Preparing Your Supply Chain for the Omni-Channel World (Part 3): Capturing and Reacting (in Nearly Real Time) to Moments of Truth

No matter what your business model is — whether you run the largest car manufacturing company in the world or operate a commercial website on eBay — orders need to be satisfied to receive payment and remain in business. The key to operating a successful business is the profitable fulfillment of its customer orders.

As we described in Part 2 of this blog series, companies today face a new level of omni-channel complexity. They need more advanced order fulfillment systems that will enable them to micro-manage both their profitability and the experience of their customers. Technology is now available that enables retailers and suppliers to balance demand and supply in real time, leveraging in-memory simulations that take into account various near-term demand and supply scenarios, so that they can fulfill each order in a profitable way.

Without such scenario planning capabilities, it becomes impossible to give customers the expected customer experience they desire — and maintain the company’s profit margins. In order to build the necessary agility and control over both the customer experience and associated profitability, the following processes need to be re-invented and integrated differently:

  • Demand Planning
  • Fulfillment
  • Transportation
  • Warehousing
  • Store Operations and Labor Management
  • Order Management

To achieve the necessary agility to support an omni-channel operation, companies need to adopt a single, enterprise-wide demand-shaping forecast that can be seamlessly shared across all fulfillment functions. This ensures that the necessary infrastructure is in place and any fulfillment capacity bottlenecks can be identified and proactively addressed.

In the omni-channel world, intelligent fulfillment is about reacting to moments of truth (MOT), which occur when consumers interact with a brand, product or service. In the previous blog post, we discussed two MOTs: when a consumer decides to buy a particular brand, product or service, and then the experience (good or bad) that the consumer has after the purchase of a particular brand, product or service. Recently, experts have introduced two additional MOTs: the interactions a consumer has with a brand, product or service prior to purchase that’s impersonal (as a result of research, or marketing/advertising exposure) or personal (information from emails or social media followers).

Together, these four MOTs play a critical role in first shaping demand, then allowing the retailer or supplier to sense the demand response and adequately react to it. So, how does this new context change the nature of fulfillment for companies?

Figure 1 shows how various new data sources can enrich the demand-shaping effort. Through store-level, point-of-sale (POS) data, transactional logs and loyalty card information, budgets and financial projections can be realigned in real time with business opportunities.

Additionally, category, shelf-space utilization, product launches or promotion efficiency can be assessed in near real time, and fulfillment strategies adjusted accordingly. In the best cases, sufficient data elements are available in the data marts to leverage predictive analytics and forecast the potential success of a product launch, promotion campaign or pricing strategy. The potential lift, as well as the correlation with causal factors, can be established to refine the initial budgets and forecasts.

 

Figure 1 – Using big data and predictive analytics to improve demand sensing and shaping

However, it is not only the demand planning side that requires improvements in an omni-channel environment. On the supply planning side, various improvements are required as well:

  1. The network model and number of stocking points to consider for replenishing inventory have increased exponentially. As companies consider more ship-to locations (local stores, shipment drop points, home delivery, etc.), additional stocking points and inventory buffers will need to be included in the distribution planning, warehousing and transportation management processes.

It’s critical for companies to have visibility into all of these stocking points, automated inventory allocation based on predefined rules, and dynamic warehousing and transport optimization in order to constantly realign the warehouse and transport orders and available inventory.

  1. Simulation of supply and transport scenarios need to be built into the daily planning operations to evaluate the least costly supply options, making the best use of available inventory and production capacity.

Whereas in the past transportation and warehouse routines were rather static, the dynamic nature of the omni-channel network pushes many logistics operations to re-evaluate the best approach through simulations on a very regular basis. Event-based replanning is now a matter of life and death, in terms of profitability, thanks to cutthroat competition from companies like Amazon.

  1. In the most extreme cases, the network itself must be reassessed more regularly to account for a fast-changing customer base, as demand, ordering behavior and geographic coverage are evolving quickly and dynamically.

As part of this process, a supply planning control tower is required to connect the consumer to the manufacturing plant and provide visibility into all material flows across the the grid-based supply chain, including the manufacturing distribution center (DC) and the retail DC. This provides companies with immediate visibility into changes, calculated options, proactive recommendations, and systematic responses.

The Excel spreadsheets, and downloads from your enterprise resource planning solutions, do not have the intelligent fulfillment capabilities you need to maintain consistent service and a superior customer experience for your client base. As shown in Figure 2, capabilities for demand planning, supply planning, sequencing, sales and operations planning, order promising, transportation management and warehouse management must now provide each other with instantaneous feedback to enable rapid replanning and what-if scenario simulation.

 

Figure 2 – Establishing an accelerated planning and execution platform

It is through the establishment of an accelerated planning and execution platform that companies will be able to capture and react (in nearly real time) to MOTs – and drive a better, and more profitable, customer experience in today’s omni-channel world.

In the next blog post, we’ll discuss the advantage of cloud technology when managing your omni-channel supply chain capabilities.

To view previous posts in this blog series, visit:

Part 1: Why We Need New and Better Technology Solutions to Address Today’s Supply Chain Challenges

Part 2: The Death of the Linear Supply Chain

 

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