Preparing digital supply chains for the new normal
26 May 2020 • 5 min read
In April 2020, the ONS reported that 48% of adults in full-time employment in the UK are now working from home - to no-one’s surprise, a result of the Covid-19 pandemic. The move to a nation of remote workers has presented challenges for sectors of all shapes and sizes, and digital supply chains have been no exception.
A key impact has been that additional time at home has seen increased demand for home delivery, and for many digital supply chain companies, this is proving to be the ultimate test for the supply chains powering ecommerce capabilities.
Adapting to the new normal
Prior to COVID-19, purchase behaviour for many industries was orientated around a Monday-to-Friday, 9-to-5 working week, with more people at home over the weekend. Since the world went into lockdown, this pattern has been disrupted. There’s no clear view of when normality will return, or what that new normality will look like.
In the new normal in which we find ourselves, consumers are less reliant on weekend deliveries. Our new, flexible work-at-home routines mean we are currently able to accept home deliveries throughout the week.
So, whilst before the digital supply chain had to accommodate weekend peaks, this is no longer the case. In fact, Covid-19 has presented the opportunity to create and seize a flatter weekly order profile.
The advantage of a flatter order profile
There are many benefits to having a flatter order profile.
With a flatter order profile, the weekend peak no longer dominates how companies arrange their capacity. Instead, companies can re-evaluate how they align people and resources more consistently across the course of a week. This can create new opportunities to achieve operational efficiencies on a daily basis - not just at the weekend.
With an order profile that has peaks, you’re more profitable on your busier days. On quieter days, you still have to pay for your staff and utilities, but you’re not making as much profit to balance out overhead costs, due to less orders.
When you have a flatter order profile, ideally order levels on your previously quieter days have increased, which means you’re now balancing out overhead costs throughout the week, not just on your busier days. This means you have higher profits and are able to lower order costs, which is beneficial for customers.
Preparing your supply chain
In the current volatile climate we find ourselves, for an organisation to adapt their order profile, transparent supply chain information is essential.
And whilst assessing capacity is unique to every business and based on multiple variables, below are some of the key areas to focus on to leverage the data you already have, now.
1. Create risk profiles for Stock Keeping Units (SKUs)
Delivery options are created when retailers identify available capacity and present them as specific delivery windows for the customer.
However, we have already seen (and are likely to continue to see) select SKUs become limited in the weeks to come if there’s not enough labour or resources available in the supply chain to process them. Collaborating with suppliers can help to identify the likelihood of this, creating a risk profile for certain SKUs that in turn helps to ensure you can serve orders customers have placed.
Good collaboration starts by using the forecast with suppliers to identify purchase order requirements. This forward-looking window is dynamic - being shorter, for example, for short shelf-life products. To firm up and increase the accuracy of this forecast in the current circumstances, many retailers are encouraging customers to reserve slots ahead of time and/or bringing order cut-off forward.
Suppliers should also identify what demand they are able to meet with confidence, and what stock may have a variable supply. If the tolerance on variability can be defined, even better. Retailers can use this to improve risk profile and map alternatives. This would then provide the opportunity to influence purchase choice based on availability.
2. Identify next best alternative SKUs
SKU alternatives can be identified as the same product from a different supplier or the next best option, and product specifications can be compared to identify and match SKUs when one becomes unavailable. Alternatively, make use of existing purchase data to identify what customers have previously bought when the desired SKU was unavailable.
Based on the desired delivery slot, the availability of each SKU can be used to influence purchase options. Commonly, products are displayed according to price, brand, rating or frequency of purchase. Listing SKUs with weighting applied according to availability could help to spread demand per SKU, aiding fulfilment.
3. Spread demand across products
Already, as highlighted by the Harvard Business review, supply chains are seeing the knock-on effects from the closure of manufacturing hubs in Asia. We will continue to see a delay of the stock coming through once they reopen due to the shipping time. In the meantime, we rely on inventory buffers.
One tactic to manage this is to spread demand across products, which means that a retailer is less reliant on a single supplier delivery. Operations in turn face less pressure to process a large volume of a single SKU in one delivery window, and this ultimately means there will be better fulfilment for a greater number of orders across the week.
4. Cross-collaborate internally
Digital supply chain management needs to be cross-collaborative to be effective, especially during the unprecedented climate created by the coronavirus pandemic.
For a business to operate smoothly, its teams need to be aligned on everything from stock levels and ordering peaks, to warehouse capacity and marketing strategy. Misalignment between teams can create bottlenecks that hinder productivity, the ability to fulfil orders and maximising capacity.
Using the data you have cross-collaboratively to market the right product at the right time can enable operations to benefit from better efficiencies, with demand spread across SKUs and orders spread across the week.
As mobilisation restrictions are reduced, demand may return to being more elastic for home deliveries.
However, for the foreseeable future, customers are set to have different routines with more time at home for a longer duration. This could be the start of new habits, and for retailers, an opportunity to influence purchase behaviour and optimise their supply chains accordingly.
The road to recovery is going to be different for every country, and each sector. Data and technology provides the insight and means to scale and shrink according to the cyclical pattern of the coming months and perhaps years. The digital supply chain network needs to be ready to utilise this capability to the full - to not only meet fast-moving demand but also to still provide customers with choice.