Analyst insight: A world-class supply-chain strategy enables speed and flexibility while mitigating cost from end to end. 

Today’s best businesses are a lot like world-class runners: They can sprint, run marathons, and do both on flat roads, rocky trails or up the side of a mountain. Speed, flexibility and cost management are key to performance.

Speed: Customers are demanding next-day and same-day delivery, and “delivery windows” are no longer acceptable. Successful organizations are approaching this on two fronts: technology and physical infrastructure. 

Tools like distributed order management (DOM) are giving companies a single view of inventory across locations and channels, which aids fulfillment and delivery decision-making to optimize speed, cost and margin. Companies are also moving high volume and velocity SKUs to “rapid deployment centers” that are closer to the end customer — leveraging brick-and-mortar locations to fulfill orders, for example. 

Flexibility: Change is happening at a rapid pace, and the impact on supply chains is significant. In the absence of certainty and predictability, successful organizations have designed supply chains that are flexible, scalable and responsive. 

Flexible supply chains can adapt to changes in sourcing, product, channel or demand, while scalable supply chains can expand and contract as demand requires. Responsive supply chains monitor signals and respond in predefined ways to minimize impact on customers. Organizations are designing or redesigning their supply-chain networks and technology roadmaps to build in these characteristics. 

Cost: Customers want speed and flexibility for free (or at very minimal cost). Coupled with a shrinking labor pool and increasing costs, many companies are turning to automation. 

Automation can provide predictability in terms of labor availability and productivity rates, and the current automation alternatives span across all distribution center functional areas. Organizations that have executed automation strategies successfully have balanced risk and reward through proof of concept; developed a robust business case to determine financial viability; and created a risk-mitigation plan prior to implementation. Those that have followed these practices have seen a significant drop in operational costs. 

Outlook

Expect to see more companies investing time and capital into network strategies that optimize speed and proximity to customers; prioritize technology and infrastructure that enable flexibility and scalability; and leverage automation across the supply-chain network to reduce cost. Those that do will continue to evolve and likely thrive. 

John Lowe is principal at Tompkins International.