Engineering the supply chain to achieve fast delivery.
We are living in a ‘now’ culture, with customers expecting fast delivery of purchased goods and services. A customer wants to know when (date and time) an item will be delivered, as well as track its progress. Retailers need to realise these expectations, and do so now.
Some companies are challenging existing ways of doing business, and our understanding of current and future supply chains. For example:
- Uber – Connecting immediate demand to the closest taxi driver
- Amazon Dash Button – Ordering household products directly via a button
- Amazon Prime Now – Offering one hour delivery slots
- Domino Pizza – Tracking pizza orders from cooking to delivery
- Zipcar – Finding, booking and driving when needed, with no need to own a car
- Shutl – Delivering products within 90 minutes of ordering
- Task Rabbit – Arranging task execution on demand
Over the past two decades, retail competitiveness has been built on the success of the supply chain – managing products from source to customer at the lowest cost and via the most efficient route.
Within the supply chain, retailers have honed their skills in utilising demand-driven supply chain signals, from improving the levels of data and forecasting through to optimising shelf replenishment, but retailers have to accept now that we are moving away from this demand-driven supply chain to a model that is being imposed upon the industry by the need to fulfil customer demand immediately.
In addition, more brand owners are investing in direct to consumer (DTC) fulfilment. This implies that the current structure of agents, distributors, wholesalers and even some retailers will not exist unless they adapt and evolve.
The key factors bringing about this change are:
- Data accuracy – It is not only the accuracy of the data, but the scale of information that is now available both up and down stream that directly influences these demand patterns
- Forecast and order accuracy – There is a danger of developing too much confidence in forecasts, especially after investing time and money in expensive forecasting systems. Depending on the situation, this overconfidence can be a critical failure point
- Order quantity – The optimum order quantity can no longer be built around production runs or consolidated shipping container loads
- Replenishment – All inventory locations need to meet replenishment demands, and the subsequent frequency to replenish is a key to future demand patterns
- Supply time – Lead times need to be reduced by either localising product or increasing assembly to meet consumers’ immediate demand
- Shelf replenishment – The mantra of right product, right time, right place is no longer relevant for fulfilling demand
Of course, operational cost (which will be attached to the supply chain) is a major factor in fulfilling immediate customer demand.
Retailers aiming to push the fulfilment and delivery boundaries need to review and consider the following:
- Fulfilment – More frequent and smaller deliveries, faster inbound shipments, responsive tracking, complex technology demands, ship from store, personalisation (packing and VAS), and possible increased returns will impact upon operational costs
- Inventory – Extended inventory across multiple locations will drive further investment and without the right mechanisms to exit these wider ranges, the danger of faster aging stock will have a significant cash impact
- Delivery – Specific booked slots, Saturday and Sunday deliveries, lower density deliveries, variable carriers, services selected by the customer, multiple choices of drop off points, and tracking will challenge the services and add further costs to support this flexible fulfilment
- Customer Experience – Immediate response about product information, inventory availability and order tracking have a direct input to each customer experience and its potential repeat activity
- Analytics – Further analytical tools that consider the nuances of predicative planning are less reliant on conventional forecasting and will need financial investment
The word ‘now’ in the supply chain has always been considered to be a costly word, but is now vital in order to meet the immediate demands of the customer. Those that ignore the ‘now’ will be the ‘was’.