in the meantime, the importance of getting the fundamentals right cannot be underestimated, as this will help forge strong partnerships and help ride the wave of changes influencing the sector. 

For more information on procurement, supply chain and logistics topics - please take a look at the latest edition of Supply Chain Digital magazine.

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Jun 11, 2021

NTT DATA Services, Remodelling Supply Chains for Resilience

NTTDATA
supplychain
Supplychainriskmanagement
Procurement
6 min
Joey Dean, Managing Director of healthcare consulting at NTT DATA Services, shares remodelling strategies for more resilient supply chains

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.

The Challenges

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.”

 

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