Don’t Let Omni-Channel Pressures Force You Off the Supply Chain Grid

Seamlessly managing business in today’s ever-changing omni-channel environment is a lot like competing in the Super Bowl: It requires a superior level of skill, agility and collaboration to take home the championship ring. Coaches must devise a strategy and reach consensus about their offensive and defensive lines before they finalize the game plan. Yet, once the players are on the field, any number of things can happen—players get injured, the ball gets intercepted, etc.—to disrupt a team’s plan. The team that can react more quickly to these disruptions, and then execute a newly revised plan to score, is the one that wins.

The same is true in business today. How quickly a company is able to see and react dynamically to market trends, disruption, or change in consumer demand is dependent on the agility of its supply chain and the collaborative relationships it has developed with its supply chain partners. Just as a football is rarely carried in a straight, uninterrupted path toward the goal line, getting a product from one end of the supply chain into the customer’s hands requires significant coordination, adaptation and collaboration between all players of the extended supply chain.

Yet, in reality, often little to no collaboration occurs between retailers, manufacturers and their partners because of differing or conflicting business objectives. We rarely see suppliers, manufacturers, third-party logistics (3PL) providers, warehouses, and retailers operate in unison, and the evolution of today’s connected consumer has only amplified this problem.

Consumers’ expectations are higher than ever now that smart technologies have become an intrinsic part of the shopping experience. Increasingly connected via social media, consumers are more informed and influenced by their peers than ever before. These consumers expect a personalized shopping experience—from initial promotion to post-purchase communication—that’s tailored according to how and when they like to shop. They are also willing to pay more for products and services they value, and they expect these preferences to be anticipated and met.

As a result, succeeding in this new consumer-driven environment is not easy. Increased complexity in the marketplace, data overload, fluctuating demand, trust issues and competitive threats are just a few of the challenges retailers, manufacturers and distributors are facing.

The Impact of Omni-channel in Manufacturing

Fearful of being left behind, many companies are embarking on a “me-too” omni-channel game plan, rushing to offer consumers more personalized products and services. The problem, however, is that few businesses are earning a return on these investments. In fact, according to a recent study conducted for JDA Software by PwC, only 16% of companies can fulfill omni-channel demand profitably today.

In a rat-race to address consumers’ ever-changing expectations, companies are paying a high price to sustain or grow their market share. As businesses sell and deliver products across multiple channels, it’s the high cost of fulfilling orders that is eroding margins. Plus, 67% of companies in the study report that their fulfillment costs are growing, not shrinking, as they increase their focus on selling across channels.

One of the reasons behind this increase is the complexity and high costs associated with managing a fulfillment network that is essentially driven by the end consumer. Smaller order quantities (e.g., eaches or cases), more order variants (e.g., a zillion yogurt flavors) and temperamental consumers who now have access to many different shopping channels are all factors influencing the complexity of the supply chain and the new level of coordination required of all supply chain players. According to the study, businesses report their highest costs associated with omni-channel selling are related to handling returns, shipping directly to customers and shipping to the store for customer pick-ups.

It’s no surprise, then, that the need for multi-channel management has created a plethora of planning and distribution challenges not just for retailers, but for manufacturers, wholesale distributors and 3PLs. In the face of increasing competition and rising demand volatility, companies often make ambitious price/product/service offers in order to win the sale—without considering the true cost of fulfilling those offers.

Manufacturers and their trading partners need to work together as collaborative partners to achieve the ideal balance between too much product and not enough. By tightly connecting the planning and execution processes to what is actually happening with demand, inventory visibility is increased and products can more effectively flow through a synchronized supply chain.

To achieve this level of seamless supply chain planning and execution, companies must build a new type of supply chain—the supply chain grid—that will enable them to thrive in an omni-channel environment.

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BNSF transports cargo from largest ship to reach U.S. coasts

The CMA CGM Benjamin Franklin — the largest vessel ever to call at a U.S. port — arrived at the Port of Los Angeles on Dec. 26, where BNSF Railway Co. was waiting to move more than 2,500 containers of the ship’s cargo to inland intermodal facilities.

BNSF will use 10 trains to move the containers to intermodal sites in cities that include Chicago, Dallas, Houston, Kansas City and Memphis, according to the railroad’s website.

Longer than the Empire State Building, the 18,000-TEU (20-foot equivalent) container ship is 1,300 feet long and 177 feet wide, according to CMA CGM.

Managing Your Supply Chain

Everyone is suggesting what the trends in Supply Chain Management (SCM) are for 2013. Most of the writers agree on a “core” of important trends (sort of like the  “motherhood and apple pie” thing. Then there are even some new ones that pop up too. I am going to bring out as many as I find. Where they are not as common, I will provide a link to more information. Read on and tell me if you agree or disagree.
Everyone agrees that Globalization is important and changes the way SCM operates. Likewise, increased Competition and a push on prices is here to stay. Along with competition, Product Life Cycles are getting shorter and requiring more complex solutions. Throughout 2012 we saw a continuing trend for Collaboration with suppliers. The move towards Lean manufacturing and supply chain means an increase in Demand Planning. We have, of course, see the rise of Outsourcing, but keep an eye on Insourcing too. The growing number of SKUs (because of changing customer preferences) for consumer-facing businesses will impact the SCM operation.  Consumer products folks are pushing to open Direct-to-Consumer Channels. Last, but not least, is Social Media.

 

Not necessarily major “trends”, but never-the-less “issues” are important too. An on-going reduction of operating costs, remains the primary mission for supply chain managers. Along with this, companies must keep SCM on the same page as business strategy, for example, concentrating on enhancing customer service and loyalty. SCM continues to play an important role in supplier relationships, faster product-development cycles, and business expansion. E-Commerce will continue to be highly important, especially if the end-user is in near proximity.