Comparing year-over-year e-commerce sales, DigitalCommerce360 says volume was up 76% in June. And while that increase leveled off at 55% for July 2020, e-commerce sales are still up 55% year-over-year for the first seven months of the year.
Retailers are driving much of that growth as many completely changed their distribution models (either permanently or temporarily) away from brick-and-mortar and over to alternative online fulfillment strategies. Already underway pre-pandemic, the movement to sell more online accelerated rapidly once B2B and B2C customers started placing more orders from their laptops and mobile devices.
Reacting quickly to an event that hit fast, hard and unexpectedly, companies made e-commerce shipping decisions based on a desperate need to stay in business. As a result, those decisions do not always include a complete analysis of the true cost of shipping those goods to customers. As added costs emerge, including peak parcel surcharges from UPS and FedEx, the true cost picture becomes blurry.
It’s time for a thorough assessment of exactly what your COVID-related e-commerce strategy is costing your company.
Many of these companies will continue handling more e-commerce volume than they did pre-COVID (even with their physical stores opening again). Managing both sides of the equation profitably requires a thorough investigation of the true cost of shipping and a strategy that factors in customers’ needs with organizational profitability.
Companies should also weed out their “losing” SKUs, assess shipping costs right down to the package level, practice good margin management across the entire organization, utilize data for good decision-making, and work with a reputable logistics partner.
Master E-Commerce Shipping, Master Order Profitability
Continue shipping products without closely examining the time, effort and money that goes into sending out each package and you will soon find yourself underwater. As pandemic pushed e-commerce sales and residential orders to new heights, was your organization among those that raced into reactive mode?
Do you know the true cost of your e-commerce shipping decisions? You can not afford to ignore this problem.
To help you master your response to online demand, our Supply Chain Masters created “You Shipped It, but … Did It Make Money?” Read today and access strategies to protect profitability for every order and every customer.
“They have better visibility into the structure of their supply chains. Instead of scrambling at the last minute, they have a lot of information at their fingertips within minutes of a potential disruption. They know exactly which suppliers, sites, parts and products are at risk, which allows them to put themselves first in line to secure constrained inventory and capacity at alternate sites,” concludes Arizona State University professor of supply chain management Thomas Y. Choi.
Peeling into the physical layers (where is my shipment?) and virtual layers (which customer/SKU combinations are profitable?) of supply chain visibility, business leaders can uncover data evidence to drive network decision-making. Combined, information gathered through both layers of visibility answers questions that improve cost control and service to customers.
Where and when?
At its most basic, supply chain visibility gives you physical location of a product in the supply chain. This can include where an inbound shipment is, where you have inventory, or when a shipment will arrive at a customer. When you have this type of visibility, you can make decisions around production scheduling, facility/customer alignment and proactive communication to customers for delivery expectations. Visibility allows the awareness needed to provide the highest level of customer service while maintaining cost control.
Where are the suppliers?
Understanding your suppliers’ geographic location is critical not only to executing a robust network design but also in mitigating risk. Understanding the production and shipping locations of your suppliers during a period of disruption allows you to execute contingency plans developed during modeling exercises.
For instance, when an overseas disruption affects a foreign supplier, maintaining a geographical awareness of primary supply chain partners is vital. Combine location information with advanced understanding of alternative sources and you can facilitate a rapid crisis response that protects customer experience and prevents other breaks in the supply chain.
Where are the customers?
Your customers and their demand drives everything about your supply chain. From the locations of your distribution centers to the shipping options available to meet customer service requirements, having a detailed understanding of the concentration of demand means you can work backwards to develop efficient and reliable options to keep them happy.
Take for example an emerging market in a different region of the country. Customer expectations for delivery are very high. Not providing a high level of service is not an option. Options exist to leverage expedited freight but may make the price point too high or erode the margin on the product. A partner warehouse may be a good option to position inventory to meet service levels without investing in owned brick and mortar.
Where is the inventory?
Your physical assets connect the vendor and customer locations. These assets allow you to position inventory to mitigate risk while providing the service customers expect. Having complete visibility to where and how much inventory you have is critical to making smart sourcing decisions:
From which location can I fulfill the order?
Is it cheaper to consolidate or split the order?
Can I drop ship?
Understanding all of the inventory options available enables you to leverage your vast web of connections throughout your supply and customer base to delight your customers.
Can I access all my data?
Your supply chain generates a tremendous amount of data. Accessing all of it is not easy, especially when you are working across multiple vendors, customer segments, product categories or transportation modes. Consolidating your information across disparate systems and sources is the first step toward gleaning actionable improvement opportunities from your supply chain data. The more access to information you have, the more it can impact your bottom line.
An expert partner with significant technology capabilities can compile disparate data in an accessible repository and provide it in personalized dashboards, as well as apply experience-inspired analysis. Accessing that analysis in the same platform as operational data and tactical execution activities is critical to supporting quick, evidence-based decision-making.
What is cost to serve?
For each product and customer, executive leadership needs to understand cost to serve, which reflects all the activities and costs incurred as movement and conversation occurs from vendors through your network out to the customer. Cost to serve metrics provide actionable information by enabling visibility into the profitability of individual customers and products, and finding a fulfillment configuration that balances service and margin.
By utilizing actionable data derived from historical shipment information and running what-if scenarios with regional data and characteristics, you can develop the most responsive and efficient supply chain that meets customer demand for the best cost.
Why is my cost going up/down?
Leveraging robust score cards can provide insight into the factors that are driving your financial performance. Not all drivers are completely controllable. You cannot make your customer order from a different location or change what they want to buy. There is an old adage “you cannot change how other people act, only how you react to them.” The same holds true for the supply chain. Develop plans to react to supplier performance and customer behavior to set up your company for success.
It is absolutely critical to have an unbiased party developing and interpreting the scorecards and information produced. You want objective viewpoints that highlight all options available to contend with dynamics in the marketplace. Not only do you want a view into your data but also what is going on within the market. In the new environment, it is more critical than ever to leverage every bit of available information across the marketplace.
Combine Layers for Master Vision
Physical visibility to shipment, service and costs can be accessed through very basic solutions that exist in the marketplace, some at low or no initial cost. Customization often requires additional investment, and visibility is black and white based on data made available by vendors, clients or carriers. A basic Transportation Management System provides tactical visibility to all of the connections in the supply chain, and it can enable cost savings.
Virtual visibility to all the activities that drive cost, service and reliability allows you to delve into the “what” and “why” around supply chain performance systematically and regularly. This requires investment in people, process and technology. The return on that investment: an enhanced ability to react to supply chain changes that impact performance. You also improve service to partners and customers.
Visibility does not just happen, and it is not free. Corporate alignment from the top down is required to achieve a complete solution. You want knowledgeable resources with broad experience to help guide you.
This fundamental truth applies to many aspects of our lives, including how we run our business. It’s a question that logistics managers and technology teams will have to consider when they think about their transformation from a single-direction supply chain to a multi-direction supply web. Does your team have the time to build out a technology suite of value? Or does partnership allow us to save time to focus on what’s best, and drive long-lasting change.
It may come as no surprise that the time you save through partnership may be the most valuable investment of all.
Technology: The Core of Supply Web Change
For manufacturers and distributors, the question on transforming into the supply web comes down to technology. If your current systems don’t provide a deep look into how your supply chain operates, then you could be losing out on data that could provide insight and identify opportunities.
While this is one of the top priorities for supply chain leaders in the future, the problem lies in building the solution. Creating a custom, in-house solution requires dedicated time and resources from your supply chain, shipping, and technology teams. Taking them away from their tasks means lost man-hours in fulfilling customer demands, which can result in an immediate loss your team cannot recuperate because the time to serve them is gone.
Meanwhile, customers expect their providers to have the technology to identify the most efficient and expedited processes to fulfill orders. If you don’t have that capability, they will go to the next source that does. Can you afford to lose orders because of a lack of supply chain transparency?
Finding Agility and Transparency Through Partnership
Agility in the supply chain is all about being able to react quickly to customer behaviors. Because e-commerce and direct ordering increases are part of our “new normal,” customers demand their packages get to their destinations faster and with full transparency.
There are two ways to achieve this audience demand. The first way is to work with partners who already have the supply chain technology you need to succeed leading to being a better partner to your component and supply chain partners through data sharing and expectation setting.
Your company is already good at providing your core products and services to your audience. Time and money should not be spent building systems that already exist – they should be spent serving your customers and helping them succeed. This is why you need an analytics and business intelligence partner who understands your business, and has both the technology and know-how across supply chains to develop the data and options you need to execute.
This is where a partner like Transportation Insight comes into play. With proven tools that give you the supply chain transparency you need to transition into a supply web, your team can get access to big data analytics and business intelligence tools sooner rather than later. This gives you end-to-end transparency which can help you identify new synergies within your web, including fewer internal touches before shipping, and the potential to drop-ship directly from suppliers.
With this information, your team can be a better partner to your domestic and foreign suppliers. With sales information, time-in-shipping data, and other key performance indicators, you can help predict when you will need to reorder supplies, track trends which can help drive production guidelines, and ultimately create a workflow that keeps your shelves stocked with the right items, and customers happy with the efficiencies of their orders.
Tying It All Together
As the supply chain transforms into the supply web, driving a durable information network will give you the agility and intelligence you need to meet your customer demands. By utilizing a partner to tie it all together, your team can get the insight and transparency you need to make the best decisions for business.
Now and into the future, Transportation Insight is here to help your business grow at the speed of commerce. Schedule a consultation today to learn how we have the tools and skills needed to save time and save money.
As an example, sourcing from multiple producers across your web can add inbound shipping costs on all modes: ocean freight, multi-modal inbound delivery and outbound shipping. If your company decides to offer direct fulfillment as a service, can you identify how much additional shipping and handling costs affect your bottom line?
Moving to a supply web model is not an overnight experience. Rather, it is a process that involves understanding how all the pieces work together, how they can drive improved revenue and how to best share information and work hand-in-hand with your partners.
Becoming the Conductor of the Supply Web
When you consider managing the supply web, think of the work an orchestra conductor must do before a symphony performance. At the center, the conductor leads multiple parts that must work together to create art. Although each individual section can create beautiful music on its own, one slip from the brass, strings or percussion and the sound of the entire symphony is broken. Only by building up each part’s strengths as a collective whole can the conductor get everything performing in harmony.
In the context of the supply web, logistics leaders are the conductors, bringing multiple pieces together to create symbiosis across each part. This requires analysis on multiple metrics, including profitability by SKU category, customer types and service levels.
Without a knowledge of how granular cost components affect the supply web, you can’t achieve cost savings in both order and promotion management. Good shippers put multiple pieces together to get their supply webs operating in line, including linking order data with carrier billing data, and tracking SKU-level and order-dimensional profitability. Understanding each metric can help your supply web perform on cost targets and with more efficiency – exactly like a well-tuned orchestra ready to perform.
Engineering for Data-Forward Supply Webs
The transformation from a single-source, lowest-cost supply chain into a supply web presents the prime opportunity to start gathering previously inaccessible data from your supply network. By building in the capability to accurately determine production, storage and shipping costs at granular levels that support cause and effect analysis, your company is prepared to identify cost factors that ultimately affect performance.
This is a two-step procedure, requiring deep insights on both shipment sizes, as well as carrier analysis.
Regular investigation of network costs can help you recognize where increases are occurring, and why they are cutting into SKU-category profit. Gaining visibility and taking a deep look into each cost category gives you a deep understanding of where your costs are, and how to control them.
Furthermore, understanding costs today can help you navigate around operational peaks and valleys. With regular research into your procurement and shipping habits, you can maintain costs and drive additional value.
Bringing the Supply Web Together
Simply put: operating in a supply web model gives you visibility into your operations like never before. Operational redundancies, a deeper understanding of SKU-level profitability, the ability to adapt with changes in consumer behavior and demand, and ultimately managing costs through continued improvement gives you the opportunity to compete at a higher level. When they all operate in harmony, the supply web offers a prime opportunity to drive your business forward and use logistics as an overall competitive advantage.
While the term quickly caught on and became a conceptual breakthrough, it contained one inherent flaw. The term suggests components move in sequence from source to destination. Technology and availability have evolved and changed over the last 38 years, presenting options that were never available before.
Oliver expanded on the supply chain idea in 2013, writing “When Will Supply Chain Management Grow Up?” for Strategy + Business. His conclusion is a sound argument for evolving into the supply web: “Constraints continue to be broken by supply chain innovators, but new constraints always emerge, presenting opportunities for the next generation of innovators.”
If your company is still focused on a single lowest-cost supply chain supplier and transport partner, it’s time to broaden your horizons. Understanding why the supply web is a natural evolution of supply chain management can help you become a better partner with suppliers and customers, and ultimately prepare your organization to meet consumer demand.
Harnessing Success Through Partnership
One of the incredible advantages of the supply web is in the data that provides. Utilizing a larger logistics network for sourcing and distributing to customers gives you a much broader view of not only industry trends and demands, but also how your partners’ networks can support your service strategy.
Excellent partners not only have insight into their networks but share the insights with other supply web nodes to the benefit of all. With both incoming and outgoing freight, shippers who lean into the supply web can leverage the appropriate node to fulfill demand with a balance of service, risk and cost.
This is only achieved by collecting data across your supply web, starting with your sourcing partners and sharing your own. By understanding production cycles and setting expectations, and supporting better decisions by your product providers, you can drive topline revenue to new heights.
The Supply Web From the Data Lens
Data collection and information sharing is critical to successfully managing the supply web. Each of your partners possesses data that can help identify patterns, analyze time in transit, and ultimately create workflows that improve efficiency at all stops.
Let’s consider the following scenario: a distributor sends a widget to several customers and end retailers throughout the year. Although it’s in demand throughout the year, most orders for this widget come during the autumn months. The distributor obtains the widget from three sources – two overseas and one in the northern hemisphere.
This is where data understanding is critical to success. With two overseas suppliers and one closer to home, the company always has a reliable source for widgets – especially during peak season – and it can obtain them from at least two partners when one is down due to holidays or planned work stoppages. Keeping lines of communication open with each supplier helps the company plan for inbound transportation and labor needs.
The inbound data can then be shared with customers and strategic partners to set expectations and manage order volume. In turn, customers will be happier because the improved communication of options supports their own planning. This data can also be used to identify efficiencies that aren’t based on fixed nodes. For instance: if a customer receives an order for the widget and is geographically closer to your facility, the data findings can help determine if drop-shipping to the end customer is a better option than shipping to a partner, before going out to that same consumer.
Using Data to Make the Supply Web a Competitive Advantage
At the end of the day, data is your most powerful currency. If you can identify patterns in the supply web and align them with the best logistics network, you can create a better experience for the end customer. The best companies utilize the information from supply web operations to ensure inventory is in the best places to serve customers.
Are you utilizing the supply web to its full potential? Between supply network models, flow mapping and LEAN principles, your company can drive success at all touch points within your network. Our supply web masters can help you drive success and create efficiencies that you never knew existed. Contact us today.
Many aspects of our life may be changed forever. Air travel shut down virtually overnight, with no indication on when we can fly to see friends and loved ones across the country. It’s not uncommon to see retail store shelves barren of the cleaning items we take for granted, leaving some to seek these necessities through less-traditional channels. Additionally, when shoppers do visit mega-stores, their carts are usually filled with groceries instead of household items, appliances and clothing.
Will isolation and social distancing cause a permanent change in shopping behavior? Will e-commerce become the new way Americans get their vital needs? A shift in consumer trends could have serious implications for retailers, their entire supply network and the overarching logistics strategies applied around the planet.
Why do companies need to pay attention to the spike in e-commerce orders?
With federal and state guidelines suggesting that everyone stay at home, online shopping increased in popularity. The online demand is so significant that Amazon is conditioning customers to not shop excessively on its platform. Meanwhile, e-tailers are overwhelmed with requests. We’re also seeing this trend among our customers as well. One customer – a chain of home improvement stores – recently asked for our help managing a skyrocketing e-commerce business that required an adjustment in their freight and parcel strategy.
The end consumer may see nothing wrong with this change. Online shopping is more convenient, requires less effort, and happens either over the phone or online. But for retailers and distributors, a growing e-commerce demand creates many issues on the back end.
While the growth of e-commerce has been the big story over the past decade, it still represents less than 20 percent of all retail sales overall. If that volume doubles, could your business sustainably make money?
Our research tells us that the largest companies are spending more time focusing on e-commerce profitability. Direct order fulfillment costs can easily exceed 25 percent of sales, which creates a precarious balance for companies offering direct-to-consumer service. Slim profit margins in brick-and-mortar retail add complexity. In the best situations, in-store sales only yields a profit margin of three percent.
If your e-commerce channels aren’t optimized for success, growing the channel is expensive at best, and unsustainable at its worst.
An inconvenient truth: environmental concerns from e-commerce
Another issue to consider is the environmental impact of online shopping. Fulfilling digital orders requires additional resources, including packing materials, corrugated boxes, additional fulfillment centers and waste handling. On top of that are emissions from trucks making last-mile deliveries and returns to homes across the United States.
All of the packaging and air pollutants have to go somewhere. While corrugated boxes and most packaging can be recycled, there’s never a full recovery of those materials. Although emissions can be reduced, we’re a long way from net-zero emissions globally.
These two challenges illustrate why the supply chain needs to change. We are no longer in a world where the supply network is one straight line from source to consumer. Instead, retailers and distributors need to work together to discover new ways to manage commerce through a supply web.
E-commerce as a catalyst to the supply web
As our world looks to e-commerce as a potentially permanent shopping solution, now is the time to start the transformation from a supply chain to a supply web. There are many different reasons why the supply web provides better solutions for both your company, distribution points and end consumers.
A supply chain suggests freight moves in one direction: from the source to the distribution center and then out to the retailer or customer. However, this model may create several unnecessary steps. For instance: if a customer makes an online order, the supply chain implies the product goes from its source point to the consumer. Under a supply web model, the order can go from the retailer or manufacturer to the closest distributor for fulfillment. The customer gets their order faster from the closest point, without the need for excessive shipping or re-packaging.
One of our clients in the construction industry recently transformed their supply chain into a web model. Instead of taking everything in at one center and re-distributing through smaller fulfillment centers, freight began moving from overseas into two different distribution centers that fed other centers in their network. This gain in shipping efficiency ensured customers could get orders in days instead of weeks.
Measuring the efficiency of the supply web is critical to success. Transportation Insight has tools which enable your e-commerce team to understand key performance indicators and drive success. Our margin management tool enables shippers to determine profitability by both dimension and SKU. It quickly identifies cost-killing areas of your e-commerce offering such as SKUs that drive split-package orders, excessive freight expense, high cube, high service expense or long zones.
The second key tool available through Transportation Insight is our supply chain and value stream mapping expertise. We develop a graphical representation of where your items, information and finances are coming from and going to. By mapping out your flows in this manner, we identify gaps and risks that can be mitigated through actionable plans and network optimization.
The significant profitability and sustainability challenges of e-commerce fulfillment are here to stay. By transitioning to a supply web model, your company can not only find better routes to profitability online, but also drive long-term, sustainable results.
Society’s sudden move to a shelter-in-place and work-from-home environment dramatically affected buying behaviors, and, in the process, expectations increased on companies responding to demand.
Organizations equipped with an agile, customer-centric supply chain network are capitalizing by evolving their service to the current environment. Distributors are re-locating inventory to meet emergent demand for products needed to support COVID-19 response in specific geographies. Retailers have kept Americans fed and working by adjusting online fulfillment strategies to utilize brick-and-mortar curbside pick-up or alternate home delivery methods. Manufacturers are drop-shipping products directly to homes to meet newfound interests in exercise.
As customer preferences carry even greater weight in modern supply network planning, the organizations with a holistic network view will deliver the most cost-effective shipping strategies that empower choice-conscious clients.
Customers Take Control
In 2016, parcel and express delivery volume bypassed railroads to become the second-largest transportation sector behind motor freight, according to the Council of Supply Chain Management Professionals’ 28th Annual State of Logistics Report. With that leap, consumers seized control of logistics spending and “supply chain as we’ve known it” changed forever.
In the past, traditional retail strategies put the brand in control, using a push-based system with consumers at the end of the supply chain. Throughout the rest of the supply network, past experience drove inventory decisions, and product was pushed to stores based on what consumers “should” like and purchase.
Ongoing expansion of e-commerce has increasingly shifted decision-making for many organizations toward the customer experience. With the outbreak of COVID-19, historical buying behaviors are no longer valid and the consumer is in charge now more than ever. Companies that didn’t have a consumer-centric approach are adapting to survive.
Adopting a consumer-centric approach isn’t automatic, however. It requires thorough understanding of your customers’ preferences from point of purchase to final delivery.
Consumer Behaviors Changing Forever
While society has steadily shifted more buying to online platforms, COVID-19 sent more people online to buy a broader array of products than ever before.
In March, online grocery sales hit an all-time high. And in April, online grocery retailers topped that record by about 37%, according to survey data from grocery consultant Brick Meets Click (BMC) and research firm Symphony RetailAI.
Driving the sales growth was a 33.3% increase in the total number of orders: 62.5 million in April vs. 46.9 million in March. Spending per order grew more modestly, as did the number of online grocery shoppers.
Retailers like Wal-Mart and Target are reporting record online sales growth as well, giving further evidence that more buyers are turning to e-commerce sales channels for everyday needs. As the convenience of online buying appeals to a broader population, the need for diverse delivery options will increase, just as it has since parcel transportation took the No. 2 spot in logistics spend in 2016.
Effectively fulfilling those customer delivery demands requires a transportation strategy supported by multi-modal expertise and technology. Transportation management systems that integrate vital transportation information from freight and parcel service providers, along with historical shipping data, can offer a strong basis for decisions that improve customer service and protect bottom line profitability.
A Case for a Personalized Supply Chain
Organizations that can create a supply chain personalized to the expectations and behaviors of their customers can achieve greater brand loyalty. By allowing customers more control over their delivery experience, brands can create greater loyalty and improve customer retention.
At the same time, the shippers that establish a nimble network can rapidly respond to fluctuations in supply and demand and capitalize on opportunities for growth.
When it comes to the blockchain, artificial intelligence and other emerging technologies we’ll increasingly implement in go-forward supply chain practices, we’ll still rely on the same essential element: trust.
Now more than ever, to benefit from these technologies, all parties in the supply chain will be required to share data at an unprecedented level. Possibilities for improved efficiencies, real-time visibility, data security, vendor compliance and other benefits will flow from shared data streams.
Yet many companies are culturally uncomfortable with the depth of transparency that will be required. Those organizations that do not participate will find themselves increasingly isolated from the economic mainstream.
Certainly, organizations should exercise due diligence in understanding the partners who will access their information and how it will be used. Organizations don’t have to share with every vendor or service provider that requests access. But enterprises must prepare for the new world of shared data with policies and procedures for these technologies emerging in the supply chain environment.
Do you have concerns about sharing data with your supply chain partners? If so, do you know why?
Blockchain Builds on Trust
Technologies like blockchain create a new “trust economy” where the old intermediaries are replaced by new systems. As blockchain and artificial intelligence enter day-to-day use, sharing data with third parties and vendors will be necessary. The system creates security through technology rather than relying on familiar relationships of the past.
To be useful, your organization’s data must be validated to ensure it is accurate and complete. Information stored in the blockchain isn’t valuable if it’s wrong.
Blockchain, in particular, is developing as a safe, customizable standard to share data in a way that protects proprietary information while providing value from the openly available information. For example, companies can manage supply chain vendor compliance issues without revealing specifics about their supply chain.
As the use of blockchain moves forward, it will be critical to strike a balance between transparency and confidentiality for all stakeholders as they adopt the technology to record and share supply chain data. With well-thought-out restrictions, a company could use the blockchain for internal purposes and share only the necessary data with other stakeholders.
Sharing data makes the most sense when it’s part of a strategy to improve processes or connect with partners in the supply chain. Blockchain information will drive tactical and strategic decisions that support predictive analytics and demand forecasting. Companies fear losing control of their data for any number of reasons, from baring their operations to competitors to sharing accurate costs with vendors. Some internal organizations see data management as their base of power and are reluctant to be open to external engagements.
Validate Captured Data to Maximize Technology Capabilities
Most organizations don’t have the internal capabilities to support endeavors focused on utilizing emerging technology applications like blockchain. An Enterprise Logistics Provider with deep analytical experience can help you identify and focus on the actionable information that you already capture on a regular basis.
With a trusted partner, your organization can manage its data-sharing strategies to share only what’s required and maintain control of your information, while connecting with the benefits of blockchain.
Unfortunately, many organizations still operate in siloed environments with data collected and housed in fragments across different departments, such as location-based procurement teams. Organizations that expand their data management and data analysis capabilities often do so without verifying the accuracy and depth of the data. There may be a mismatch between what products have been sold, what’s been shipped, and what’s been returned. What’s in the database may not reflect the reality on the inventory shelves. Or product data may have incorrect dimensions, leading to false assumptions about warehouse space and shipping weights.
The results of initiatives such as inventory optimization and carrier compliance could be skewed from low-quality data, leading to decisions that could reduce efficiency in your supply chain.
Are you making decisions driven by inaccurate data?
Analysis Drives Decisions, Start with Better Data
Good decisions start with clean, accurate data. Data input via manual processes or information that may require on-the-spot decision-making tends to have lower accuracy than data collected through technology. Back-end systems that are incompatible may require redundant inputs, leading to duplication and mistake
As the flood of data grows, it’s vital to close the loop – collection is not enough. The information must be converted to actionable insights to deliver value across the supply chain. Clean data is simply information that reflects a high degree of confidence in its accuracy, stored in the correct, usable format.
Confirm Accuracy, End Goal before Analysis
Identify end uses. Decide which challenges you want the data to help solve to decide which data to collect.
Implement standards. Develop standards for collecting and manage data such as formats and keywords.
Convert to actionable insights. Focus on data for KPIs and decision-making.
With accurate, thorough data, your organization can uncover hidden opportunities to optimize your processes. Optimization software and simulation tools can reveal options that drive structural changes to deliver the highest level of value to the customer. With increasing customer expectations for improved visibility into product locations and expected delivery times, data accuracy has never been more essential.
Objective Data View Accelerates Performance
Keep in mind that data accuracy is a marathon, not a sprint. It requires systems and policies in place over the long term. Work with an Enterprise Logistics Provider with deep technical expertise in data analysis and cleaning processes to improve current data and set up improved processes going forward. A trusted third party can help develop an objective view of your data landscape, including visibility down to the SKU level to generate strategic insights and shape demand forecasting.
Of course not. It doesn’t exist. In fact, the highest real zip code is 99950, for Ketchikan, Alaska. Still, if you scour your database, there’s a good chance you’ll find more than a few 99999 zip codes.
Most organizations find that it’s been entered as a placeholder in their shipment database. If shipments go as planned, what’s the problem? If your strategy calls for automating your processes, you’ll encounter serious challenges created by a lack of data accuracy. Let’s talk about how data becomes inaccurate and what you can do about it.
Dirty Data Drives Supply Chain Inefficiency
Depending on the solutions in use, a database may fill in 99999 if no zip code is entered, or 99999 may have been entered rather than taking the time to look up the correct number. While a placeholder zip code may not be a fatal problem, it’s likely an indicator of deeper issues. That’s one reason industry experts estimate that data is faulty in 35 to 40 percent of supply chain systems.
For example, look at a company’s fundamental systems such as the Item Master, Customer Master and Vendor Master. They must be comprehensively reviewed and corrected. Basic data such as dimension and weights could be filled with default numbers. That means there’s been a lack of validation of the data that’s been input. The lack of accurate, clean data leads to expensive inefficiency through mistakes and a lot of manual handling.
While individual data problems are not good, they are also a symptom of the more significant challenge of potentially suspect data. Without the right numbers as a baseline, it’s impossible to make accurate strategic decisions. If you’re looking at adding or repositioning distribution centers, rationalizing your product lines, or myriad other initiatives, clean data makes all the difference.
Clean data is also essential for implementing automation, artificial intelligence and other emerging technologies. Poor data quality can lead to problems with carrier compliance, shipment tracking and predictive and prescriptive analytics. As shipments generate more and more data in real-time, quality data is essential. It’s also vital for decision-making and sharing with strategic partners to drive benefits across your shipping eco-system.
Solving the Dirty Data Problem
How do you correct the zip code 99999 problem in your company?
The key is to evaluate the integrity of data collection and management programs continuously, not only against your internal requirements but also in relation to external demands. Does your organization have the capability to dig deep into your data collection and management programs, identify challenges and fix them with internal resources? Or will the organizational structures and culture prevent you from making the necessary changes? Third-party analysis may be required to identify the data issues that will derail your competitiveness.