Add Flexibility with these 4 Logistics Technologies
Traditional supply chains have survived a long time without requiring too much deviation. Today’s consumers are changing all that. Adding flexibility to your supply chain is now a must-have to stay relevant with your customers.
I helped a friend purchase a grill a few months back, and her story crystalized this predicament for me.
She started the shopping process on her laptop. She identified which model she wanted and then comparison shopped online. She did research at home, she thumbed through options on her mobile and she made phone calls to stores when further clarification was needed. After a few hours, she was ready to buy.
The deciding factor between which store to buy the grill from was surprisingly not cost, but rather speed-to-pickup. Once she was ready to buy, her expectation was to order online and get the grill that day, whether in-store pickup or same-day delivery.
If the home improvement store my friend eventually bought her grill from had not had flexible shopping options—such as mobile shopping, online ordering, in-store pickup, etc.—it’s very likely it would have lost the sale to a competing store that did.
Meeting customers’ demand for flexible shopping options is more complicated than ever before. Consumers expect shorter product life cycles with higher product variety, same- or next-day delivery, free shipping and an option to order online and pickup in-store.
Supply chain managers are feeling the pressure to add flexibility and agility to their network to meet these new customer expectations. The cost of not doing so is felt directly in the retailer’s pocket.
Sales are lost when supply chains cannot respond to consumers’ demand for more flexible shopping options.
There’s good news though! There are a handful of new ways to add flexibility to your supply chain that didn’t exist a few years ago. Technology and a shift toward systems thinking has helped make agile supply chain networks more achievable.
Here are four new ideas supply chain managers are using to add flexibility to their network:
1. Pop-up Fulfillment
Pop-up fulfillment adds complimentary fulfillment capacity for eCommerce during peak periods. Supply chain managers are using this as a seasonal solution. By getting products closer to their customers, companies are able to offer same- and next-day shipping. As well as cut transportation costs, which helps cover the expense of free shipping. Most importantly, it delights the customer with shorter lead times and makes the sale more profitable.
Pop-up fulfillment is a way for retailers to augment their supply chain without making long-term commitments or outlaying large amounts of capital. Retailers can pop-up capacity when and where they need it. And, new industry solutions are enabling them to make it happen very quickly.
In 2004, only 38% of Amazon’s fulfillment capacity was within 200 miles of a major metropolitan area. Today, 79% of its distribution centers are within 200 miles of a major metropolitan area.
Getting products closer to your customers is the name of the game and pop-up fulfillment is making it easier and more affordable to do it.
2. On-demand Storage
On-demand storage functions similar to pop-up fulfillment in that you can add capacity quickly without long-term contracts and service fees. This solution adds flexibility to the supply chain by allowing you to move slow or dead stock out of your prime distribution center positions and into a replenishment position in another warehouse.
Utilizing on-demand storage has helped supply chain managers free up much needed space in their most active distribution centers. Having extra storage capacity in a fulfillment or distribution center can relieve capacity constraints that hinder efficiency. Optimizing picking and shipping efficiency in a distribution/fulfillment center during peak is key to delivering on the customer promise.
Retailers are being forced to compete with Amazon’s delivery speed and that has put tremendous strain on traditional supply chains.
Before, it was possible to push 10K orders through one system in a day because it didn’t matter if you processed the order over three days. Today, “carrying a tail” isn’t an option, orders have to be dropped by noon and shipped the same day. On-demand storage can add the missing flexibility to your distribution center by freeing up just enough capacity to relieve the pressure.
3. On-demand Transportation
In short, we are talking about the Uberization of transportation to address last mile delivery. Last mile delivery has become more and more important as consumers expect in-store pickup and same day delivery. However, sending trucks several times a day to every store in big cities costs a lot of money and is complicated given unexpected disruptions. To resolve this issue, many companies are exploring options like Cargomatic or Convoy, which are technology companies that offer on-demand trucking services.
Cargomatic is working with companies like Williams-Sonoma, Perry Ellis and Bass Pro Shops, offering lower-priced local shipments. When a new shipment comes in, it’s broadcasted to Cargomatic’s network of truckers, along with the warehouse address and final destination. If the trucker is going that direction, he or she can select it in the app, and nab the job.
Like on-demand storage, on-demand transportation allows companies to add flexibility to their existing freight strategy by crowdsourcing their costly and disruptive last mile deliveries.
4. Pop-up Distribution
In many ways, retail store management is driving a need for more flexible supply chains as much as consumer behavior. Shorter product life cycles, higher store inventory turns and smaller back rooms in the retail front are dramatically increasing the frequency of stock replenishments. This is driving a need for more agile and dynamic inventory management to take strain off the distribution centers. Additionally, many retailers have adopted a dynamic inventory positioning model, reacting to in-season, regional and local demand patterns. Product gets re-routed from one region to the other based on near-real-time consumer purchasing data and demand patterns.
Many retailers are augmenting their static distribution center models in the US with additional pop-up distribution centers during peak season.
This more dynamic strategy allows them to achieve one-day transit times for delivery into their wholesale and retail channels, allowing store managers to react to consumer demands, keep high velocity items in stock and capitalize on holiday sales.
Just like pop-up fulfillment and on-demand storage, you can add capacity quickly without long-term contracts and service fees.
All these solutions are new in the last five years. Technology has been a key factor in enabling more flexible supply chains. As the technology grows, we can anticipate more interesting solutions coming out of the gate.