Supply Chain Brain: Making Supply Chains Smarter
From “farm-to-fork,” “biotin-to-beauty” or“cotton-to-clothes,”we depend on supply chains to transform raw ingredients and components into products, and then deliver what we want, when we want it.Supply chain “brains” in the form of technology software and hardware are becoming increasingly important to meet consumer demand and deliver the “perfect order.”
Every year, technology analyst firm Gartner recognizes its Top 25 Supply Chain companies that “best exemplify the demand-driven ideal for today's supply chain.” Past top 25 companies range fom McDonald's and Walmart to Johnson & Johnson and Unilever. The Gartner top 25 list provides best practices that can be emulated and over time, those practices have spread well beyond the list.
Business Process Management (BPM) technology helps knowledge workers make smarter decisions not just about physical flows, but also about the financial flows over the supply chain. In some instances, technology can be applied to replace humans in the supply chain and in others technology can be used to make the human element in the supply chain that much smarter.Both approaches help ensure products can continue to flow cost effectively to the customer point of sale and ultimately to the consumer.
For example, Revlon was struggling to keep up with the workload of its high volume retailer claims. The financial impact was significant with chargebacks amounting to 20 percent of gross revenues. Credit claims processors were overburdened and were often unable to review claims or contest them if appropriate. The document collection process by itself took 30 minutes on average per claim. After implementing its case management solution, Revlon reduced processing time by two-thirds, giving the company the opportunity to process all claims at a net reduction of employee time of over 50 percent.
Zappos is perhaps best known for their very cool customer service, but it is automation in their supply chain that helps them ensure they can deliver on their “wowful happiness” brand promise to the consumer.Zappos has implemented an advanced supply chain system in their warehouse operations from vendor Kiva Systems. At the risk of being called a supply chain geek -- you've got to check out these cool robot pickers!
As supply chain experts realize, a technology advantage in your warehouse gives you a cost advantage over your competitors, and also a speed advantage on the delivery side. This proved so important that ultimately Amazon, who acquired Zappos, also acquired Kiva.A telling stat: Using its non-Kiva-enabled order management processes, Zappos.com can fulfill an order in as little time as 48 minutes or as long as three and a half hours. With the Kiva system: 12 minutes, every time.
Supply Chain Heart: Focusing on the Customer
Companies like Zappos focus on the connection of its brand with the customer, and to do this means better understanding of buyer behavior and motivations. That means getting to the heart of not just what they are thinking but what they are feeling. And in turn, it means acting on what they learn from the customer, integrating sensing capability into the core of the experience and the supply chain.
Fast moving consumer goods and the big brand retailers who present them to the target customer are especially interested in developing their supply chain “heart.”A top company is distinguished by its ability to efficiently produce and deliver the items that are in highest demand by consumers, while developing loyalty and trust towards the brands.
By connecting to the customer desires, Walmart’s world leading supply chain not only means stores rarely run out of a product, but they rarely have to write off unsellable merchandise.Case in point is the cautionary tale about the effective use of customer behavior data.As the case study goes, customer data revealed that female shoppers wanted low prices on detergents, and they wanted detergents in large enough quantities that they didn’t have to buy a box more than once a month. But the packaging they wanted was boxes small enough to carry easilyto the car.Walmart integrated that consumer-focused information into their supply chain packaging and pricing. At the same time, a Walmart competitior stuck with a policy of selling huge boxes of detergents. On a unit-basis, theirboxes were priced about the same, but Walmart’s detergent sales quickly dwarfed the competitor.
Walmart has integrated this packaging approach throughout their supply chain, pressing suppliers to condense the same amount of product into smaller packages, driving increases in revenue per-square-foot over the competition. While suppliers may feel pressure from this approach, it is a strong example of ensuring the supply chain is connected to customer demand and aligned with buying behaviors.
Today’s customer-centricexperience model rewards those who make it simple and rewarding for the buyer. A "customer first" mentality has to prevail throughout the business including orchestrating the supply chain and presenting products across omnichannels -- from “brick and mortar” stores to the web to mobile apps.This will mean that the C-Suite will need to collaborate to be successful. The CIO will need to work with the Chief Marketing Officer, who increasingly owns the web experience and the customer data, and both will need the Chief Supply Chain Officer to be responsive in meeting customer demand.
Supply Chain Soul: Leading the Charge for Sustainability
Delivering for the customer can also serve a higher purpose, and when it does supply chains are showing us their “soul.”Staples, members of a Supply Chain Leaders council I supported a few years back, has focused on sustainability goals for their business and talks about what they are doing as Staples Soul.
Staples Soul recognizes the close connection between our success and our ability to make a positive impact on our customers, our associates and the planet. We believe Staples Soul helps to make us an employer and neighbor of choice, differentiates our brand and allows us to grow profitably and responsibly.”
For example, several years ago Staples first rolled out new packaging technology, entitled “Smart-size” packaging from Packsize, focused on delivery boxes that are custom fit to each order. The move was driven by online customer demands and customer requests. Staples is one of the largest e-commerce companies in the world, with more than half of the company’s revenue derived from e-commerce.
As Don Ralph, then head of supply chain for Staples, explained:
we had been working with our suppliers under the banner of sustainability and challenging them to reduce their packaging by about 30 percent for a multi-year period. We said we need to be doing the same thing, because customers were asking for it and it is the right thing to do.”
Benefits include 60 percent reduced air pillow use and 20 percent reduction of average cardboard box size, which Staples estimates is an annual carbon footprint reduction of 30,200 tons, or roughly 120,000 trees.
More shipments can fit on each line haul and more orders in each delivery truck, coupled with just-in-time packaging with Smart-size cutting costs and warehouse space from storing delivery boxes.”
Kimberly-Clark Corporation, recognized as one of the 2014 World’s Most Ethical Companies, have a strong focus on sustainability.For example, they havea plan to source 50 percent of wood fiber to alternative sources from traditional trees by 2025.They have already reached $100 million in sales of the Scott Naturals product line in just five years from launch, demonstrating the competitiveness of inserting recycled fiber into the supply chain.
As Greenbiz highlights in their STATE OF GREEN BUSINESS 2014 report, “The challenge for sustainable business is to identify growth models that result in reduced environmental impact.” Staples and Kimberly-Clark are proof points that a company can generate both business and environmental benefits by leading the way in sustainable business practices, with supply chain as foundational to these efforts.
I am continually fascinated by the impact supply chains can wield and how they affect our daily lives. The supply chain is central to how businesses organize suppliers and partners, serve customers, and indeed drive how entire industries are structured. In my view, it’s all about supply chains having brains, heart, and let’s not forget soul. Injecting brains into the supply chain helps companies drive speed and efficiency.Supply chains with heart can connect and strengthen the relationship of the business customer and the consumer. And, supply chains with soul are ultimately how we all win on this shared planet.
Title image by Marcin Balcerzak (Shutterstock)