Before the COVID-19 pandemic struck, supply chain remained — to use a sailing analogy — a ‘below-deck’ function, despite all the assertions to the contrary. This reality was not the result of a lack of attention to innovation in supply chain. Rather, it was the result of businesses around the world taking the supply chain status quo for granted. Customers — consumers in particular — followed suit, simply assuming their purchases would arrive in a matter of a few days, on time, in full. Everyone expected offshore factories to run as planned, transportation to be available and plentiful, demand and buying behaviors to grow and change incrementally, and expected warehouse space, port capacity and other supply chain staples to work predictably. In the last three years, the pandemic – which caused a massive consumer shift to e-commerce and other global events — blew up those assumptions.
“Frictionless supply chain” applications have evolved to meet the issue head on. What are the toughest challenges now disrupting supply chains, and how can frictionless applications solve them?
Supply chain chaos.
Global supply chain disruptions, failures and instabilities have become so prevalent and significant as to make headlines worldwide. And now, they have contributed to a monumental issue — global inflation.
One of the major causal factors of this era of disruption is the fact that customer buying behavior shifted substantially to e-commerce in all its forms, putting pressure on supply chains that were still largely built to accommodate a ship-in-quantity to a distribution center or a store model.
A report from the U.S. Department of Commerce’s Retail Indicator Division quantifies this massive shift. In the U.S., e-commerce sales grew 50% to $870 billion during the pandemic. Forced to work and stay at home, consumers bought furniture, building materials and electronics — categories that grew more than 200% since 2019. Food and beverage e-commerce grew 170% during that same period.
This new normal is characterized by a cascading list of factors and developments, starting with sudden supplier shortages, delays and out-of-stocks. Centralized inventory and production site models are not geared to rapid order fulfillment. Many organizations currently have limited visibility of commerce across the organization, patchwork logistics networks and services, and transportation and logistics capacity constraints. Supply chain IT is also out-of-date. Add to that, rapid price inflation delivery failures, all leading to increased customer dissatisfaction and buyer frustration.
The last three years have made it clear that businesses need to focus on creating the next generation of supply chains — that are resilient, stable, agile, fast-acting and customer-centric. They need to minimize costs and ensure order perfection every time, with full accuracy, transparency and control over inventory and returns. They need to ensure zero friction — meaning zero problems — for the buyer.
In sum, legacy supply chain IT is struggling to keep up with this evolving environment. For companies, that begs the question of whether to upgrade supply chain technology and if so, how and with what?
To upgrade or not — the issue of “technical debt.”
Businesses hesitate to invest in new supply chain IT — for many reasons, the biggest being “technical debt.”
Major supply chain organizations have invested millions in traditional supply chain applications such as order and warehouse management, and supply chain planning and analytics. Many, surprisingly, still also rely heavily on spreadsheets. And because of this technical debt, they are reluctant to change technologies.
According to a McKinsey survey, companies hang onto older systems because of the time and money needed to replace them, even if upgrades would bring substantial benefits. Companies average 2.8 years from vendor selection to complete rollout. Industries with highly complex supply chains, such as pharmaceuticals, typically spend four to six years and $62.5 million to $125 million to fully implement a new supply chain planning system. Industries with less-complex supply chains, such as consumer-packaged goods, can spend two to three years and about $17.5 million on a new system.
Technical debt carries a high cost today. But choosing not to upgrade or keep pace with innovation will inevitably impact competitiveness, customer experience, profitability and more.
How frictionless commerce technologies can help.
Frictionless e-commerce supply chain technologies can and already are helping hundreds of the world’s leading retailers and e-commerce operations.
These are technologies that ensure customers can find, buy, and get the products they want, when and how they want them. The measure of the success of these elements is known as the friction index. The lower the friction index, the fewer the problems, and the happier the customers.
Frictionless supply chain commerce means every transaction is digitally assisted; for example, using smart IT to reduce the number of hands touching the products and reducing the amount of guesswork about how much product to stock and where.
This requires reliable data powering every step of a transaction — from including the product details on the website to determining where a product should be shipped from, ensuring fast and accurate fulfillment, arranging reliable and cost-effective transportation and successfully handling reverse logistics/returns.
All of this sounds expensive, but thanks to the introduction of “composable” supply chain architecture, it doesn’t have to be. And it can be implemented, scaled, and adapted quickly — in months, not years.
Composable architecture builds software systems from small, independent, modular application components that can be combined and changed/substituted to form a complete system. Modules are easily assembled and configured to meet specific business needs, saving time and money. The modular components communicate with one another via application programming interface (API) integrations.
How to build a frictionless supply chain.
The goal of a frictionless supply chain is to provide execution capability, visibility and analytics that extend across the entire supply chain. This construct begins with the data itself — making sure it’s clean, sync-ed correctly, and accessible. Then, interoperability and visibility are used to compose solutions easily and quickly across the enterprise, giving the chief supply chain officer visibility across the entire organization and enabling faster and more accurate decision-making.
Membership in the Mach Alliance enables this solution approach. The MACH (Microservices-based, API-first, Cloud-native SaaS and Headless) Alliance is a group of independent tech companies dedicated to advocating for open, best-of-breed technology ecosystems.
Integration and visibility for a leaner supply chain.
Frictionless solutions allow enterprise-wide supply chain visibility and orchestration. The combination of integration expertise and connected data-driven supply chain software and tools enable this orchestration. They help companies create self-stabilizing and responsive supply chains. Businesses can deploy new modules and models quickly as their e-commerce needs change. Predictive analytics, AI and machine learning can help businesses become more proactive in their supply chain operations, and better able to scale with demand and the pressures of constant disruption. This means a leaner, more efficient, cost-effective and resilient supply chain and, for the customer, a more stable, satisfying buying experience.
Pivotree provides products and solutions to design, build, and manage complex e-commerce ecosystems. It helps companies build resilient and adaptive supply chains to enable frictionless commerce.
Pivotree’s commerce solutions are built upon the MACH Alliance principles, which enable a composable architecture approach. Pivotree looks to Mach members to provide best-in-class order management applications. It also relies on its own warehouse management, control tower and analytics applications for supply chain.
Pivotree uses analytics modules to help companies create self-stabilizing supply chains allowing businesses to deploy new modules and models quickly as their e-commerce needs change — with implementation times of weeks as opposed to months or years. For instance, when COVID hit, one customer was able to deploy click-and-collect from store locations at a rate of about one store added every two weeks. This is the kind of speed and agility the new supply chain requires.
Pivotree’s suite of products and services in the OMS and WMS domains forms the foundations of efficient and scalable operations. Its Connect tool serves as a platform for cross-organization collaboration and its Control Tower supply chain visibility and predictive analytics solution equips managers with real-time data for actionable insights to support agility and adaptation. And the company’s Store Accelerator enables rapid deployments for e-commerce and marketplaces.
Resource Link: www.pivotree.com
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