Digital Supply Networks And Warehousing: As we enter a new decade, retailers must take stock of their current positioning vis-à-vis the market and the industry. It is also critical for them to be aware of customers they are serving and manage operations to meet the rapidly evolving expectations. Retailers have been periodically investing time and resources in technology.
In the past decade, they have developed advanced supply chain operations with a far greater reach and a product line targeting more consumers. However, with large global retail giants penetrating markets, the competition for acquiring customers has only become more intense. Thus, retailers are realising the need for constantly innovating.
The availability of advanced tools is pushing retailers’ limits from fully integrated networks to procurement networks that allow them to choose vendors. The digital customer has never had a better time to shop, with companies integrating tech throughout their systems.
Shift from traditional supply chain to digital supply networks (DSN)
A fast-paced shift is being witnessed in the way supply chains function. Advances in computing memory and processing are driving entrepreneurs to develop innovative new digital technologies and capabilities.
These technologies, including sensors, artificial intelligence (AI), machine learning (ML), and cognitive computing, create the foundation for analytics and a conversion between the physical world and the digital worlds, transforming traditional, linear supply chains into connected, intelligent, scalable, customisable, and nimble supply networks.
These new supply chains, also known as DSNs, are dynamic and integrated. These chains address the issue related to the delayed action-reaction process of the linear supply chain using real-time data. This enables better informed decisions and enhanced collaboration across the entire supply network, as well as provide greater transparency.
The main characteristics of the DSN include always-on agility, connected community, intelligent optimisation, end-to-end transparency, and holistic decision-making. Each of these characteristic plays a role in enabling more informed decisions and can help organisations address the central question in their strategic thinking: how to win?
Organisations need to consider preparing themselves to lead by imbibing agility into systems, processes, and decision making. Personalisation at scale, leveraging ecosystems, and driving
business-led digital strategies are some of the key themes.
Digital adoption technology pyramid
Digital adoption is a transformative process that uses technology solutions from the ground up, starting from a unified pool of data that can be analysed and then used to drive business decisions. Starting from the bottom of the pyramid, the process of adopting digital technologies needs to be an ongoing and focused initiative.
It should be a part of every business’s long-term strategy. This in turn is expected to lead to a game changing competitive advantage. Refer to the diagram to know the four stages of digital adoption.
Logistics and warehousing
With hyper personalisation, customers are becoming more demanding and asking for same-day or even same-hour deliveries. These demands are affecting the logistics and supply chain function. Meticulous planning and execution are needed to fulfill these demands.
With the rapid infusion of new-age technologies, the ability to effortlessly coordinate delivery locations, time, and returns mile by mile is no more a novelty, but an expectation.
As the online economy grows rapidly, the importance of last-mile package delivery increases—the final step in the competitive and costly process of moving items to customers’ homes as quickly as possible.
Delivering products ‘right now’ is the expected norm. As these capabilities advance, we are likely to witness a high degree of convergence and movement towards data unification across platforms, which will communicate seamlessly behind the scenes.
The highly broken global networks of transportation and logistics providers, ocean carriers, retailers, and other large shippers are expected to witness an incremental but fast paced movement towards integration, intelligence, and automation that can move more goods more quickly to more places, and with more transparency and efficiency than today.
The value of these enabling technologies will unlock as they converge. For example, as connected communities grow in parallel with maturing IoT and blockchain standards, critical supply chain data will begin to flow more freely across the network (amplifying the power of cognitive technologies to drive improved holistic decision-making).
In a similar vein, when holistic decision-making merges with automation, the power of automation will shift from cheaper to smarter as cognitive technologies and predictive insights feed into a growing robotic network (creating intelligent supply chains that cannot only see into potential bottlenecks but orchestrate around them).
Future of order fulfillment
AI and ML based fulfillment systems
The latest AI and ML platforms can help retailers accelerate their order fulfillment process. These technologies allow retailers to automatically map demand conditions with stock availability across stores, warehouses, distribution centres, and even on-road fleet.
For example, a US-based footwear manufacturer acquired multiple start-ups with analytics and ML capabilities in the past 18 months. These acquisitions are aimed at combining RFID technology with predictive analytics to accelerate inventory matching and order fulfillment to meet consumer needs.
By combining investments in AI and ML technology solutions and rewriting sourcing policies, retailers can be at the forefront of convenience and provide real-time product availability without having to accumulate unsold inventory.
Irreplaceable node in order fulfillment journey
While retailers are still contemplating their plans for fulfillment centres and last-mile delivery for convenient order fulfillment, physical stores play a critical role in the supply chain. Retailers are likely to accelerate the conversion of excess space in their stores into micro-fulfillment centres, especially in densely populated areas.
One likely hurdle in retailers’ plan to redeploy an unused store space could be redesigning limitations due to clauses in existing leasing agreements, thus pushing more redesigns to owned storefronts.
Major focus should be on returns
Traditional retailers are also placing big bets in the area of reverse logistics to attract store traffic. A major US department retail chain completed the nationwide rollout of returns programme offered by one of the largest e-commerce players. Foot traffic to its stores increased nearly 24% in the first three weeks following the rollout.
Emerging retail models, such as direct-to-consumer and subscription services and rental businesses, are built to consume high volumes of returns as a part of their supply chains. Anticipating returns with high-predictability data helps retailers form their inventory strategy.
For many retailers, this creates a behaviour for which the current supply chain is not designed. However, to thrive in reverse logistics, retailers should move from return policies to return strategies.
More visibility, more control
One of the largest e-commerce giants is building a vertically integrated, closed-loop movement of goods network in the US.
Meanwhile a paradigm-changing player is showing what is possible with a truly integrated, start-to-finish supply network and highlighting the threat to incumbents that fail to adapt their own operations according to the rapidly evolving environment.
The movement of goods from China to the United States on its owned vessels in 2018 marked the completion of the world’s first end-to-end shipping network.
This is the last missing leg joining a chain of cargo planes, fulfilment and distribution centres, long-and short-haul trucks, a rapidly expanding last-mile network through branded delivery service partners, and its own website. The company’s shift towards being vertically integrated and having a closed-loop network seems to be deliberate.
The company focuses on complete transparency when goods enter its ecosystem from manufacturers, and the movement of those goods between warehouses and sort centres, leaving few dark areas.
This transparency is a key part of how the brand can guarantee its growing base of global same-day/two-day shipping customers for more than 100 million different items. The definition of convenience is constantly being re-written in the age of intense focus on last-mile delivery.