Omnichannel, with e-commerce,
is cascading across worldwide, affecting how retailers and manufacturers
sell. Omnichannel is selling
duality. In turn, it requires supply
chain duality. Online selling success is
about meeting—and exceeding—customer expectations. It is driven by supply chain management. The one-size-fits-all supply chain cannot
efficiently handle both store/brick retail or plant manufacturing and
online/click sales. It is central to the
global supply chain revolution.
All these elevate the need for
a comprehensive total supply chain approach that reduces costs and working
capital investment while improving service and market positioning, including
omnichannel. This is transformation.
Manufacturers and retailers
need a supply chain strategy that recognizes the differing requirements of factory/store
and e-commerce. The strategy must work
at the corporate level, at the division/region level, and at the local level. It should integrate these levels. The new supply chain must have strong
technology and process capabilities as essential foundation elements.
Toward that end, the
overriding question is--What
is the goal?
Ø Goals and objectives on optimizing
supply chains centered—first—around:
o Cost reductions
o Greater visibility
o Increased buying leverage
o Better efficiency
o Improved control
o Leaner inventory and increased agility
with time compression
o Reduced capital exposure with
extending inventory (also called, being inventory rich)
o Strong omnichannel capabilities
driven by supply chain management
o Better service / Competitive
advantage
Ø Recognizing issues to supply chain
optimizing execution:
o Lack of clarity on the length and
breadth of the supply chain. This
includes that supply chains are not linear.
o Infighting among divisions and
stakeholders
o System or process limitations
o Agility of demand and supply
functions to deal with moving targets
o Lack of holistic visibility, ownership,
and influence
Ø To support the change, this deck which should help to
ensure—
o
Parties are clear
on the areas within project/transform scope and outside of scope
o
There is
consistency in the way the project is described
o
The key
fundamental questions are asked and answered
o
Stakeholder goals
are captured and built into the program/project.
There
are three parts to supply chains—the Upstream, the Mid-Stream, and the
Downstream. The three parts are interrelated
and integrated.
o
Stakeholders—sourcing,
buyers, procurement, suppliers, manufacturers, logistics, planners, finance,
risk marketing, sales.
o
Example
considerations—Vendor Managed Inventory, lean as to number of suppliers, switch
to near and off shore approaches, tradeoffs for lead time vs cost, revise
buying terms, create upstream consolidation hubs, align buying volumes to
optimal shipping modes, evaluate direct to store/market options, implement
upstream Value-Added Services and Store Ready processes, centralized demand
planning and transport functions, adapt omnichannel program.
o
Targets—reduced
costs, increased visibility and control, leaner mid and downstream supply
chains, ability to re-route/adjust to match demand, duplication, and cost avoidance.
o
Impact—Highest
impact on supply chain cost, requires strong systems and supplier coordination
possibly via a Control Tower type of solution.
Ø Key points:
o
Supply
chain success begins with the Upstream supply chain. Problems here create exponential problems in
the Mid-Stream and especially the Downstream segments.
o
Retail
supply chains, especially with omnichannel, are about "pull", not
push, product through the supply chain.
The pull demand makes supply chain integration and the Upstream supply
chain more important.
o
The
majority of supply chain cost is determined by the efficiency of the Upstream
processes and how the Stakeholders interact.
o
A
focus on this area typically yields greater results and have a positive impact
on both Mid-Stream and Downstream activities and costs.
o
Upstream
optimization requires a holistic approach to ensure that the concerns and needs
of the respective stakeholders are recognized and addressed.
o
It
is still possible to break out specific areas of the Upstream supply chain and
tackle these for quick wins, such as freight consolidation.
2) Mid-Stream Scope—Areas of Consideration:
o
Stakeholders—Marketing,
Sales, Logistics, Planners, Finance, Risk.
o
Example
considerations—Review inventory holding points vs flow through or direct to market
solutions, optimize SKU range, create internal processes that allow for
omnichannel prioritization without bin/location duplication, increase level of
store/range packs at POS, allow for rounding of demand to optimize four wall
activities, sell through vs returns study, invest in technology and
mechanization to reduce touch points.
o
Targets—Reduced
costs, increased visibility and control, leaner inventory and associated
capital, ability to re-route/adjust to match demand, reduced investment in
infrastructure and assets, higher velocity throughput.
o
Impact—Reduction
in dormant inventory and capital tied up in inventory, assets, and
infrastructure; higher service levels to demand points, reduced handling points
and capability to expand the range/handle seasonal fluctuations without adding
infrastructure.
Ø Key points:
o
The majority of
static dwell time is linked to Mid-Stream processes and the ability to flush
inventory through the system to demand points.
o
Focus on this
area will typically yield improved performance and less obsolescence, reduce
manpower and inventory (capital) costs as processes change to suit the upstream
improvements.
o
Mid-Stream
optimization requires a process driven approach to ensure that the concerns and
needs of the demand partners are recognized and addressed.
o
Mid-Stream change
management can be approached on a site, activity, or brand level and can be
actioned independently or in parallel to up and downstream activity.
3) Downstream—Areas of Consideration:
o
Stakeholders—Buyers,
Procurement, Logistics, Planners, Finance, Risk, Marketing, Sales, Real Estate
o
Example
Considerations—Creation of "store ready" or "store
friendly" configuration packs in Upstream or Mid-Stream processes, hub and
spoke transport solutions for key SKUs, intra-store transfers and sell-through
options vs returns, outsourced/shared distribution assets, store
dressing/replenishment during non-trading hours, environmental packaging
options to reduce CBM/unit.
o
Targets—Reduced
cost to serve, reduced environmental impact from optimized routing, delivery
and replenishment solutions, reduction in returns, reduced lead time to demand
for high yield/key SKUs.
o
Impact—Highest
impact on consumer confidence and brand loyalty, directly impacts COGS and
optimization of high cost real estate, reduces costs and ensures
"fresh" seasonal inventory.
Ø Key points:
o
The majority of
customer facing activity takes place in the Downstream areas of the supply
chain.
o
A focus on this
area will typically yield positive results for the Brand image and less waste
throughout the supply chain.
o
Downstream
optimization requires a consumer centric to ensure that the concerns and needs
of the respective stakeholders are recognized and addressed.
o
Prior to tackling
this area, it is key to understand the sales channel strategies of the brand
and prioritization of current and future channels.
Optimizing
a Supply Chain and its related activities can produce significant savings
estimated of between 10-30% depending on the baseline migration model and
scale/complexity of the business.
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