Supply chain executives are the experts in riding the highs and lows of a demand-driven economy. Whether it’s feeding the frenzy for fidget spinners or ridding retailers of excess inventory of what may soon be a glut of toilet paper, pinpointing the how, what, when and how many items will reach the consumer has become newly essential data.
For a supply chain more in tune with the needs of retailers, a mind shift is necessary. Consumers segued to online ordering and contactless check out during the Coronavirus disease (COVID-19) crisis, and it is extremely likely that their shopping behavior will remain focused online instead of flocking back into stores when the “coast is clear.”
It is also a moment for supply chain executives to take the spotlight on the corporate stage.
All-important direct-to-consumer shifts
The days of a primarily B2B supply chain may be changing. The shift in direct-to-consumer goods will necessitate a mind shift by supply chain operations leadership. For instance, apparel retailers made the pivot to digital early and have seen their share of total online transactions increase from 21% to 23% over the last five years.
How will supply chain executives manage the shift? Significant investment in technology and automation will be necessary to meet the direct to consumer movement. Technology that enables end-to-end traceability and automation to optimize supply chain operations will be the most efficient means to deliver a higher volume of packages to the end consumer.
With over 40% of essential items now being bought online, supply chain executives need to take a deep dive in restructuring operations to accommodate much higher volumes in direct-to-consumer shipping.
How did we get here?
The obvious answer is that people around the world caught a virus. But, that virus didn’t just infect humans. In a manner of speaking, it also “infected” the supply chain. The drive to increase inventory velocity was itself a symptom of this virus. During the pandemic, bottlenecks appeared at nearly every point on the supply chain, which left supermarket shelves barren and deliveries delayed – it’s safe to say that every American who experienced this unique moment in history will never look at a roll of toilet paper or a bottle of hand sanitizer in the same way again.
As speed to deliver essential items to market significantly increased, manufacturers, distribution centers and retailers had to make speedy temporary re-configurations. And now, as businesses hope to return to normal, supply chain executives need to take a holistic view of the supply chain – from end-to-end, and retool the rules for best practices.
Where to begin to fix the supply chain
The starting point will be to enable end-to-end inventory visibility, which will allow the supply chain and its encompassing manufacturers, distribution centers and retailers to quickly respond to the ebbs and flows of consumer demand without additional labor and resource allocation.
Consider what the supply chain would have looked like during the pandemic If consumers had true visibility into inventory levels for essential products like hand sanitizer, masks and gloves. There would not have been panic buying and hoarding. The lack of total inventory visibility to both shippers and consumers during the pandemic was a clear signal to supply chain executives that technology offering end-to-end visibility throughout the global supply chain would be the way of the future.
It’s high time to incorporate “agility” into lean logistics. We know that the workforce will shrink to at least some extent. Cost-cutting will mean smaller staffs, but direct-to-consumer demands will continue to present labor challenges that need to be met.
With the anticipated continued escalation of direct-to-consumer demand, manufacturers, retailers and distribution centers will be incredibly stretched by the reduction in manpower. A move to automated processes through technology will be more and more necessary.
In a “traditional” lean set up, operations are already set up to process inventory in order to maximize labor efficiency. What COVID-19 demonstrated is that this model doesn’t support shift both up and down to meet changing market demand. We can anticipate a shift in the “lean” mantra to a greater focus on agility, because executives have witnessed the urgent need to adjust operations to meet fluctuation in consumer demands on almost a daily basis.
Take a look at the consumer demand for masks. Previously, the supply chain for masks was nearly all B2B, and truckloads of pallets moved from manufacturers to distribution centers to medical industry end users in a reliable manner. However, as the general consumer market created an urgent need for masks, pallets have had to be broken down in the manufacturing and distribution facilities to accommodate shipping directly to the consumer. This change created major disruption in the supply chains and presented unexpected challenges. We have learned that the supply chain has to be ready for the next up and down swings whether its medical items in a pandemic, or even a new fun fad if and when consumer desires become more marketing than panic driven.
Where’s does the agile supply chain “magic” come from?
The good news is that supplier performance can be improved, but of course there’s no magic involved. It will rely on supply chain executives who take leadership in acknowledging that there have been problems and take bold steps to make operational changes to make sure present, future and unforeseeable challenges will be met. It’s time to embrace a fickle consumer-driven marketplace and become flexible as new demands emerge.
The digitization of goods is the primary means to achieve agility in the supply chain. What became evident during the pandemic was that consumer expectations in online ordering have taken on new prominence at the end of the supply chain and logistical adjustments that were made on the fly need to become a permanent operating model as fluctuations in consumer fulfillment needs will in fact, be a new and unpredictable normal.
By giving products a digital unique identifier at the origin of the supply chain, full transparency of inventory at the product-level is possible. This is vital to meet the new rise in direct-to-consumer expectations.
Digitization of the goods through technologies such as RFID and barcode is what provides that full transparency enables agility across the supply chain.
The rising importance of supply chain operations
Supply chain executives will not be the only business unit that needs to adapt its practices. Past the pandemic, implications may be more complex and have a ripple effect on other business operations. Marketing will likely need to face up to recent twists in consumer behavior, engendered by the pandemic supply chain issues.
It remains to be seen whether consumers will be brand loyal or if they continue to shop in the mindset of the any-brand-will-do that was so evident during the pandemic. Store or off brands may be the new Cottonelle and Charmin at least in the toilet paper aisle. As some semblance of normalcy returns, marketers of name brands will need to differentiate their products.
Agility in the supply chain may even become a key consumer selling point. Supply chain executives who adopt technology that truly responds to new and ever-changing consumer demands have an opportunity to be the new consumer heroes.