Transforming the supply chain for better customer experiences

Profile picture for user pwainewright By Phil Wainewright September 25, 2016
Summary:
Digital transformation in the supply chain goes beyond new tech to bring fundamental changes in how an enterprise organizes itself to meet customer needs

Drone carries fragile parcel over water near city © tiero - Fotolia.com
Better visibility into a connected supply chain opens up new ways to manage stock movements and customer deliveries. In conversation with GT Nexus president Kurt Cavano, I've been discovering some of the implications for how enterprises are able to transform the way they design products, organize their operations and interact with customers.

It's clear that, as in so many other areas, digital transformation in the supply chain goes way beyond simply deploying new technologies. It brings in its wake fundamental changes in how an enterprise organizes itself to meet customer needs. As Cavano puts it:

It's not just a digital transformation of saying, 'Oh, I'm going to make my supply chain digital.' It's also a transformation of how my organization works and how it fits together.

In part one of this interview, we looked at several ways in which better visibility improves supply chain efficiency. By being able to track items through the supply chain, enterprises can optimize stock levels and transport modes, improve risk management, and collaborate more effectively with suppliers to manage costs.

That visibility forces people to think outside of their traditional functional silos, says Cavano.

What's really interesting, when we go into most organizations, is how siloed they are.

There's the buyers over here — they just want to get a quick price on stuff. Then there's the expediters and those people that are worried about, 'Is my stuff going to come on time?' My transportation management people, they're the people that get out and book transportation. My warehouse people are worried about when is that stuff going to get in there and how's it going to go into my warehouse. There's all these hand-offs.

This old world, siloed ... doesn't work anymore. Organizations have got to become much flatter and much more flexible about working across that supply chain, all the way, for them to be successful.

If it stays siloed and uncooperative, it doesn't matter how much you digitally transform your supply chain, it's not going to work.

Lessons from retail

It's also important to tie that visibility and collaboration through to what the end customer experiences. If the product marketing function is rolling out mobile apps that offer customers more tailored product choices, then the supply chain has to be capable of delivering those outcomes. Companies in consumer-facing industries such as apparel, fashion and retail have seen this very early, says Cavano, although he sees similar trends in the B2B sector. The lessons from retail are instructive.

The challenge that brands in retail are facing right now is, they optimize their supply chain for containers — these are big boxes with a lot of stuff in them — but they've enticed the consumer with all these new tools.

They say shop anywhere, anyway you want. They've given this beautiful user experience to the customer. Now they've got to make this big investment in their back office to be able to fulfill that promise. It's not easy to do that.

Sportswear maker Adidas, for example, has created custom product lines that gave consumers the ability to specify their own variations on the standard SKU (stock keeping unit). Instead of a conventional purchase orders for tens of thousands of units at a time, those orders come into GT Nexus for single units, each with a custom bill of materials on it. It passes the order to the factory that makes the shoe, and instead of coming off the assembly line with just a SKU barcode, it also has to have the information needed to ship it to the customer, whether by sea or air. Referring to a recurring theme of the Gartner-run supply chain conference where we were meeting, Cavano says:

Managing that whole process, so we can get it directly to you, that's a bimodal supply chain, right there. It's optimized for containers, and also optimized for single units of one.

Ready or not, that same multimodal flexibility is coming to the B2B world too, he warns:

All of our industrial customers say, 'Yeah, but that's consumer goods.' Well, those same consumers that are purchasing those consumer goods are becoming management, and these industrial companies, they want it the same way too. That's the experience that they want ...

The consumer's been trained now that you can get anything you want exactly when you want it. They only shop when they need it. They expect it to be available the next day, or two days later.

That kind of consumer behavior is going to work its way into all of supply chain, which for companies like GT Nexus is a great thing, because it forces the need for this visibility and this hyper-granular visibility of down to the unit of one.

Flexibility at speed

Some of the company's industrial customers are already starting to pilot rapid delivery of custom configurations. One of the takeaways is that it often means re-evaluating how the supply chain is organized, because offering greater flexibility at speed may require a more modular approach. For example, a heavy equipment manufacturer may decide to build an incomplete base unit that ships from its factory, and then add certain parts to finish it off at a more local facility to meet individual customer specifications.

Segmenting the bill of materials across the supply chain in that way demands greater visibility. Instead of tracking entire container loads from the point of origin to a single destination, it may mean co-ordinating multiple journeys of individual items. That demands more instrumentation as units move through the supply chain, says Cavano.

We're doing some interesting projects using IoT technology that give us what we call hyper-granular visibility into the supply chain, and it's that unit-of-one visibility. Just like Adidas with the sneaker, I want to follow a truck or a giant engine, whatever it is, through the supply chain, so that I can optimize on a unit of one rather than in a container of things or on a group of things.

That visibility makes it easier to keep customers informed of the progress of their order, which is another important aspect of delivering the right experience, he adds.

One of the things you find with consumers is, they want it now, but if you can give them visibility to where it is and when it's going to be shipped, they're willing to wait a little bit for it.

GT Nexus is also working with its parent company Infor's retail product team, which aims to give grocery chain Whole Foods Market greater control over its demand forecasting, merchandising and assortment management. Dealing with perishable items that have a shelf life measured in hours or days is good preparation for a world where the supply chain is becoming a continuous, real-time process rather than a discrete set of steps, says Cavano.

My belief is that we're going to get to this place where it used to be [that] you plan, then you buy, then you sell, then you re-plan, then you buy and you sell — to this daily, hourly, real-time selling/buying machine.

It's less about planning. It's about real-time planning and real-time execution combined together.

My take

Cavano paints a picture of a world where ingrained habits, longstanding processes and outdated functional boundaries will have to give way to new ways of thinking and operating. Some of this is happening now, the rest of it is yet to come. But enterprises that aren't willing or able to embrace this more granular, real-time supply chain visibility and management will find themselves unable to deliver the outcomes their customers will increasingly take for granted.