Capping IT Off

Capping IT Off

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Key components of a dynamic supply chain

Categories : WebDigital Strategies

 Across the consumer products and retail industries, advances in IT and Automation have helped make the supply chain way more responsive and efficient than in the past. However, the traditional supply chain essentially remains linear and sequential in structure. This means that like any other chain, you cannot go from point A (for instance, a factory) to point B (the shop floor) without passing through all the points in between.

Technology as well as socio-cultural and demographic changes are already making such models redundant. As the report “Rethinking the Value Chain: New Realities in Collaborative Business” puts it, “The path to purchase is no longer linear. It might involve social media, an app, web-based research, an in-store visit and an online purchase, in any order.” Consumers are also demanding more flexibility and convenience in terms of delivery options with different consumers wanting different things. They are also less likely to be influenced by the traditional channels of communication such as print, radio and TV, which marketers used to rely heavily upon. In fact, with on-demand consumption increasingly popular with many consumers, traditional media channels can’t keep pace.

When you put all of this together, you realize that we have moved to a new world; a world which moves very fast and one in which a lot of the control has shifted into the hands of the consumer. The consumer today decides how and when they want to access information about your company or product, how, when and where they want to buy your product, and when and where they want to receive the delivery.

The traditional, linear value chain may not be able to respond efficiently and quickly enough to all of the demands being placed on it. In order for retail and consumer products companies to successfully compete in this brave new world, their supply chains must incorporate the following key capabilities:

  • Agility: The supply chains of tomorrow need to be agile and not locked into a rigid framework that makes quick adaptive changes impossible. For competitive advantage, supply chains need to be dynamic and responsive to changing technologies and market conditions. Plug and play business technologies, processes and systems as well as collaborative relationships between different partners within the ecosystem will help in achieving this.

    For example, Google Shopping Express will be partnering with Uber for same-day deliveries. In this partnership, Google will look after pricing, the storefront and merchant partnerships while Uber will provide the drivers through its UberRUSH offering.

    This is one example of a dynamic plug and play relationship where Google Shopping Express is not locked into an expensive commitment to its own fleet of vehicles. If tomorrow, something in the current market conditions change, or new models of operations or new technologies arrive, the partnership can be reexamined and Google can quickly move on to a different way of doing things.

  • Flexible, open integration: Linear supply chains are by definition inflexible and the supply chain adapted for the future must support flexibility in forming new connections and forms of collaboration, both within and outside an organization.

    A good example to give here would be that of DHL. As mentioned in the Capgemini whitepaper, Making the Last Mile Pay, “In Germany, logistics giant DHL is rolling out all sorts of ambitious pilot initiatives in an attempt to meet consumers’ growing expectations and stay ahead of the curve. In one trial, DHL Parcel has joined forces with Amazon and Audi to enable items to be delivered quickly and securely to customers’ cars.”

    It is this openness to collaboration-as-required which makes DHL a flexible organization primed for future growth.

  • Intelligence: If companies are to meet the varied expectations of different consumers quickly and without prohibitive cost, then intelligence is a key requirement. It is this intelligence and the actionable insights derived from marrying unstructured and structured data sources that will allow companies to optimize and reconfigure their operations on an ongoing basis, to deliver on what consumers want while setting themselves up for long-term growth.

    For instance, Home Depot has invested heavily over the last decade in redefining its supply chain so that its online and store-based activities are closely integrated. Now every time an order comes in, its customer order management and inventory display platform calculate the optimal flow path to fulfill the order. This calculation is made based on many different variables including stock location, customer location, shipping costs and available lead time to service the order.

  • Fluidity: A supply chain can be said to be more fluid when information and goods flow freely and efficiently to where they are needed most. Companies that seek to have greater fluidity in their supply chains must grapple with questions such as whether they absolutely need to hold goods closer to the customer or whether they can still make the standard, economical route of warehousing products in central distribution centers and then shipping them out work for them. There is no standard model here and every company will need to answer these questions for itself based upon customer requirements, nature of competition, its own capabilities and a test-and-learn approach.

    Amazon, for instance, is currently trying to apply predictive shopping to its operations. The online retailer first used these techniques to tailor specific offers and product recommendations to web shoppers and is now trying to anticipate (in aggregate) customers’ needs in a certain geographical area, based on previous shopping patterns. In-line with these predictions, it can decide whether to hold merchandise closer to its customers for faster delivery turnaround.

    For Amazon, the whole thing hinges on the reliability of its predictive analytics. The better its data mining and analytics capabilities and subsequent predictions, the better the business models that deliver customer satisfaction while delivering on business goals, such as profitability. Similarly, other companies will need to find their own answers based on their own strengths and requirements.

  • Visibility: Retailers spent years perfecting their supply chains for store-based fulfillment. Later, they added separate fulfillment centers for ecommerce. This has resulted in information and stock for each being stored in separate silos. Obviously, this has driven up costs and prevented companies from responding quickly to different trending demands.

    Supply chains of today need to enable visibility, which implies a clear line of sight across operations so that a retailer is better able to optimize logistics, cut costs and provide a higher level of service to its customers.

    A good example is the UK department store chain John Lewis. Over the years, it has invested heavily to provide a seamless online and store-based fulfillment solution from a single distribution unit. Using IT improvements, it is now better equipped to track, understand and manage its activities across its different channels.

In this post, I covered some of the key components required to build a dynamic supply chain. However, this is just one aspect of last-mile services. To get a more global overview of the ways in which the retail and consumer products industry is changing and how to deal with these changes, please check out the Capgemini whitepaper on Making the Last Mile Pay.

Capgemini provides global, industry-relevant expertise, business process and consultancy, integration and infrastructure services, and end-to-end technology solutions. Drawing on industry best practice and our own methodologies (e.g., Integrated Planning and Execution for Retail, Consumer Demand Driven Supply Chain for Consumer Products), we can collaborate, co-innovate, advise and implement supply chain and last mile transformations.

If you have any questions about last-mile services, please reach out at peter.lindell@capgemini.com.

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Peter Lindell

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