Why Retailers Must Strive for Supply Chain Automation
In April 2023, Walmart unveiled its plans to automate its supply chain network by 2026 to increase productivity and enhance the customer and associate experience. With customer expectations higher than ever and supply chain disruptions impacting inventory levels, we can expect many other companies to follow in Walmart’s footsteps by taking steps to automate their supply chains.
The benefits of automating processes in the supply chain are widespread and far-reaching. For instance, automation can help supply chain managers analyze IT alert patterns to identify early warning signs and take action before a disruption occurs. In turn, retailers can exceed their profit goals by avoiding product waste, mitigating service-level agreement (SLA) fines, and keeping up with customer demands. In this article, I’ll dive into some of the most common supply chain and procurement challenges that can be optimized by implementing automation.
Pinpointing Shipment Delays
Since the start of the pandemic, it seems as if there has been one supply chain issue after another. Whether it's a product shortage or a port closure, shipment delays in particular have become quite common. Retailers must have visibility to understand the root cause of their shipment delays to prevent them from occurring again in the future. Data mining tools, which leverage the power of artificial intelligence to extract and discover patterns in vast data sets, can help organizations predict delays by acting as an early warning system. The technology investigates what shipments have been historically delayed and pinpoints any commonalities between each shipment.
For example, suppose that every time a retailer orders a shipment of more than 30 boxes of pens, it experiences a delay. Data mining tools can unearth patterns from each transaction by looking at various elements that might contribute to the delays. For instance, the delay might occur because the quantity is too large or the supplier might have a history of being unreliable. Once the cause of the delay is identified, supply chain teams can add it to their software to monitor any new purchases that might have a pattern match. If there's a significant delay, logistics teams can flag that the transaction will likely be delayed so they can proactively follow up with the supplier, pivot to another vendor, or decrease the quantity of the order.
In the ideal procurement scenario, procurement officers lock in a price for a specific item with a single vendor. This ensures that they will spend the same amount of money when purchasing the item despite any cost fluctuations. However, in larger organizations, it’s often difficult to lock in prices, as this would be a highly tedious process involving numerous contracts with various vendors. Thus, many companies find themselves buying the same item from different vendors at different rates on an as-needed basis.
With AI-based spend intelligence, organizations can regularly analyze and track their procurement activities against third-party data to proactively find ways to save money. This technology looks at all historical purchases, particularly those made outside of contracts where there was no locked rate involved, and identifies the various prices at which the organization procured an item over a certain timeframe. The tool can then identify both instant and long-term savings opportunities by regularly monitoring and analyzing spend for sub-optimal supplier arrangements, purchase price fluctuations and noncompliant requisitions. It can also provide organizations with recommendations for which vendors they should purchase from and at which price they should purchase it for. Procurement executives can also set watch lists to show the price point options for a certain item so they can switch vendors, if needed, to pay the optimal price.
The Future of Supply Chain is Automated
While the supply chain will always have a level of volatility and unpredictability, the right technology can help retailers and their logistics teams stay one step ahead by mitigating risks and optimizing supply chain spend. With retail giants like Walmart already prioritizing supply chain automation, companies that invest in technology that accelerates digital transformation will have a competitive edge.
Shouvik Banerjee is product owner at Digitate, a provider of SaaS-based enterprise software for IT and business operations.
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Shouvik Banerjee is a product owner at Digitate. He has over 25 years of experience working with technology to transform business and IT operations.
Over the past five years, he has been working extensively on building business solutions using ignio™, autonomous enterprise software built by Digitate. During this time, Shouvik has worked closely with many procurement professionals from multiple industries, observing the challenges they face, and conceiving, designing, and building solutions using ignio™ to manage spend monitoring and procurement.
Shouvik holds a Bachelor’s degree in mechanical engineering from the Birla Institute of Technology, Mesra, Ranchi, India.