Fulfillment Strategies: Is Your 2021 E-Commerce Plan in Place?

Fulfillment Strategies: Is Your 2021 E-Commerce Plan in Place?

This is important for many reasons, not the least of which is the big uptick in e-commerce that’s occurring in 2020, and that will likely continue well into 2021. Already increasing year-over-year, U.S. e-commerce sales were up 43% in September 2020, having grown by 42% the prior month. This growth impacted manufacturers, distributors, and retailers, many of which were unprepared for the onslaught. 

If you spent most of 2020 just trying to get through the pandemic, it’s time to dust off your supply chain, logistics and transportation plans and make sure your fulfillment strategies align with your 2021 e-commerce goals.

Changing Business Models 

As a whole, the pandemic was a wakeup call for these companies that were forced to question some of their fundamental assumptions. 2021 could bring an entirely new set of supply chain, logistics, and transportation challenges with it. 

“As many executives heave a sigh of relief, they are also preparing for a dramatically different environment in 2021,” Industry Week points out. 

“Recent economic challenges have forced manufacturers to change their business models, seemingly overnight, to stay competitive and prepare for not just recovery, but unprecedented growth,” it continues. “However, it may be difficult for manufacturers to keep up with both a snap-back in demand and a huge appetite from customers for innovative products and solutions.”

Navigating the New Fulfillment Normal

Under normal circumstances, companies can add labor and shifts to make up for throughput problems in their warehouses and DCs. With social distancing guidelines in place and the need to keep employees healthy a huge issue for companies right now, simply throwing labor at the problem doesn’t work anymore. 

These realities directly impact customer service which, in turn, affects margins and revenues. When customers feel like they’re being kept in the dark or that they’re not in control of the ordering and shipping process, they’ll take their business elsewhere. 

Here are six more strategies that all companies should include in their 2021 plans: 

  • Get your parcel shipping act together. In a world where nearly all customers expect their goods in three days or less, and where 30 percent of them expect them next day, you can’t reduce shipping costs at your customers’ expense. With this emphasis on delivery expectations, companies have to create parcel strategies that acknowledge the fact that shipping is the highest cost component of any e-commerce order.   
  • Watch your accessorials and peak surcharges. With the parcel carriers continuing to roll out increasingly-complex pricing strategies and inflating rates due to the lack of competition, shippers also have to keep a close eye on accessorials and peak surcharges at the package level. Understand how it’s impacting your costs and how to adjust and adapt moving forward into 2021. If SKU-level profitability is an important KPI, for example, then add that to list of metrics to measure. 
  • Consider a multi-carrier solution. There’s a lot of good value to be had by working with regional carriers and freight consolidators. Varying your approach also helps support customers’ delivery expectations. Amazon, for example, has worked hard to ensure high levels of visibility that starts when an order is placed and that doesn’t end until the package is on the buyer’s doorstep. With more of these customers having same-day and next-day delivery expectations, the multi-carrier approach can help support your overall fulfillment strategy and even make it more affordable. 

  • Rethink your fulfillment approach. To meet your customers’ fulfillment needs, you can either offer a higher shipper service level or you can change how your product is fulfilled and positioned (i.e., either with a bicoastal or multiple fulfillment level location plan). Whether you’re fulfilling it yourself, using a third-party logistics provider (3PL), or a hybrid approach, the key is to look to 2021 and beyond when setting up these networks. 
  • Use advanced technology tools. To get a head start on 2021, companies can tap into the tools that help automate, personalize, and engage virtual transactions, and that fuel their e-fulfillment engines. Cart integration, for example, automatically answers buyer questions like: How much is it going to cost? What are my shipping options? And, is there an opportunity for me to pick it up in-store? Through that integration and automation, the customer gets the choice and the control that they’re looking for today.
  • Focus on more than just the sales process. Companies should also consider post-purchase experience and post-purchase engagement tools, both of which automate the customer buying journey. These data-centric tools also lighten the workload for your customer service team. Finally, having shipping analytics right down to the individual order level puts the power of business intelligence (BI) into the shipper’s hands, and allows it to make good decisions based on accurate, relevant information (versus just guesswork).  

While it’s easy to get mired in the complications of 2020 right now, you’ll be much better prepared if you break the mold and start planning for the future today. That way, you’ll be in the right position and ready to pivot—in whichever direction is necessary—when 2021 comes. 

5 Tips: Curtailing the Supply Chain Bullwhip Effect

A phenomenon that quickly turns otherwise accurate forecasts into far-reaching supply chain inefficiencies, the bullwhip effect refers to the increasing swings in inventory — in response to shifts in customer demand — as one moves further up the supply chain

Accustomed to seeing ample supplies of diapers, toilet paper, and cleaning products on store shelves, consumers were in for a shock when COVID-19 began to take its toll on the world’s supply chains in early 2020. Although the barest of shelves began to rejuvenate by midyear, there are still some lingering effects (plus the potential for more shortages later in the year and into 2021). 

Blame the bullwhip effect for creating a lot of this chaos and uncertainty. 

“Supply chains allow companies to focus on their specific processes to maintain maximum probability,” Osmond Vitez writes in The Bullwhip Effect in Supply Chain. “Unfortunately, supply chains may stumble when market conditions change and consumer demand shifts.”

Here’s what companies should be doing now to avoid supply chain disruption in the future. 

5 Supply Chain Takeaways for 2021

Under “normal” circumstances, companies invest in extra capacity, inventory, labor and work shifts to minimize the bullwhip effect or to avoid it altogether. The problem this time around is that otherwise routine approaches didn’t work. Demand sensing, forecasting and other forward-looking predictions were equally as ineffective, and mainly due to the unprecedented nature of the global pandemic. 

Here’s the good news: shippers now have boots-on-the-ground experience with a fairly extreme case of the bullwhip effect. Using their 2020 experience as their guide, companies can now prepare for the next potential disruption with a better understanding of the hefty impacts that it could have on their global supply chains. 

Here are five lessons that all companies should apply toward their future supply chain management: 

  1. Communication, data sharing, and visibility trump all when it comes to minimizing the bullwhip effect. One large national retailer, considered to be a leader in supply chain strategy, opened the lines of communication by allowing suppliers to access their inventory data. The result: increased customer satisfaction, a decrease in inventory and warehousing costs, and more stable supply lines.
  2. Third-party logistics experts have proven their worth. Well equipped to handle the logistics, transportation and technology that go into a well-oiled supply chain, experts like Transportation Insight know both sides of the business (i.e., shipper and carrier), and we can demonstrate and articulate how each node in the supply chain will benefit from a specific decision. 
  1. Scenario planning and simulations actually work. Think of them as the “war games” of your own supply chain, use them to run simulations on historical data across different hypothetical scenarios (e.g., if we can’t get raw materials from country A, how will it impact the rest of the supply chain?). Getting the answers to these questions before a disruption occurs will help you be more prepared in the event of a disruption.
  1. Use dashboards and control towers to get big-picture views in real-time. The days when a warehouse manager had to wait until the end of the month for a printed performance report are long gone. Thanks to advancements in technology, the same manager can get that information in real-time and then use it for good decision-making. Being able to drill down into order profits, for instance, will help you better understand what you should actually be charging for shipping. This, in turn, helps support good margin management in any business conditions.
    
  2. Alternate sources of supply are a good thing to have. In surveying 150 senior manufacturing executives, law firm Foley & Lardner found that most expect to make “fairly drastic” changes to their supply chains post-pandemic, including a shift away from just-in-time manufacturing (JIT) and sourcing in China. In Global Supply Chain Disruption and Future Strategies Survey Report, the law firm says that of those companies that were operating in China pre-pandemic, 59% have either already withdrawn operations, are in the process of doing so, or are considering it. Many of those organizations are looking to reshore their operations closer to home in the U.S., Canada, or Mexico.

Depending on how you approach it, transportation can play a major role in avoiding the bullwhip effect in your supply chain. Through good communication and data-sharing across all supply chain partners, you’ll gain an understanding of both real-time and historical information as it relates to all points in the supply chain. The better decisions you can make, the better the odds of avoiding the bullwhip effect.    

Tame the Bullwhip: Manage the Demand Waves

We examine the steps you can take to build a responsive supply chain management system in our latest Supply Chain Masters Series digital event. 

Watch the webinar to learn best practices for collecting, retaining and analyzing supply chain data. We also highlight the business intelligence solutions that drive continuous improvement and proactive strategy adjustment. 

Click the link below to learn supply chain strategies that minimize risk and protect your profitability today and tomorrow.

The Bullwhip Effect: Managing Swings in Demand

The “Bullwhip Effect” is a term often used to describe a phenomenon that quickly turns otherwise accurate forecasts into outdated information, amplifying misinformation along the supply chain. The dust was brushed off this broad concept, and it returned to the shelves not long after COVID-19 began disrupting global supply chains.

“Supply chains allow companies to focus on their specific processes to maintain maximum probability,” Osmond Vitez writes in The Bullwhip Effect in Supply Chain. “Unfortunately, supply chains may stumble when market conditions change and consumer demand shifts.”

That’s exactly what happened when an abrupt change in customer demand plus factory shutdowns put companies in the tight spot of having to forecast demand in the middle of an unprecedented, worldwide pandemic.

With demand for certain items amplified, the tiniest crack of the bullwhip’s handle caused an uncontrolled, snapping motion at the tip of that whip.

Balancing Demand Effects and Available Inventory

“When major swings in inventory occur from panic buying and hoarding, the impact of this sudden demand is magnified as it moves upstream in the supply chain (similar to the way a bullwhip’s thong amplifies in a wave as it moves away from the handle),” Jenny Reese explains in “Preparing for COVID-19 and the bullwhip effect: What happens to the supply chain when you buy 100 rolls of toilet paper?” The customer feels the anxiety of empty aisles, the retailer loses sales, and customer service suffers. “Distributors are left scrambling to determine who should get how much of a given product in a shortage,” Reese continues, “and manufacturers are overwhelmed with sudden, unanticipated spikes in demand.”

With little or no visibility into demand patterns to lean on, many companies wind up flying blind and hoping for the best.

How Does the Bullwhip Effect Work?

Without accurate, accessible, and strong communication across the various partners in the supply chain, the bullwhip effect can occur in any business environment. In a supply chain made up of a factory, a distributor/wholesaler, retailer, and end customer, for example, the retailer and customer tend to be closely aligned. For instance, a customer places an order and a retailer reacts accordingly.

Continue further up that supply chain, however, and that alignment begins to diminish.

Manufacturers don’t always align their forecasts with retailers’ own projections and distributors are, frequently, caught in the middle of two entities that have zero communication with one another.

These gaps widen during events like COVID-19, with even a small variance creating a Bullwhip Effect. In fact, Jay Forrester, who first conceptualized the Bullwhip Effect in these terms, says that even a 10 percent change at either end of the supply chain can result in a 40 percent fluctuation in the middle. That’s when the wheels fall off the cart; all players in the supply chain make quick adjustments to compensate for the problem.

Why Should You Care?

Virtually every organization must address or, at least be aware of, the Bullwhip Effect. Without up-to-date and wide supply chain communication, companies risk having it adversely impact their operations and their customers. Since no organization is an island, even the most vertically-integrated companies should know the signs of the Bullwhip Effect and how to deal with it effectively.

It’s easy to recognize the Bullwhip Effect in retrospect, as customers are cancelling or returning orders that they were clamoring to buy because they bought too much, overestimating their need. In order to meet perceived demands, erratic production, excessive inventory and depletion of resources highlight this effect. During COVID 19, suppliers most at-risk from the Bullwhip Effect included makers and distributors of PPE, hand sanitizer, toilet paper, and other hard-to-find items.

As a Supply chain professional you’ve been exposed to the Bullwhip Effect. The costly consequences materialize quickly and immediately erode your profitability.

Are you able to make informed decisions based on real time data?

Transportation Insight allows your business to make evidence-based decisions. We amass data about your supply chain to give you a comprehensive understanding of your logistics network. Our expertise and tools enable contingency planning through “what if scenarios” that address the Bullwhip Effect before it impacts your bottom line. Transportation Insight monitors multiple key performance indicators that measure your business activity and reveal threats and opportunities to drive continuous optimization of your supply chain.

Tame the Bullwhip: Manage the Demand Waves

We offer more context around the Bullwhip Effect in our Supply Chain Masters Digital Event. Watch the webinar today and learn how you can manage demand fluctuations with a responsive supply chain management system:

  • Best practices for collecting, retaining and analyzing supply chain data.
  • Processes that encourage scalability and readinesss for decline, recovery and even growth.

Learn the supply chain strategies that minimize risk and protect your profitability today and tomorrow.

Buy Online Pickup In Store: Retail in Evolution

Yet, the store remains a core focus of the buying experience. That’s how it should be. The in-store customer is typically more loyal and tends to buy more than the online shopper.

A robust strategy for “Buy Online, Pick Up In Store,” or BOPIS, can offer the best of both worlds. BOPIS expands a retailer’s online exposure while preserving and deepening the in-store experience. In fact, retailers find that is common for shoppers to buy more product once they arrive at the store to retrieve their online orders. 

A well-designed BOPIS retail program also helps reduce delivery costs because the customer is going to the product, not vice-versa. Consumers prize the ease and convenience of the transaction, especially when the COVID-19 pandemic has made contactless interactions more of the rule than the exception.

Responding to a New Retail Landscape

For retailers with limited resources and insufficient time spent mastering alternate fulfillment methods, the real world suddenly became a very different place in 2020. Many have been challenged to adjust to an unfamiliar “fractured fulfillment” model where products are ordered, fulfilled, and distributed from anywhere to anywhere. It is difficult for retailers to strike the right balance of inventory levels that satisfy in-store shoppers and ensure product availability to support online channel growth.

Retailers often over-order store inventory to avoid the risk of stock-outs. This raises carrying costs, and shrinks inventory  available to allocate to online channels. 

Moving ahead with an ill-vetted BOPIS strategy can make things worse. Customers assured of a product’s in-stock status on a retailer’s website will be displeased if they take time to visit the store only to find the item isn’t available. This could damage a brand’s reputation, especially if word spreads quickly on social media.

Visibility is the pain point. Many retailers lack proper visibility into the inventory flow from their partners to effectively plan and execute an error-proof BOPIS strategy. Without visibility, retailers will continue to prioritize avoidance in-store stock-out scenarios, and will continue to absorb excess and costly inventory.

A strong 3PL provider arms retailers with superior, actionable data that improves inventory visibility without forcing them to increase levels of safety stock. The endgame is to manage appropriate safety stock thresholds for both in-store and BOPIS experiences so the customer is satisfied in either scenario. 

Personalized Solutions Require Visibility

Each retailer is unique, and each shipper-retailer partnership is unique. Working with good data, an experienced 3PL partner creates customized plans to achieve optimal results. Progress and outcomes are constantly measured and refined so fill rates achieve acceptable thresholds. Changes to the plan can be implemented quickly should circumstances change – and they often do. 

For example, a plan could require the partners to issue electronic order acknowledgements indicating changes to item quantities and arrival dates within a specified time of receiving an order. It could call for transmission of advance ship notices within two hours of a shipment’s departure so visibility is optimized. Fully leveraging distribution center connections to stores optimizes shipping flexibility to react quickly to customer behavior. 

It is still most profitable for stores when customers pick up their orders in-store, but the busy holiday season could make it difficult for consumers to get to the store. Data generated by zip codes can identify areas of strong online ordering and in-store activity. This offers retailers insight into how to best position inventory for timely and accurate distribution.

For example, a retailer wants to offer one- to two-day deliveries but its transportation providers are challenged to consistently hit those targets. It may be more feasible to ship that order out from a store versus a fulfillment center. This could require shippers to invest in a drop-shipping strategy to support an e-commerce strategy where goods are brought directly to the store level. All this strategy is grounded in visibility.

This holiday season will be like no other. In-store buying will still be prevalent. However, more consumers have adopted online ordering after being required to do so in the early days of the pandemic. BOPIS utilization will be strong this holiday, but it will continue long after peak season and even after the virus passes. Consumers want options. It is critical for retailers to comply, but to do so efficiently.

Master Your BOPIS Revolution

The last mile is the most complex part of e-commerce fulfillment. It is also the most important. The last mile makes or breaks everything that came before it. That final delivery is the moment your customer will remember your brand most. How well do you finish?

A BOPIS strategy is just one of several last-mile offerings that shippers and retailers are expected to deliver. Done right, it reaps brand loyalty, lower costs and profitable opportunities for new market share. However, it requires a specialized level of resources and knowledge. It also requires skills and vigilance to ensure flawless execution.

We created The BOPIS Revolution: Navigating the New Never Normal to highlight some of the things you need to keep in mind when approaching – or modifying – your BOPIS strategy. Watch our SME Roundtable for a deeper dive into the ways we drive top line revenue results through personalized solutions driven by technology and expertise.

To continue the conversation, reach out to one of our supply chain experts. Let’s talk about how we can help you evolve solutions that support final delivery strategies to control cost and consistently wow your customers.

Margin Management: Why Are You Selling Money-Losing SKUs?

In July, Coca-Cola announced that it was cutting some “zombie brands” and focusing its resources on more profitable lines by introducing margin management. The company has about 400 master brands, half of which are brands of little or no scale and that account for about 2% of the firm’s total revenues. 

These brands (Odwalla juice and smoothie brand was among the first to get the axe) consume resources and divert money and time away from Coca-Cola’s more profitable businesses. 

Do you know the products that are consuming your resources without delivering the profitable benefits of sale?

Following Suit

Shippers of all sizes can borrow a page from Coca-Cola’s playbook which takes the examination of SKU viability to new levels by assessing (and in some cases, eliminating) entire brand portfolios in order to determine which products are making money, and which ones aren’t. 

When you understand SKU viability, you can refine your marketing messages, pricing, pass-through costs, and other elements that determine whether you make money on an order (or not). The key is to determine which products are “winners” and which are “losers,” and then focus on the former. Weed out the products that are not making money and focus on the ones that are profitable.

Use the 80/20 Rule

The Pareto Principle (80/20 Rule) comes into play here, and asserts that roughly 80% of the effects come from 20% of the causes. Recognizing that 20% of your SKUs typically represent 80% of your sales volume, determine a baseline. Focus on what it costs to pick, pack and ship each of those different SKUs. 

There aren’t many companies that have a good handle on profitability at the individual SKU level, particularly when factoring in fulfillment costs, inbound costs and shipping costs. Combined, these drivers can make a major difference in an order’s profitability.

Consider the manufacturer of outdoor goods that typically sells to big box retailers. During COVID, this company began shipping directly to consumers when more people started placing orders online. Shipping a pallet of 25 outdoor umbrellas to a large retailer at no charge was a profitable venture. On the other hand, free shipping for those 9-foot, 75-pound umbrellas bound for 25 different households via Parcel takes a huge chunk out of the bottom line.

This is a situation where evaluating SKUs based on the price that customers pay doesn’t work. Offers like “Buy $50 in merchandise and get free shipping” can further complicate the circumstances. Complexity increases when orders must be shipped in multiple boxes—a reality that quickly consumes the profitability on any order. 

Find a Partner to do the Heavy Lifting

Without good transportation analytics, SKU profitability becomes an expensive guessing game. And the more SKUs you’re selling, the more complex your margin management profile will be. 

Avoiding these problems requires a pick-and-axe approach similar to what Coca-Cola is using to whittle down its brand portfolio. If you don’t have the time, staff, or technology in-house to manage it on your own, Transportation Insight is here to do the heavy lifting for you.

To help you better understand all that’s required in determining SKU profitability, we created “You Shipped it, but … Did it Make Any Money?” Download it today for strategies that will help you protect profitability on every order.

Don’t Let Peak Surcharges Kill Your E-Commerce Profit

Shippers often don’t expect accessorial changes and peak season surcharges that carriers introduce at different times throughout the year. In most cases, seasonal demand swings and business peaks drive these cost changes. 

This year a global pandemic prompted peak season surcharges. Because these new costs coincided with skyrocketing demand for online shopping, many shippers lacked the visibility required to protect e-commerce profit on every shipment.

An Aug. 7 communication from UPS confirmed that more peak surcharges are coming for the holiday season. 

Here are three ways to keep these surcharges from killing your company’s profitability. They’ll become increasingly important as peak season surcharges could become a new year-round norm.

  1. Carefully Audit Every Carrier Invoice
    Go beyond examining the invoice number and dollar amount. Taking the position, “Okay, last week I shipped $75,000 worth of merchandise. That sounds about right,” isn’t a deep enough dive into your parcel invoices. 

    This high-level analysis doesn’t give you the insights you need to pivot effectively when surcharges are imposed. Get down to the actual package and charge level. This is one of the most important practices in managing peak season surcharges and protecting e-commerce profit.
  2. Share the Cost – Pass It or Promote It
    Don’t assume that these surcharges have to get tacked onto your “costs of doing business.”

    As long as it doesn’t affect your competitive position, pass the surcharge costs along to your customers. By strategically aligning products with marketing promotions, you can also increase order value, optimize shipment density and, ultimately, mitigate bottom-line impact of peak-season costs.

    If you do have to absorb the additional cost, be sure to factor that into the sale, versus waiting for your parcel carrier’s invoice to arrive and taking it right out of your profit for a specific order.   

  1. Team-up with E-Commerce Partners 
    Burdened by carrier surcharges and operating in a challenging business environment, shippers may be tempted to only deal with carriers when they have a gripe, a fee that needs to be refunded, or a surcharge that doesn’t apply (but was charged anyway). 

    These situations generally reach a positive resolution when shippers have win-win relationships with their carriers. This has been a practice for years in the truckload/less-than-truckload sector, where being a “shipper of choice” has become a popular stance for companies that are assessing their total costs of transportation.   

    The same applies in the parcel space, where we rely on accurate, up-to-date, supporting data when working with carriers on behalf of our customers (versus just managing issues in a one-off manner). 

    By serving as a link between shippers and carriers (who would otherwise be forced to work with thousands of different customers on an individual level), we are an extension of your parcel team. 

Master Your Parcel Program

To help you control costs in an ongoing peak season surcharge environment, we created “Manage the Surge: Avoid Surcharge Shocks, Power Performance.” It explores the how and why behind parcel carriers’ cost-recovery tactics. Read it today for the strategies you need to power a parcel program response that offsets these costs and protects your e-commerce profit.

Logistics Outsourcing? 4 Things Your Partner Needs

Depending on the logistics outsourcing approach that your business deploys, make sure your provider’s skillset aligns with your organization’s needs. 

In today’s environment, supply chain practices are taking central focus. Recovery will depend on adaptive response to global pandemic, economic turmoil and a sharp shift in buying practices and delivery needs. 

A lot of companies don’t have a complete understanding of what their partners should be providing. Outsourced solutions supplement your internal response to these dramatic shifts. When your partner exhibits these 4 Outsourcing Must-Haves they have the buy-in to keep you in the game.

Your partner can’t deliver? Better understand why.

Outsourcing Must-Have No. 1: Responsiveness

If you are not with a responsive partner that is able to enact change quickly within your supply chain, you are setting up yourself and your company for failure.

What does it mean to have a responsive partner? Your broker or 3PL should have a regular cadence for response. This is more than a quick, timely email follow-up when there is a problem – although that is important.

More than that, a responsive partner lends an empathetic ear to what is happening within your organization. That is fundamental to internal communications within the partner organizations, and it streamlines the ability to enact change that delivers value back to you – and your customer. 

A global pandemic validated the vital importance of having a responsive partner able to deliver value in the face of your individual disruption. 

Outsourcing Must-Have No. 2: Visibility

Not long ago, visibility was on the wish list. Today, it is a must-have for doing business.

Global supply chains have become so complex with the myriad of partners that exist around the world. Even if you only have a domestic North American supply chain, it is still quite complex.

Whether you outsource logistics, manufacturing or human resources, your partner should be able and willing to provide you with visibility to your data. It is valuable beyond belief. 

Accessing that data – as well as meaningful analysis of it – requires technology. You should have access and visibility to what is happening down to the SKU-level, in terms of historical trends in the shipping market with parcel, LTL, truckload and warehousing costs. 

If you are trying to make a decision on outsourcing part of your business, there is data that is going to help you with those decisions. If you do not have access to that data – or if you cannot get it quickly, you are with the wrong partner. 

Outsourcing Must-Have No. 3: Agility

Look back at the first half of 2020. How many supply chains were turned upside down? Right or wrong, so many risks for the future have emerged.

For example, what happens if, culturally, we decide not to continue doing business with China? What if a big portion of your market does not want to buy from a company that sources from China? 

With strategic alignment to your business and operational agility, your partner has the ability to anticipate market changes and provide a response plan that mitigates any emerging threats to your profitability. 

Whether achieved through their own technology stack or internal alignment, your partner needs to have the flexibility to adjust as your business changes.

Look at the retail world. In the early stages of COVID-19, every retail store closed apart from the essentials. That spurred panic for organizations still trying to figure out ways to sell products. It forced the traditional retail model further toward e-commerce. 

Companies that have really thought about their supply chain were able to begin using their retail footprint to fulfill from stores. Ship-from-store strategies kept inventory moving without requiring moves from distribution centers scattered throughout the country. 

That helped Levi Strauss expand its e-commerce business 25 percent during its second quarter, including a 79 percent uptick in May. About one-third of that online demand was fulfilled by stores. Doing that requires a massive change. If you do not have the internal resources of Levis, you need a partner that can support you. 

Outsourcing Must-Have No. 4: Expertise

Global networks are complex, Technology is changing rapidly. Your supply chain drives many moving parts across your business. A world-class partner should provide expertise in managing each of these dynamics – in addition to its core executable value. 

What does that mean? You need a partner that is delivering expertise around technology, process, innovation and their experiences in other industries.

A supply chain master that manages hundreds of supply chains across diverse verticals, service models and geographies has the ability to apply strategies that deliver optimal logistics performance across a broad variety of operational environments.

That broad experience means that when there’s a new technology, innovation, or process that might improve manufacturing, our supply chain leaders are looking for ways to apply best practices in retail or distribution arenas.

If you are in a monitored outsourcing model focused simply on tactical execution, expertise has limited value. 

However, if you are looking for a truly strategic, orchestrated relationship with a partner, expertise keeps your company moving forward in a disruption-filled marketplace.

What Sets Your Partner Apart?

If you have a responsive partner that is agile, flexible and able to deliver visibility and a deep bench of experience – hold on to it. These are prerequisite traits for a successful service relationship.

It also helps to know some of the traits that set a logistics provider apart in the marketplace. Three capabilities really elevate the performance of your entire supply chain. We detail these qualities during “The Logistics Dilemma: Insource vs Outsource.” 

Watch the webinar today. Hear real world scenarios where our clients have realized elevated value from:

  • Trust
  • Transparency
  • Strategic alignment

Your organization works every day to fulfill strategies focused on meeting the needs of your customers – and deliver additional value along the way. If your partner does not have alignment to and understand your strategy, how can you expect them to align and create more value for you?

Open the webinar and learn more about what sets a Supply Chain Master apart.

Lean Supply Chain Perspective Required for New Normal

Meanwhile, the pressure is on lean-focused supply chain experts expected to examine internal processes and accommodate supply chain shortfalls. Their perspective is integral not just to the continuous improvement of in-house activities, but, importantly, to the network adjustments that come with the re-shoring of supply production.

Unfortunately, just as COVID-19 disrupted manufacturing networks, it also created new challenges for keeping lean supply chain teams engaged. Workforce reductions and remote operating environments create hurdles for maintaining the close awareness required to identify wasteful activity and efficiency improvement opportunities.

As manufacturers focus on a new normal, a lean perspective supports supply chain corrections, and the timeline for turnaround does not need to be limited by social distancing and remote environments. An expert partner can help you identify and execute the most effective supply network strategy, so you can keep focus on advancing your business.

New Manufacturing Normal Begins to Emerge

Midway through a year of disruption, we are hearing common refrains among manufacturers across diverse industries. It seems that, regardless of the supply chain network, the comments are very similar:

  • Manufacturing is moving toward reshoring to reduce supply chain disruption and distance.
  • Constant supply chain focus is needed to eliminate current and future supply chain disruptions.
  • Supply chain failure is the No. 1 reason a company is having issues in start-up or restart activities.
  • Adjusting product mix and production set-up is a struggle.
  • Lean training and learning is difficult outside the facility “Gemba”

Focused on cost, some companies furloughed or laid off their lean teams. This leads to significant impact across the organization, often requiring executive attention to resolve emerging network problems. Losing the process visibility provided by these experts can lead to costly misalignment across your existing network and in any future supply chain adjustments.

Problem Solving for Inventory Management, Network Changes 

Looking deeper at these trends, some of the specific emerging problems can be resolved through the total supply network awareness your lean expert maintains. 

Inventory management drives the biggest questions manufacturers encounter as they reset to serve a new normal. Common inventory problems in our assessments of  manufacturers include:

  • Too much of it, not balanced or not accurate.
  • Too much of the wrong inventory for the manufacturing product family mix.
  • Not enough of the correct inventory to manufacture replacement parts and service clients.
  • Never adjusted parts inventories for major equipment repairs.
  • Single sourcing from Asia, Europe, etc.

Losing the visibility of your supply chain expert can quickly impact your transportation cost, especially in a volatile environment following a significant disruption.

Organizations that scaled back their lean team during COVID-19 experienced common outcomes:

  • Quickly lost awareness to inbound ocean transportation and ensuing TL freight moves
  • Unprepared for spike in air freight costs for productions and parts inventory
  • Increased costs such as detention fees resulting from misaligned lead times and production planning
  • Reduced capacity for problem solving 

In the “old” normal environment, while your lean resources maintained process awareness required to exert continuous improvement, ongoing training also offered perspective for global practices that are applicable within your organization. Losing access to those resources – usually provided on-site – impedes your ability to evolve your processes.

Leverage a Master Partner to Evolve Processes

There is no doubt that a loss of process monitoring inside the operational environment leads to reduced visibility. Lean operators need to be in the Gemba to be most effective.

In a quarantine or remote environment, it is not always possible to have that consistent on-site presence – but, you don’t always need it. Some organizations have achieved success with lean supply chain teams of two that maintain social distance and COVID-19 protocols. While this has slowed Kaizen work, there has been success, it just takes longer than planned. As a positive outcome, lean leaders have executed administrative items for each Kaizen, a process that can be carried forward.

A problem solver’s mentality supports these types of in-the-trenches adjustments, and they are vital not only to your disruption response, but to the ongoing evolution of your supply chain. We offer our clients access to that mentality on an ongoing basis, using supply chain data analysis to provide awareness of emerging improvement opportunities.

At the same time, we offer organizations the ability to develop their own internal lean expertise. While protocols of a contact-conscious environment can limit on-site activity, the power of modern technology not only supports classroom-like digital learning, it also grants virtual visibility on par with physical presence.

For more information about invigorating your organization’s supply chain capabilities to support reshoring or other new practices for a new normal, schedule your lean supply chain consultation today. Whether you want to bolster the expertise of your internal resources or plan and design a supply chain network suitable for serving your customers tomorrow, we apply our mastery to help you establish efficient processes that control cost and improve service.

Post-Pandemic Tactics for E-Commerce Logistics Advantage

Before COVID-19, businesses looking to build an e-commerce presence were hamstrung by the lack of speed in developing their current labor pool with the skills required for e-commerce, as well as fulfillment automation capability. Others dabbled in a web storefront strategy. These companies typically lacked the sophisticated technology, generally a good Warehouse Management System (WMS), needed to pick multiple orders to a cart and then have them quickly and accurately auto-sorted through a RF or mobile device. The result was unsustainable inefficiencies. We saw that e-fulfillment costs in some cases exceeded 25 percent of sales.

In the meantime, Amazon.com, which controlled about half of all U.S. e-commerce going into the crisis, kicked into high gear during it. At one point during the crisis Amazon customers spent as much as $11,000 a second on its products and services. By contrast, nearly 1 million traditional retail workers were furloughed in one week, and more than 250,000 stores had shut down. Many stores may never reopen, or may look very different going forward. The same goes for fulfillment centers. Many have and will continue to be physically modified to ensure worker safety. The flow of operations may need to be modified as well.

For many e-tailers, the “new normal” of e-commerce will be challenging and may seem insurmountable, but getting to the other side is doable. 

E-Commerce Logistics Strategy for the New Normal

Understand what current state looks like in the new normal − starting with your cost per-order. 

Are your costs segmented by freight, management and supervision, labor, facilities and shipping supplies?

Then understand what and how these costs can be managed, optimized and reduced. Typically, freight costs exceed the sum of the other components. Reducing freight dollars spent per revenue dollars created should be an immediate focus. 

The questions to ask from this point are critical to the next step. 

  • Is your network aligned to best serve the customer? 
  • Are your shipping lanes optimized? 
  • Are you using the best shipping partners to meet your strategic goals? 

Stay on top of your rates. Evaluate them frequently, and renegotiate them when appropriate. 

This is where collaborating with a seasoned logistics expert adds enormous value to you e-commerce platform. Our long and deep relationships with carriers, our data analytics and information mining expertise and our proprietary audit technology platform give you end-to-end visibility to answer those key questions.

Align Your Operations and Your Network

Once your network is optimized, it is time to consider how your operations play into that. What questions can quickly be addressed?

By asking these questions and making some quick, deployable solutions, you can improve your profitability profile in short order.  

Benchmark your service-level performance with best-in-class metrics. How does your fulfillment center operation compare with leaders in the field? 

Focus strongly on the efficiency of your picking and packing operations, which can account for more than half the cost of your order outside of outbound shipping. A thorough analysis of your fulfillment center process will yield changes to improve operations and reduce costs.

Apply technologies where it makes financial sense and where it fits your growth plans. Many legacy WMS applications were designed to manage fulfillment orders in pre-determined waves. They were not optimized to manage the unpredictable flows of e-commerce traffic. Today’s technology is built to allow orders to be picked for store and e-commerce simultaneously. This enables businesses to leverage inventory buys to achieve economies of scale.

Also, consider a multi-fulfillment center strategy, including BOPIS strategies. These can expedite orders to consumers quicker and reduce shipping costs. Facilities expansion can carry with it significant operating expense. An expert partner with a robust portfolio of data, expertise and carrier relationships can support your decision-making on this critical issue. 

Improvement Focus Drives Customer Experience

Above all, be consistent with ongoing process improvements. Don’t consider e-commerce logistics just a project, it is a process that has to be constantly improving. Companies that dedicate full-time employees to process improvements are those that make the biggest strides. 

Analyze your facility space requirements, and how labor is being utilized. Be open to suggestions on how to improve productivity and boost customer satisfaction. Make it a part of your corporate culture.

According to a recent study, millennial consumers who account for about $1.2 trillion in U.S. retail sales say they value the “experience” that accompanies an online order as much as the product itself. The “Generation Z” group coming up behind the Millennials shares those sentiments. 

At the core of that experience is fast, timely delivery supported by in-transit visibility across multiple digital platforms. Succeed in executing on that final step, and you will achieve favorable word of mouth that can help build a brand. Fail, and that brand may not get a second bite.

Those attitudes were in place well before Covid-19. And they are unlikely to diminish. It is both an enormous opportunity, and daunting challenge. Is your e-commerce strategy ready?

Master Logistics, Power Competitive Advantage

You invest a lot of money in your logistics network. But are you maximizing its value? Do you feel like your logistics operation is more of a cost center than a tool of competitive advantage?

It doesn’t have to be. In fact, with the right strategy and execution, logistics can drive the success of your enterprise. Companies like Amazon, Walmart, Target and Dell made logistics a priority, with spectacular results. There is no reason you can’t do the same!

To master your logistics strategy, read “Moving to the Front of the Line: Making Logistics a Competitive Advantage.”

Budget Planning 2021: 9 Supply Chain Things to Know

The booming e-commerce marketplace opens access to new segments of consumers seeking direct delivery on a growing list of staples previously procured through brick-and-mortar channels. Meanwhile, end users seeking personal protective equipment, sanitizers, cleaning supplies and other products required for contagion response will create new revenue streams for organizations nimble enough to shift supply chains and adjust processes to meet fluctuating demand.

Responding in this environment, executives who prioritize supply chain strategy will be best positioned to not only meet and exceed customer expectations, but also control costs that jeopardize bottom line profit.

Looking ahead to the remainder of 2020 here are some looming trends I expect to emerge, as well as recommendations for how a supply chain master can continue to control business performance, even through the disruptions that are bound to happen in 2021.

4 Supply Chain Predictions Influencing 2021 Planning

Looking ahead to the remainder of 2020, ongoing marketplace awareness informs a few predictions that will determine priorities for 2021.

  • The recovery will be a saw tooth, with an upward trend. There will be ups and downs as economic activity re-emerges, particularly in regions that experience fluctuating levels of COVID-19 outbreak and control. Companies have to really protect themselves for that and plan alternative ways to serve their customers and compensate for workforce disruption. As Gartner points out, the path to recovery will be unique for every organization as they respond, recover and renew.

  • Companies that deal in non-essential goods will struggle, and they need to be the most agile. Consumer spending will continue to shift, largely toward e-commerce channels. There’s going to be fluctuating demand for hand sanitizers, cleaning products and personal protective equipment. A lot of companies can maintain workforce in the manufacturing realm by pivoting to secondary products that support pandemic response and recovery. Expect demand spikes, particularly related to the back-to-school and Christmas shopping seasons. Organizations impeded by shipping limitations, will depend on a nimble supply chain to access available shipping channels.
  • Boards and executives will expect robust contingency planning to deal with disruptions. Contingency planning is one of the most critical pieces that informs everything else about how you respond to another likely disruption, whether it be a COVID relapse, an unexpected stop in production or depletion of raw materials.
  • Companies that invest in process and technology during this time will see the best long-term growth. These companies will be in the best position to take advantage of consolidation in their respective industries.

Five Recommendations for 2021 Planning

Organizations creating budget plans for 2021 should consider these recommendations to maintain customer service levels while controlling costs.

  • Treat the 2021 budget as a range and be prepared to adjust as conditions on the ground evolve. In many ways budgeting will be a guessing game, and companies need to put together a plan based on contingencies. When revenue doesn’t meet expectations, have a plan for cost-cutting measures to implement. If earnings swing the other way, identify investments to make. Executive leaders must commit to evolving cost management so that scarce resources and funds consistently flow to the most valuable business outcomes.

  • Leverage supply chain resources to determine corporate impact (cost, service, risk) of plans produced by the other departments (sales, procurement etc.). Experts working in supply chain possess analytical capabilities and a global picture of an organization’s total business. This supports acute awareness of the control levers that affect cost and service. When you put supply chain masters in the role of trusted advisor, they are in the best position to help those executives and leadership boards navigate tumultuous waters.
  • Take a partnership approach with all relationships. The supply chain is dependent on everyone succeeding. Often, by working with an expert supply chain partner you can access end-to-end transparency that facilitates more opportunities across your network. That visibility allows you to be a better partner to your domestic and foreign vendors. With good clear communication around sales information, time-in-shipping data and other key performance indicators, you can help predict when you will need to reorder supplies and track trends that can help drive production guidelines. This supports a workflow that keeps your shelves stocked with the right items, and customers happy with the efficiencies of their orders.
  • Aggressively evaluate the entire supply chain and take an open-minded approach to the long-term structure. Ensure the supply chain strategy aligns with corporate strategy – and leverage analysis and expertise to inform that strategy. This is especially important as e-commerce demands continue to drive increased expectations for flexibility in customers’ end delivery options. You may be getting product shipped out the door – but are you making any money on it?
  • Low water exposes a lot of rocks. Take the opportunity to evaluate internal processes and systems. Balancing resiliency and efficiency, supply chain leaders can secure their networks. A recent Gartner survey revealed that only 21 percent of respondents believe their supply chain is resilient enough to provide “good visibility and the agility to shift sourcing, manufacturing and distribution activities around fairly rapidly.”

A global pandemic changed priorities for many supply chain leaders, elevating the agility of their network alongside the balance of service and cost. As Gartner points out, more than half of its survey respondents expect their supply networks to be “highly resilient” within two to three years. 

Master your 2021 Budget Planning

The first half of 2020 provided painful lessons for many organizations, some of which still face jeopardy. The businesses that quickly adapted to dramatic marketplace changes have often done so through an effective strategy for risk management. 

Future success relies on your ability to assess potential risks that exist in your network and create alternative ways to plan demand response. Contingency planning today, especially in light of network weaknesses revealed in the past six months, will position your business to not only weather the storm but also seize growth opportunities.

While you are in the midst of managing your business, a supply chain master can provide the risk assessment and strategic planning required to establish a flexible responsive network. With that, you will always satisfy customers in the most cost-effective way.