Technology for SMBs: No Small Matter
Supply chain technology isn’t just for large companies. It’s possible — and necessary — for businesses to invest in new innovations, no matter what their headcount.
It was not long ago when supply chain operations were thought of as a backroom affair, running on paper charts and fax machines. But after nearly two years in the spotlight, the sector has attracted attention—and resources—at new levels from Silicon Valley.
Funding for supply chain technology hit $11.3 billion in 2021, reports Crunchbase News. That’s nearly double the dollar amount supplied in 2020, and it dwarfs the previous record of $9.1 billion in 2019. Advanced technologies such as big data, management systems, and artificial intelligence have become integral to supply chain operations.
Technology to manage the supply chain is not just for the Fortune 500, either. Supply chain disruptions are the second-largest concern for small and mid-sized businesses, according to a Chamber of Commerce report released in March 2022. Sixty-five percent of companies reported that it is difficult to manage pandemic-related shocks, 66% are impacted by labor shortages, and 59% of businesses struggle to keep up with customer demand.
To address these challenges, an influx of technology has become accessible to small and mid-sized businesses.
“New startups are lowering the barrier for small and mid-sized businesses to innovate their supply chains,” says Nick Vyas, associate professor of clinical data sciences and operations at the University of California Marshall School of Business. “They are allowing much greater access to resources that these companies didn’t have before.”
Good News/Bad News
The good news for small e-commerce merchants is that, in 2022, sales channels and marketing opportunities abound. Online retailers can advertise on any number of social media platforms, and sell through Amazon, Walmart, Macy’s, and other channels.
The bad news: actually getting those products to customers has become unruly and expensive. Restrictions on manufacturing activity in China culminated in erratic production and shipping schedules. As a result, it has become increasingly difficult for companies to get inventory to U.S. shores.
“Moving a container from China to the United States might traditionally cost around $2,000,” says Dhruv Saxena, co-founder and CEO of ShipBob, an omnifulfillment platform headquartered in Chicago. “Since 2020, that cost has skyrocketed to $20,000. As a result, margins are going to take a massive hit.”
It’s a tough environment for companies of any size, but these logistics snags create a unique set of challenges for smaller retailers.
“Small business owners don’t do large-scale manufacturing, which means they are rarely able to fill up an entire container coming out of China,” Saxena says. “They always have to find brokers or fight for space in an existing container to ship their inventory.”
In 2021, ShipBob introduced FreightBob, a managed freight and inventory distribution program, to help its 7,000-plus less-than-containerload clients secure shipping capacity.
“Because we have so many small merchants, we are able to pull all their inventory into one container,” says Saxena. “Because the entire container is reserved for ShipBob sellers, it doesn’t need to be opened once it reaches a port. It can get pulled straight onto a truck, and bypass some of the logjam.”
SharkBanz, a provider of shark deterrent technology, employed FreightBob to move its inventory out of China more quickly in anticipation of Black Friday/Cyber Monday in 2021. Utilizing FreightBob, SharkBanz experienced 50% faster shipping from Hong Kong to Los Angeles.
Bringing Transparency to Transportation Rates
The carrier market to move freight inbound hasn’t been much easier to navigate. Both imports and exports in the United States hit record highs in 2021, according to the Department of Commerce.
Meanwhile, an unending stream of external factors, such as the pandemic and low levels of labor force participation, depleted trucking capacity last year. According to Averitt Express’s 2021 State of North American Supply Chain Survey, 37% of shippers had trouble securing capacity in 2021 and 76% of respondents expected to ship more freight in 2022.
Tight trucking conditions create a difficult negotiation climate and limit carrier accessibility, especially for smaller shippers, says Josh Dunham, CEO and co-founder of Reveel, a shipping intelligence platform headquartered in Irvine, California.
For example, most carriers require a minimum number of shipments before they can assign a dedicated sales representative to a customer. Smaller businesses often can’t meet that threshold, which means potentially missing out on discounts and optimal rates.
Meanwhile, consumers’ appetite for fast, free shipping shows no signs of abating. A 2021 Inmar Intelligence survey finds that 79% of consumers expect free shipping on apparel and home goods, and nearly 90% expect their purchases to arrive within five to seven days.
“There’s a direct correlation between lower shipping costs and higher sales, especially in the commodity space,” Dunham says. “Years ago, lower shipping costs were a ‘nice to have.’ Now they almost determine whether a company will survive as a business in the next five to 10 years.”
Such was the case with eFavormart. The wedding favor distributor, which began in 1994 with just two employees, relied on free shipping and competitive prices to maintain a market advantage. Using data compiled and displayed in Reveel’s dashboard, eFavormart cut shipping expenses by 26%. That enabled the company to lower its free shipping threshold and achieve 30% higher sales within one year.
Bring On the Robots
As companies adapt to the post-pandemic world, the twin difficulties of staffing shortages and evolving customer demand have persisted. Respondents to a June 2022 survey conducted by Zebra Technologies identify faster delivery expectations as a top challenge. Meanwhile, 61% of managers report a need to increase their workforce, but struggle to recruit and retain enough labor.
“Everyone is trying to keep up a certain level of service,” says Zach Gomez, senior director of global logistics business at Realtime Robotics in Boston. “Small businesses don’t have the flexibility of Walmart or Target, and it’s hitting them harder.”
Automation is starting to level the playing field, Gomez explains. Access to technologies such as autonomous mobile robots (AMRs) used to be limited to large corporations with the budget for a research department and multiple engineers on staff. But over the past decade, new innovations have made these tools accessible to smaller shippers.
Meanwhile, the productivity gains enabled by automation help small and mid-sized businesses stay competitive with larger companies.
Realtime Robotics technology, for example, helps companies palletize more efficiently. The software automates robotic programming, enabling multiple robot arms to build pallets faster and with less human involvement at a warehouse or e-commerce facility.
The 2021 MHI Annual Industry Report found that 53% of supply chain professionals are increasing their investment in automation. Thirty-eight percent of survey respondents said that automation and robotics are currently in use at their company, and another 38% plan to adopt these technologies within five years.
“It’s not a luxury to automate, it’s a necessity at this point,” Gomez says.
3-D Printing: A DIY Job
Manufacturers have always had to replace spare parts. Usually, that entails outsourcing production to another company. But lead times have stretched over the past two years, thanks to materials shortages, shipping delays, and rising costs.
Those challenges are culminating in more frequent production delays.
“When you overlay a pandemic, a global supply chain crisis, and a shortage of business-critical items, you end up with a value chain that was once right-sized, but is now completely turned on its head,” says Daniel Lazier, product marketing manager at Markforged, a 3-D printing provider based in Watertown, Massachusetts. “As a result, the process to get from raw materials to finished goods and into customers’ hands no longer works predictably.”
Enter 3-D printing. At Markforged, printers weave continuous strands of carbon fiber into a printed part, resulting in an object that can withstand the same heat and pressure as 6061 aluminum. Manufacturers can use 3-D printing to make component parts in-house to bypass production delays.
“3-D printing opens up a world of possibilities that was not accessible before,” notes Lazier. “It gives businesses a buffer against uncertainty with a system that slashes lead time from two weeks to one day, at a fraction of the cost.”
3-D printing can produce objects ranging from repair parts to airplane cockpit equipment. FormLabs, a 3-D printing operation based in Somerville, Massachusetts, uses a process called selective laser sintering, in which a laser melts powdered plastic materials such as nylon or polystyrene into a final product.
Partial Hands Solutions, a producer of prosthetic equipment, uses FormLabs printers to make prosthetic parts for veterans and amputees.
Smoothing Out Inventory
Businesses of all sizes got a crash course in selling through new channels after the pandemic struck. E-commerce sales rose by 32.4% annually in 2020, and then by another 14.2% in 2021, according to the U.S. Department of Commerce.
The transition to online selling had its difficulties, but the real challenge came when merchants had to adapt to multi-channel sales.
“E-commerce worked really well for millions of businesses,” says Doug LaBahn, chief marketing officer at Cin7, an omnichannel inventory management system provider. “But once your store reopens, your cash register can’t tell you how much merchandise you have in the store, much less what’s available online.”
The lack of inventory visibility within different channels can cause multiple problems for a business, LaBahn adds. Think about selling the same item twice or shipping out incorrect orders. He recommends a cloud-based inventory management solution to reconcile orders from different sales modes.
Order forecasting is one example. Say a business receives a large holiday season order from a major retailer. The company would have to manage—and pay for—the order, sometimes months before seeing any sales revenue. That means ensuring that the order is correct and arrives on time, and having the appropriate cash flow to keep the rest of the business running.
Cin7’s inventory forecasting helps companies anticipate which items will be popular, how much product would sell at a profit, and what it would cost to replenish the storeroom during a busy quarter.
Companies that took advantage of modern inventory management technology were 74% more likely to accelerate their sales growth following the pandemic, according to Cin7’s 2021 Inventory and Order Management Trends report.
London-based Brompton implemented Cin7’s order management tool when demand for its foldable bicycles spiked. Using Cin7, Brompton manages sales across seven different channels, including a brick-and-mortar store that recently opened in the United States.
Keeping An Eye On Operations
Forrester Research predicted in 2018 that inventory and supply chain management investment in Internet of Things, or IoT technology, would grow 20.2% between 2017 and 2023.
The use of technology to track assets has historically been associated with large companies. For example, international shipping giant Hapag-Lloyd announced in April 2022 that it would equip its entire fleet with GPS-enabled and temperature-monitoring sensors by 2023.
But IoT technology is steadily becoming more accessible to smaller businesses, too. Much of that has to do with cost. The price of an IoT sensor, for instance, fell from $1.30 per unit in 2004 to 44 cents in 2018, according to Microsoft’s 2019 Manufacturing Trends report.
Meanwhile, IoT uses abound. Sensors give feedback, letting shippers know where their raw materials or finished goods are in their supply chain.
Beyond that, IoT provides a wealth of data that can tell a business everything from whether it has enough raw materials to signaling that a piece of equipment needs to be replaced.
“What companies can measure, they can optimize,” says Steve Higgins, founder and president of MobileWare, an IoT connectivity provider based in Glendale, Colorado. “They can see all these different data points coming in and run algorithms that show what actions to take to save on production costs by pulling all of this data together.”
Say a company wants to tackle rising fuel prices. IoT sensors could provide feedback on fuel wasting activity, such as excessive idling.
GeoTab, a telematics provider with offices in Las Vegas, offers vehicle tracking devices that monitor a driver’s route, speed, and stop times. GeoTab’s telematics system helped Richelieu Hardware’s drivers find delivery locations and cut the time spent at each stop, increasing the number of deliveries that could be made per week.
Going forward, fostering agile and responsive supply chains will require businesses of any size to build a “robust digital backbone,” notes a KPMG report. The pandemic accelerated the adoption of technology, and consumer preferences for a fast, seamless, and digital experience have evolved accordingly.
Regardless of size or maturity, KPMG suggests that businesses embrace innovations that will automate low-value tasks, assist in routine activities, and collect data to inform strategic decision making. Businesses must enable a quick response to the next disruption.
For small and large companies alike, there’s no turning back now.
Pulling It All Together
Sometimes pulling everything together can be the hardest part of supply chain management. Supply chain has always been complex, but over the past two years, it has gotten harder to rely on any one partner for sourcing, manufacturing, or transportation, says John Rattay, chief commercial officer at Redwood Logistics, a third-party logistics provider based in Chicago.
At the same time, shippers are managing a slew of applications data sources, and visibility platforms. It’s a lot to juggle.
Redwood Logistics offers a logistics-platform-as-a-service, or LPaaS. This service utilizes an open platform that connects a shipper’s entire logistics operation with its technical applications.
A sub-feature of LPaaS is an integration-platform-as-a-service (iPaaS), called RedwoodConnect. As the name might imply, RedwoodConnect enables shippers to drag and drop all applications and data sources onto a single dashboard.
ASPEQ Heating Group, a provider of commercial and industrial heating products, uses RedwoodConnect to improve visibility into its shipments. As a producer of oversize, uniquely shaped equipment, ASPEQ needs a process to streamline booking while also getting insights into freight spend.
RedwoodConnect provided ASPEQ with LTL procurement data, brokerage information, cargo claims, and TMS insights. Having its data consolidated into one platform helped ASPEQ identify savings opportunities and reduce LTL costs by 10%.