New Supply Chain Management for Omnichannel
Many manufacturers and retailers struggle with the sales duality that e-commerce has created. E-commerce is the new retailing, regardless of a company’s industry or business. It is very different from selling in stores; it is very different from production and shipping orders. Companies must sell via multi-channels, namely multiple touch points with customers.
E-commerce is very different as to order sizes, mix, shipping preparation, and delivery requirements. Online sales have moved past just having a website and shipping orders. Customers want their orders delivered quickly after placing them; immediacy—delivering orders within 48 hours, or less--is the expectation.
The key challenge firms have with meeting omnichannel demands rests with firms’ supply chains. Standard supply chains were designed for a specific purpose. Forcing supply chains to do more than they were meant to do is not agility; it is a sales failure. The new sales duality—omnichannel—is driven by the New Supply Chain duality.
The New Supply Chain redefines supply chain management and—
- Customer Designed. It is designed from the customer back through the company and to suppliers. That provides way to incorporate service. It is not based on just picking and shipping orders from their facilities.
- Time Compression. Borrowing from Lean, extra time adds waste to the supply chain and hurts responsiveness. There is no value created—and customers determine if there is value made. Inventory is a buffer to uncertainty. And the longer the time, the more the uncertainty—and the more the inventory. The additional, unnecessary time occurs both inside the company and outside. Value Stream Mapping is a good way to see the waste of time--and its internal and external causes.
- InventoryVelocity2 . Many companies struggle with inventories for multichannel sales. No matter what and how many channels, inventory should flow. From both a lean view and a liquidity view, inventory that sits does not create value. Some companies have problems with stock outs. Others struggle with omnichannel with mistakenly increasing inventories and/or trying to allocate inventories across channels. Allocating is arbitrary. The best practice is to move inventory faster through the supply chain from end to end. It provides products to sell in the various channels. It also improves liquidity with less capital tied up in inventory. With the New Supply Chain, inventory velocity moves to a higher level to become InventoryVelocity2.
- Upstream Extension of Supply Chain. Extending upstream is more than collaboration with suppliers. Supply chain effectiveness begins with the inbound supply chain. The outbound portion cannot function well if products are not available. The inbound supply chain is also a big factor when it comes to compressing time and gaining inventory velocity. Improving supply chains must recognize that there is no single supply chain. There are supply chains within supply chains. Look at the Mississippi River; it is made up of hundreds of streams and rivers. That is how supply chains are. There should be elevated integration with key suppliers and logistics service providers. It should work like de facto vertical integration.
- Advanced integration: Process. Gaps in the supply chain are holes where problems can hide and where delays can occur. With supply chains within supply chains and suppliers for suppliers, this is a challenge—but necessary. Integrating stakeholders in the supply chain—participants acting in coordination-- is necessary for the New Supply Chain.
- Technology. LTD views technology as a process enabler and is vital given the length and complexity of the global supply chain. Gaining complete visibility can be challenging since there can be up to 17 parties involved in an international shipment. But there is more. The technology must provide exception management—what is not happening and where is it not happening. That enables attention on potential and real problems. Extending the supply chain upstream means the technology, the interconnection, should also be extended. Technologies--WMS, supply chain execution, and more--must be used and integrated.
- Network alignment and inventory positioning. The present network was built on markets, customers, and conditions that are changing. Trying to force fit the existing network to also handle e-commerce can be a recipe for operating and customer service problems A network for e-commerce must be created, and inventory should be positioned to support the networks. Different SKUs to support sales can be placed in respective networks. Servicing omnichannel markets can raise questions about multi echelon supply chains and what value is created—from a lean perspective—with them and what they contribute—or not—as to time compression and inventory velocity.
- Outsourcing. The new supply chain uses supply chain (not logistics) service providers that complement innovative supply chain service. It is about performance, not low price bids..
The New Supply Chain enables a firm to be more responsive to customers. It compresses time. All of it builds brand and creates competitive advantage and value to customers. Innovative supply chains can support blue ocean business strategies for global e-commerce. All of this means increased revenue and profits.
One-size-fits-all supply chain is facing its end. It served its purpose. The New Supply Chain and Immediacy is faster, leaner, and responsive.
Reality is there is supply chain duality to service channels. The present/existing supply chain is designed to serve its traditional purpose, such as retail stores, while the New Supply Chain delivers the Customer Experience for e-commerce sales.
Immediacy will not stop with e-commerce. It will move across markets, industries, and the world. Companies should choose to be leaders in this innovative change with the New Supply Chain. Followers remain followers.