Friday, May 22, 2015

Viva La Revolucion

Welcome to the supply chain revolution

"Sharing your data is not communism"

As more consumers shift to online shopping and the “omnichannel” retail model becomes the norm, experts say the old supply chain model is beginning to see fundamental changes.
E-commerce sales are growing at a healthy clip and are expected to account for more than 10% of total retail sales by 2016. As much as 60% of all retail sales originate online even though they may be completed at a brick-and-mortar retail store.

Changes in retail are being driven by technology advancements and that we can’t control. As such the supply chain is changing to accommodate these new paradigms.
Supply chain members and third party logistics partners had better be aware of these changes and make better use of technology to make sure they stay on top of the latest trends.

The Shift to Omnichannel means that consumers now use use various methods and devices to research, purchase and receive goods, but think about it this way, search costs are lower in the virtual world and firms can position inventory somewhere upstream in the supply chain. This in term helps them gain efficiencies and is one of the main reasons they are able to offer lower prices. The omnichannel model allows for larger assortment possibilities, endless aisles for your customers to browse. Your catalog just increased with no real cost basis, using three technologies that may have finally come of age:

Image result for virtual fulfillment1. Virtual Fulfillment (Drop Shipping)
More retailers including big box stores, are starting to move toward drop shipments in the which is a direct shipment from the supplier to the end-user. Instead of stocking inventory in a warehouse location  you can keep inventory upstream which provides for lower safety stocks and lowering the uncertainty that exists when holding your own stock.
Worried about the lack of inventory visibility and loss of control of the service to the end-user - no worries see options number two and three.

Users of the MDS-Nx system can use technology to provide the inventory visibility and tracking the products through each phase of the supply chain.
The challenge for 3PL providers  and supply chain members are the cost of infrastructure expansion to service higher demands and sourcing the qualified technical talent to handle this data exchange. Partnering with a technology provider familiar with the terminology and able to bring real world examples is one way to mitigate the work involved in this change.

2. Sharing the Final Mile

Image result for final mileToday the final mile of delivery is the costliest part of the supply chain, comprising about 25% of the total expense. The Uber model for the final mile holds some real opportunity for new players in the supply chain. Or those ready to work with the new tools. The Uber model uses crowd-sourced consumers to pick-up and drop-off ordered items to customers at a far cheaper rate than traditional courier and short-distance shippers, or running your own trucks.
Image result for uber As more retailers are signing on to the Uber-like final mile service expects to see it be more prevalent in the business to business environment.
Remember the final mile is also a challenge for transportation providers whose pricing models have been built on long hauls. But the demand for final mile delivery will only increase and carriers need to figure out how to take advantage of the change, while keeping your costs as low as possible.

3. Vendor Managed or Virtually Managed Inventory

A third technology that seems to have finally come of age is Vendor or Virtually managed inventory. These will help the inventory inaccuracies that exist within the supply chain. 
Image result for connected chainInventory inaccuracies are still a huge problem for the seller and the suppliers and arguably a big problem for customer service. Often we use the drop shipping and last mile delivery to promise goods but without knowing there the inventory is our ability to tell customers when the item will ship and be at the locations they need it is limited. 
In the Health care space this can cost thousands of dollars or even lives in the case of surgical kits and home health related products.  
As such investment in the first two technologies means you also need to invest in getting inventory in real-time so know can knowledgeably forecast and track shipments. 
Suppliers and other supply chain partners have to do their homework and they also must become more integrated as the supply chain of the future will be an open system dependent upon unique and advanced technology.

The Future is now Suppliers have to integrate from the top to bottom of the chain and then within their companies. It’s going to take more investment in technology for most if they are able to become more responsive and agile so that they can bring products fast to wherever they are required.

Sharing your data is no communism it's a simple two way street and capitalism at it's best. It is market driven demand for products and services that force a business to react. 
Welcome to the Revolution!! 

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to

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