Customers were prepared to wait several days – or longer at peak periods – so long as the goods they received were delivered within the timeframe stipulated by the supplier and were exactly what they’d ordered.
Customer expectations changed the minute leading retailers began to offer next and, later, same day delivery as a standard option. Now, customers still demand accuracy, but they are not willing to defer gratification for any longer than necessary.
They want exactly what they’ve ordered, delivered in pristine condition and on time. Give a customer an estimated date and time of delivery and they’ll expect it to be met.
Meeting customer expectations is therefore, arguably, the most important factor in determining supply chain success.
That means fulfilment centres, warehouses and logistics systems must sustain the same level of optimum service whether they’re dealing with a steady, manageable flow of orders or a massive upsurge.
While the obvious answer may be to invest in digital technology, automation and other Industry 4.0 tools, it may be – or seem to be – beyond the capabilities of SMEs without the money, time and skilled resource to invest - or indeed have the ‘licence’ to innovate – which are more readily available to bigger, less budget-conscious competitors.
What happens when you or your clients are faced with increased demand? When customers are saying, figuratively speaking, “jump”, for many, there is only one response: “how high?”
When orders are pouring in, they’ll make every effort to squeeze input costs to their limits, pile work onto existing staff, or cut into bottom-line profits by taking on the expense of temporary staff.
Customers might be temporarily ‘happy’, but at what cost to the business? It’s a reactive and fragmented approach that, ultimately, is unsustainable and causes more longer-term problems than it resolves.
And what happens next time there’s a rush?
Given that demand tends to follow a reasonably regular pattern – higher at certain times of the year, lower at others – and even ‘unexpected’ hikes can, to some extent, be predicted, why isn’t the sector better prepared?
You have the basic material they need to fuel and inform forward planning, don’t you?
The simple answer is that, in the past, there has been a lack of tools to transform data into knowledge.
Managers traditionally work on “best guesses” based on a plethora of unconnected spreadsheets, historical reports and information that, by the time it was being used, was out-of-date.
Siemens believes that digitalisation is the answer. With digitalisation, what used to be static information is transformed into dynamic knowledge that can be factored into planning.
Powerful digital tools can be used to capture and convert information on changes in demand and identify trends into predictive and prescriptive analytics.
Rather than constantly being buffeted by unforeseen change, decision-makers are armed with the knowledge and insights they need to plan a timely, effective and detailed response.
Size and wealth are no longer insurmountable hurdles stopping SMEs from competing with industry leaders.
Digital tools, such as predictive analytics and predictive maintenance ensure fulfilment centre companies, and the managers with responsibility for logistics and fulfilment performance, are as well-informed as any competitor.
It may be a cliché but it’s still true to say that with knowledge comes power. In this case, power means operating from a position of strength and always being ready and able to compete.
Digital simulation tools allow decision-makers to create virtual systems and supply chain models in which they can run “What if?” scenarios that replicate real-world situations.
A simulation takes all the guesswork out of the planning process and allows planning managers to assess the most effective approach in minute detail. In a nutshell, it allows them to put their plans to the test before investing time, money and effort.
Furthermore, one area where the digitalisation argument always gets attention is effectively tackling downtime.
Downtime can have a disastrous impact on productivity and throughput, especially during peak periods.
The problem goes beyond the obvious loss of productivity. Other work in the centre will be affected as managers juggle schedules.
Even when the problems are resolved, staff may have to work overtime just to catch-up. The costs mount as profitability dwindles.
Predictive maintenance can help reduce the potential for equipment failure by analysing real-time production and performance data to identify patterns and predict issues before a minor problem turns into downtime.
With predictive maintenance, engineering managers can identify and resolve risks or issues before they turn into the kind of problem that causes expensive downtime.
They can also ensure the correct spares are to hand and that engineer being called has the right skillset for the job. Those two elements alone will generate massive savings
Because managers have an accurate and in-depth understanding of everything that’s going on in each piece of equipment, there’s no need for the fulfilment centre to be disrupted by “just in case” maintenance.
While the benefits of digitalisation are clear, we’re talking about an industry that is, generally, still in the embryonic stages of transition.
There are more routes to digitalisation than an all-or-nothing approach to implementing digital technologies – and that is continuous improvement in the right areas.
That’s an area I’ll be expanding on further at our Digital Talks conference in Liverpool on June 11. You will also get to hear from Andrew Selim from Ocado and Bart Schouwenaars-Harms from Amazon about this and other Industry 4.0 supply chain issues.
If you are attending, I’d love to hear your thoughts as well.