The traditional supply chain model has been transformed under increasing customer influence.
Visibility and traceability are no longer buzzwords and it is interesting to consider the reasons why this change has occurred. Gerrit-Jan Steenbergen, VP of Zetes’ 3i Competence & Innovation Centre, gives his insights into the latest developments within the supply chain and outlines how companies can meet the new challenges.
Together with transportation volumes, improved availability of online networks is contributing to traceability and visibility requirements. Another trend is the changing expectation for traceability among consumers who want information on the origin of their products, constituent raw materials and product components. Environmental concerns have also influenced companies to optimise their use of resources in response to social expectations. For suppliers, there is a demand for traceability to drive logistics efficiency, quality and visibility. The availability of ‘always on-line’ information creates an early warning system to reduce out-of-stocks, shrinkage or delivery problems and implement more targeted recalls.
Overall, the emphasis on improving the customer experience using technology whilst seeking to cut operational costs is a trend across Europe. Many retailers have already invested in self-service scanning, self-checkout, smart shelf labeling or queue busting systems.
From Supply Chain to Demand Pull Network
Increasing customer influence has transformed the traditional supply chain (source-make-deliver-buy) model from a push channel to a pull channel with the customer firmly in control.
This re-emphasises the right product, right place, right time, right price mix. Balance requires a dynamic interaction between information and physical flows to ensure customer demands are met with the right amount of stock. Decisions over which technology to use e.g. RFID, traditional barcodes or imaging, are mostly driven by a cost:benefit analysis and ease of integration to existing systems.
"Increasing customer influence has transformed the traditional supply chain (source-make-deliver-buy) model from a push channel to a pull channel with the customer firmly in control."
The examples below highlight why visibility is important for a networked supply chain:
No longer can goods only be returned to the store of purchase. Now customers can choose to buy online and collect from a local store, or buy from one store, return to another or a repair centre or the web.
This can be an expensive activity and will not necessarily yield the corresponding value invested as data accuracy remains the biggest issue. As an alternative to planning from forecasts, ‘visible’ networks can be built based on the ability to supply according to previous activity - creating a 100% demand driven supply network.
For example, Vendor Managed Inventory systems (VMIs) are straightforward to introduce whereby the vendor is completely responsible for the product, has direct access to the retailer’s systems to monitor sales or stock levels and then creates replenishment orders based on demand, stock levels and existing inbound purchase orders. Because the vendor is provided with direct access to real time data generated via picking or replenishment requests, which are in turn triggered by store sales, this can be a more accurate method. Working in this way can reduce inventory levels and eliminate out of stocks, significantly reducing costs for the retailer. In addition, it offers additional benefits to both stakeholders because the retailer does not need to allocate resources to manage merchandise as it is handled by the vendor, who in turn, benefits from having direct access to valuable information which allows them to smooth their own supply chain, thus further reducing costs.
Manufacturer driven vs. customer driven promotions
Many manufacturers are increasingly operating retailer and customer led promotions in which the promotion is tailored according to the preferences or shopping habits of the local clientele. And in return for co-operating and supplying the manufacturer with sales data, the retailer benefits with discounted stock prices. Alternatively, manufacturer and retailer work in partnership based on anticipated demand. So for example, after Kate Middleton wore a navy dress as her engagement to Prince William was announced, clothing suppliers to Tesco were fast to react with a near identical garment available in their stores within days.
Focusing on adding value to customers vs. straight cost-reduction
Cutting costs used to be the motivation behind investment in the supply chain whereas in the future, the emphasis needs to be on delivering added value to specific customer groups. For instance, retailers are starting to understand that customers buying premium products will value traceability information verifying the origin and quality of their goods above other customers just looking for the lowest cost products.
Building ‘always on-line’ visible supply networks
Traditional barcodes are still used for identification of products but slowly, interest in serialised packaging is creating applications for the 2D barcode. To reduce time to market, many retailers in Europe have implemented voice picking and are expanding their use of voice directed working in the warehouse. And smaller, more specialized retailers are following suit, but seeking ‘out of the-box’ voice solutions that are quick to implement and show an investment payback.
Unlike voice, RFID is still not a mass-market technology and among luxury retailers, is mainly used for tracking returnable assets or to prevent counterfeiting. Internet shopping has brought increased demand for proof of delivery systems, and now, a newer market for ‘payment on delivery’ alternatives. Some retailers have also created innovative applications for RFID in the store - Prada for instance has created an RFID based personal shopping experience in which customers in the fitting rooms can see the garments they have selected being modeled on the catwalk.
"Internet shopping has brought increased demand for proof of delivery systems."
In the end, picking a technology is the easy part. More challenging is enabling the retailers, suppliers and other network members to use technology to operate effective supply chain networks.
Following a rebranding exercise, the Zetes’ logistics execution solution using voice technology is now called ZetesMedea Voice (formerly 3i Voice). All features and functionalities remain valid.