What Retailers Need to Know to Create a Consumer-Driven Supply Network
As we all know, retail and consumer goods companies are struggling to adapt to the growing market pressures coming from consumers and their competitors. In order to stay competitive with the explosion of omnichannel and the sheer muscle of powerhouses such as Amazon.com, companies will need to run their supply chains better, faster and cheaper — at the same time. However, achieving that objective will lie in their ability to adopt a new supply chain model.
The “old model” involves connecting companies one-to-one many times over in order to transact business across your supply network — with all companies in the network replicating their own internal demand and supply processes, and getting them connected via EDI or worse, emails and spreadsheets. This outdated model promotes delays, inaccuracies and inefficiencies across the supply chain, and makes it structurally difficult to improve performance in terms of cost, velocity and transparency.
The “new model” is predicated on getting the entire supply network comprising of company, customers, suppliers, distributors, logistics providers, etc. connected to a consumer-driven supply network in order to share a single version of consumer demand and synchronize that demand and supply across every node in the network in near real time. That structural change removes all the issues caused by the “old model,” and allows retailers to achieve much more accurate inventory forecasts, higher service levels and improved on-shelf availability — all at a lower cost to serve and with reduced levels of inventory in the network.
Companies adopting the new model will have a distinct advantage over those stuck in the old model and, as a result, are rushing to implement a modern-day consumer-driven supply network. However, before setting out on your own digital journey, there are three key phases in the deployment of a digital supply network to consider:
Phase 1: Implement a Control Tower
The simplest way to start transforming and connecting a supply network in real time is by implementing a control tower. These offer end-to-end monitoring, visibility and traceability into all the events and milestones that users want to track across the entire trading partner network, with zero latency.
The simple deployment steps include the definition of the events and milestones across all the transactions that need to be tracked such as orders, shipments, etc.; the service level agreements (SLAs) and lead times on all events and milestones; and the configuration of the alerts so the organization can be notified when SLAs and lead times are violated.
A control tower will provide early warning of business disruptions, and will enable users to resolve those disruptions in real time. It will operate on a low-touch, exception basis, allowing users to fix issues when they happen. It will also allow organizations to track supply network health, understand where the process breaks down, assess the root causes and prioritize what improvements are needed to implement to increase the overall performance of the extended network.
Phase 2: Optimize Execution
As you gain insights into the overall performance of your supply network, you can start looking at moving the execution processes from your underlying enterprise systems over to the consumer-driven supply network, and leverage the optimized execution capabilities that the network offers. Optimized execution consists of three complementary orchestration components: demand orchestration, order orchestration and supply orchestration.
Migrating to the network’s optimized execution capabilities will elevate the benefits gleaned from the network by allowing users to:
- leverage a single version of consumer demand across all nodes in the network;
- synchronize demand and supply across the entire network in near real time, from demand sensing to shipment delivery; and
- leverage intelligent machine learning agents to optimize operations in real time within the execution layer and remove any disconnect between planning and execution.
Phase 3: Integrate Business Planning
Once companies start adopting the optimized execution capabilities of the network, they may also need to better understand the impact of demand/supply synchronization performance on the organization’s financial results.
Integrated business planning will enable retailers to “dollarize” their demand and supply plans, and estimate what P&L will look like at any time over operational (hours and days), tactical (weeks) and strategic (months and years) planning horizons. The solution alerts users when their current plans don't match financial expectations, so the organization can take immediate action by altering demand and supply plans to correct the issues. Users can leverage the demand and supply data to optimize strategic planning decisions in areas such as distribution capacity and commodity planning.
Even better, moving to a consumer-driven supply network can be gradual and modular. As you invest more into the network, it will return the favor by delivering more value in the form of greater visibility and traceability, higher service levels, improved on-shelf availability, lower landed costs, and reduced inventories.
Therefore, whether challenged by competitor or customer-related pressures, rest assured that you can run your supply chain better, faster and cheaper. You just need to start mapping your way to adopting a consumer-driven supply network.
Bernard Goor is vice president and industry evangelist at One Network Enterprises, a provider of a secure and scalable multi-party business network.