12 Ways to Increase Supply Chain Velocity
Thanks to the Amazon effect, consumers expect the world—and they want it fast. Here's advice on how to speed things up—from the way you design your footprint to how you execute the final mile.
As Amazon and other retail leaders continue to disrupt established business models, supply chain velocity is increasingly crucial. "Speed is the number-one thing that this new e-commerce demand in the marketplace is driving," says Kristi Montgomery, vice president, innovation, research, and development at third-party logistics (3PL) provider Kenco, in Chattanooga.
It's not only e-commerce merchants—or retailers in general—who feel what is known as the Amazon effect. "Business-to-business (B2B) companies expect the same level of customer service as consumers," says Salim Shaikh, senior director, global industry strategy at JDA Software in Scottsdale, Arizona. "Increasingly, B2B companies expect more speed, more responsiveness, more automation, and better customer service."
From upstream planning to final-mile delivery, companies use a variety of strategies to meet the demand for near-instant gratification. Here are one dozen things your company can do to get your supply chain running faster.
1. Move Closer To Customers
"Our customers are changing their distribution center (DC) footprint and going to hundreds of smaller DCs around the country," says Montgomery. The goal is to shorten the last mile to enable next-day or two-day delivery.
Beyond Kenco's own customer base, some of the largest U.S. retailers are redesigning their distribution networks to speed the flow. Montgomery points to Home Depot, which announced in June 2018 that over the next five years it will add 170 new DCs in the United States, at a cost of $1.2 billion. One goal of this move is to provide next-day or same-day delivery of commonly ordered items.
2. Find A Partner To Extend Your Footprint
Not every company can operate enough DCs to get within fast shipping range of most customers. But a logistics partner can give even a small merchant that kind of reach.
That's the idea behind ShipBob, a Chicago-based 3PL that serves small and mid-sized e-commerce companies. ShipBob holds inventory for retailers in facilities throughout the United States. Receiving orders from the retailer's e-commerce system, ShipBob picks and packs product in the warehouse nearest the consumer, providing next-day or two-day delivery via UPS, the U.S. Postal Service, or DHL.
"ShipBob is Amazon Prime for the rest of the e-commerce world," says Dhruv Saxena, the company's CEO.
Bakblade, a Chicago-based firm whose flagship product is a back and body groomer for men, keeps inventory in all of ShipBob's warehouses. "We cover so much ground across the country, and California is just as strong as New York. So we spread the inventory evenly," says Matt Dryfhout, Bakblade's founder and a managing partner. "That helps us keep competitive with two-day free shipping that everybody expects."
ShipBob also helps to maintain velocity through its data links with Bakblade's overseas manufacturer and its freight forwarder. "The communication from our freight forwarder until product arrives at ShipBob is key," Dryfhout says.
3. Employ Data On Hand, For Better Planning
"E-commerce is a lot of math and science," says Saxena. Because e-commerce software tracks every transaction between merchant and customer, this retail channel gives companies a wealth of data that they can use to improve supply chain speed—for example, by determining how to balance inventory among different DCs.
"Companies can capture data not only on customer behavior, but also on inventory turns and inventory movement, to help make good decisions," Saxena says. "They have the same available data that Walmart and Amazon have for themselves."
ShipBob's software does those calculations on behalf of its customers, forecasting what quantities of which inventory the merchant should stock in ShipBob's various fulfillment centers, based on customer order patterns, including seasonal fluctuations. The forecasts let retailers fill orders quickly without resorting to high-cost expedited services.
4. Invest In Visibility
In 2017 and 2018, Kenco surveyed supply chain leaders to learn how they approach innovation. One question the survey explored is how companies set priorities for their investments. Visibility tools emerged as the number-one target for investment.
Eighty-three percent of respondents to the 2017 survey said they hoped to invest in technologies that influence supply chain visibility. In 2018, the number was 85 percent.
Visibility provides several benefits, including the ability to keep customers up to date on the status of their orders. It helps to boost supply chain velocity by giving a company the information it needs to effectively expand its distribution footprint.
"To have 170 new distribution centers across the country and be able to get product to 90 percent of the population in one day, we have to know where all that inventory is and what it is," Montgomery says. With that knowledge, when orders come in, the right product will be available to ship from the right DC.
5. Experiment With IoT
In Kenco's recent survey, 46 percent of respondents say they plan to invest in sensors and the Internet of Things (IoT). These technologies provide the raw data that fuels visibility tools. "IoT can enable inventory tracking and segmentation, as well as geographical placement," Montgomery says.
But as companies implement new data collection technologies, they should start with small proof-of-concept installations, Montgomery cautions. "Everything we do for customers is a pilot," she says. "We take a technology, put it into a small portion of the supply chain, and have very strong metrics around how we will measure the success." A 90-day pilot requires only a small investment and provides valuable information about whether the company should roll out the technology further, she says.
6. Use Predictive Analytics To Sense Potential Disruptions
Collect data from external sources, such as news and weather reports, and social media, and then run that data through advanced analytics, recommends Shaikh. The results may alert you in advance about upcoming events that could disrupt the supply chain. Disruptions might include everything from bad weather to port congestion to an industry strike.
"Predictive analytics includes leveraging proactive risk mitigation plans and what-if scenarios and simulations to predict a disruption before it actually happens," says Shaikh. For example, history might show that when the Port of Long Beach becomes congested, or when a hurricane closes the Port of Wilmington in North Carolina, your shipment is likely to be delayed by one week. "Because you can predict that, you can better plan for that disruption," he says. Good contingency plans help to maintain the speedy flow of goods.
7. Deploy Machine Learning And Automation To Circumvent Disruptions
As a company collects data on disruptions and their consequences, smart IT systems can learn from the experience and develop plans to mitigate future disruptions. "So as a company grows, there isn't a need to add more planners," Shaikh says. "The planners can leverage automation and machine learning to do the predictive analytics. Then planners can use their time for more value-added activities, such as supply chain collaboration with suppliers or customers."
The ultimate goal is an autonomous, self-learning supply chain that not only strategizes to avoid disruptions, but puts those strategies into action. "Determine if you can automate decision making through artificial intelligence (AI) and machine learning, so that you don't just throw inventory, planners, and expedited freight at the problem," Shaikh says.
8. Automate Your Warehouse
From sorters and conveyors to robots, companies have embraced automation to speed up a range of distribution or fulfillment center processes. One new vendor in the warehouse automation field is GreyOrange, a Singapore-based company that plans to establish U.S. headquarters in Atlanta.
GreyOrange offers three main solutions: the Butler, an autonomous robot that transports mobile storage units to human operators for order picking and replenishment; the Butler PickPal, a robot that picks items from a mobile storage unit into boxes or bags for shipping; and the Sorter, a high-speed sortation system.
"GreyMatter, our software platform, powers both Butler solutions using AI algorithms and machine learning to optimize path planning, maximize storage, streamline zoning, improve space utilization, and accelerate order fulfillment," says Samay Kohli, co-founder and CEO of GreyOrange.
The Butler system helped a home furnishing chain in Japan quadruple the throughput in its warehouse. "In Latin America, one client was able to fulfill 50 percent more orders while reducing operational expenses significantly," Kohli says.
9. Expand Capacity With Autonomous Vehicles
The driver shortage is a well-known pain point for companies that need to move product. Demand for drivers outpaces supply not only in long-distance transportation, but also in the final mile, says Adriel Lubarsky, director of business development at UDelv, a Burlingame, California, firm that provides autonomous vehicles for local delivery.
UDelv currently operates in parts of the San Francisco Bay area, serving a variety of retailers, including a grocery store, a florist, restaurants, an auto parts company, and an office supply company. Each item on the vehicle rides in a separate compartment, which opens automatically when the recipient—summoned by a text message—comes to the curb or parking lot to receive the delivery.
Today, each UDelv vehicle has a safety driver onboard, ready to grab the wheel if the need arises. But as the intelligent vehicles learn more about the roadways they travel, drivers will be able to stay behind, Lubarsky says.
For a company that can't make all its deliveries fast enough because it doesn't have enough drivers to handle the daily volume, autonomous vehicles like UDelv's can supplement the regular fleet. "A company can always have a couple more cars that are there when they need them, and that they can rent out when they don't," Lubarsky says.
10. Employ Digital Technology To Manage Last-mile Delivery For Large Items
When a customer orders a large item, such as a couch or a home theater system, the ensuing delivery is especially complex. Any small hiccup—say, a miscommunicated appointment time or heavy traffic that delays the driver—may force carrier and customer to reschedule, slowing the delivery and marring the customer's experience.
A solution such as the new Active Delivery Management (ADM) from CommerceHub in Albany, can improve crucial communications, making sure large items arrive as scheduled and customers are pleased with the delivery.
"We notify the customer when the delivery agent will arrive, and if there are any revisions to the delivery," says Mike Amend, COO at CommerceHub. "We also allow the customer to work directly with the platform," he adds.
A customer who is running late and can't meet the carrier can use the platform to reschedule. "ADM stitches together delivery agents and customers to create a seamless experience, so customers can get their items on time," Amend says.
11. Tap Local Couriers
A retailer doesn't have to restrict same-day deliveries only to customers located very close to its DC or store. A local courier company may cover a surprisingly wide area. "You're not constrained to offering same-day delivery from Chicago only to Chicago," says Saxena, by way of example. "If your 3PL has the technology and contracts with local last-mile providers, they can offer same-day delivery to a much wider radius, all the way into parts of Indiana, Ohio, and Michigan."
12. Join A Network To Find Capacity Fast
Say you need to make a white-glove delivery tomorrow in Lake Charles, Louisiana. You have a preferred last-mile carrier in that region, but that carrier doesn't have space available tomorrow on a truck headed anywhere near your consumer. What to do?
"Using a single agent, or a few agents, will not give you the sophistication needed to meet customers' growing expectations about speed, cost, service, and delivery options," says Amend. With a platform such as ADM, you get access to a wide network of last-mile carriers, including multiple local carriers in markets where a national retailer might not know the territory. "That opens various opportunities related to capacity or different agents that can deliver faster," he says.
No one is sure what the next big disruption in e-commerce and omnichannel fulfillment will be. Four-hour delivery? Via drone? Whatever the big innovators devise, it will force everyone else to get even more creative about speeding up the supply chain, from way upstream to the final mile.