The rise in e-commerce has brought about significant change. Not just in shopping behaviour, but in all the associated processes that are involved in making sure the items purchased are delivered in full at the right time and to the correct address.
Not so long ago, if a high street store opened its doors on a Sunday it was seen as a luxury, yet now consumers can shop 24 hours a day, seven days a week and have goods delivered to their door the very next day, or in some cases within 90 minutes. Consequently, expectations are high.
If the retailer fails a consumer won’t think twice about going elsewhere for their goods next time.
So with that in mind, companies have to make sure they have the systems and processes in place to ensure they can fulfil their promises to customers.
Alex MacPherson, solutions consulting manager at Manhattan Associates, says: “Multi-channel retailing is the future of the sector, which means fulfilment and logistics operations have to adapt to make it happen… A multi-channel strategy is essential for companies to create new revenues and, in the long-term, for them to survive. The impact of this is that changes need to be made throughout the supply chain, from warehouse to distribution to in-store.”
One of the biggest challenges for internet retailers is having to go from delivering in bulk to making a much larger number of smaller deliveries that go direct to customer.
Philippe Bentz, senior business consultant for Kewill Transport and Warehouse, says: “This phenomenon puts the emphasis on fast access and delivery of goods, but also transfers the transport and distribution requirements from B2B to B2C, with the extra complexities of home deliveries versus business deliveries, and the necessity and increased agility for logistics service providers offering B2C services.”
Paragon has responded to this move by developing Paragon HDS (home delivery system) that is designed to allow retailers to offer cost-effective timed deliveries to customers.
Managing director William Salter says: “The retailer can offer delivery windows that fit their resources using real-time route optimisation so that the customer does not have to wait in all day for their goods to arrive and this also reduces the chance of failed deliveries.”
While it may have its complexities the multi-channel move has also opened up many regional retailers to a much more global audience.
With that comes the need for more joined up systems though. Sean Sherwin-Smith, director of IT at Pall-Ex, reckons: “The panacea would be a supply chain standard for barcodes (and RFID) that allows a plug and play approach, a bit like IP addresses, whereby any party in the supply chain can use a single unique tracking identifier of a consignment that is compatible irrelevant of carrier, warehousing supplier or after sales provider.”
Gerrit-Jan Steenbergen, vice president of innovation at Zetes, makes a similar point when it comes to managing returned items, particularly as around a third of goods bought online are sent back.
One of the main issues he raises is the problem of counterfeit branded goods.
“In this case, the customer keeps the authentic model and returns a brand new but worthless fake. Without the use of a unique identifier to alert the retailer of possible counterfeiting, this is a difficult problem to eliminate. However by using a serialised identifier within a hidden RFID tag, the problem is resolved – an individual item can be uniquely identified as genuine and matched to its purchase history. A solution such as this is easily affordable for retailers selling high value items. The main consideration is for tags to be securely hidden to ensure they cannot be dismantled and re-applied onto counterfeit goods.”
The overriding focus points for all companies in the current climate are reducing costs and improving visibility, which more often than not go hand in hand.
“Cost control should always be at the top of the agenda – as our Western economies’ deficits remind us,” says Bentz.
“Visibility in itself reduces costs as it allows the actors of the supply chain to get informed directly. By investing in modern supply chain tools, companies can enhance visibility and reduce the amount of time spent on reporting thus ensuring their customers are informed efficiently and cost effectively.”
As such, Keith Sherry, general manager of BT Supply Chain Solutions, reckons technologies focused on supply chain optimisation and inventory management will be key investment areas.
“With companies looking to more tightly manage their balance sheets and loans becoming more difficult to get, companies are looking at different ways to release cash more quickly. Typically around ten per cent of a manufacturer’s cash is tied up in their supply chain, so reducing and optimising inventory is a key priority. This can only be achieved through better visibility of both supply chain processes and inventories – both areas where technology is playing a key role.”
Another way of releasing capital has been to opt for a cloud-based software system on a pay-as-you-go model.
In fact, software as a service is rapidly becoming “business as usual”, according to Jez Tongue, partner at @logistics Reply.
“Rather than a significant capex investment, a hosted platform requires minimal upfront cost. Instead, operating expense is smoothed over a number of business cycles, in which users pay as little as they wish – with no contractual constraints. The speed at which a system can be installed is another benefit – in some cases it can be up and running in four to six weeks, and be paying for itself in less than three months.
While, the recession may have been a catalyst for the uptake of SaaS systems, the general feeling is that it is here to stay.
Kewill’s Philippe Bentz points out, that like most “rental” models, the cost of ownership should be calculated carefully over time, but he says that “when you consider the low margins seen in some industries such as logistics, transport and distribution, the SaaS model [which allows users to avoid] up-front investment in hardware, software licence and maintenance, is definitely something to consider.”
Manhattan’s Alex MacPherson warns that while cloud technologies are here to stay, that does not necessarily mean they are applicable to all companies or for every application.
“Because of the diversity of different needs within logistics companies, on-premises systems can be the best option in many cases.
It’s unclear how the cloud will develop, but currently the sophisticated functionality and systems that make supply chains more agile are not available through the cloud.
With this in mind, the preference for on-premises technology will still dominate the market for the foreseeable future.”
However, Deltion chief Denis O’Sullivan challenges that view.
“Whereas previously SaaS providers were struggling to make a case for the new technologies around cloud computing, now it is the other way round.
Providers of traditional on-premises and bespoke systems have to show if their solutions are better than cloud applications.”
He adds: “In all types of application, whether supply chain related or not, solutions providers who did not take the rise of the cloud and SaaS seriously are finding that they have missed the boat and are trying to catch up.
It is a major problem for them because deriving a cloud solution from a standard solution is not very straightforward.”
The answer, according to Claire Umney of AEB (International), is a hybrid system where cloud computing applications are used alongside more traditional platforms.
“Hybrid solutions connect the relevant SaaS functionality as seamlessly as possible to the existing IT infrastructure so that these applications aren’t just isolated add-ons, but become easily activated plug-ins with all their benefits,” she says.
“It seems the ideal approach is to pair existing, conventional systems with latest SaaS functionalities to keep investment costs low and at the same time drive continuous improvement. This is a welcome solution for managers and chief executives who like the idea of transparent and predictable IT costs but expect flexible and adaptable solutions without increased hardware and IT support.”
Mobile Technology: Manage your supply chain from your phone
As more companies incorporate cloud-based systems, so too the establishment of mobile technology has improved, allowing the two to go hand-in-hand.
Terran Churcher, chairman of Codegate, points out that processing power has doubled, on average, every 18 months resulting in smaller, more powerful devices.
“Today, leading smart phones from Samsung, HTC and Apple, have considerably more computing capability than desktop computers of only eight years ago,” he says.
“These smart phones include GPS, WiFi, Bluetooth, digital compasses, digital cameras, accelerometers and high definition touch screens. With the right mobile computing solution, including track and trace software, these devices are very capable of interacting with other networked computers to provide warehouse managers with all the tools needed to control their warehouse.”
Another area where mobile technology is coming into play is automation.
Schad was founded in 2007 to develop a global standard for the mobile operation, control and maintenance of automated systems.
Managing director James Hannay, reckons: “Advances in mobile technology are having a big influence on the way warehouses are going to be managed in the future. It is already possible to control automated systems within a warehouse with an ordinary mobile phone linked to an existing SCADA (supervisory control and data acquisition) system monitoring an automated environment.”
The company has developed EXTEND7000, a mobile middleware application that extends monitoring and controlling onto mobile devices such as Blackberry, iPhone, and tablet PCs.
It is currently working with automation specialists such as Vanderlande and Siemens to allow their systems to be controlled using these devices in a number of commercial warehouses and airports.
AEB’s Claire Umney says: “Mobile devices have been an important part of the supply chain process for many years now, but their technical advancement in recent years has shown significant development in their scope of capabilities – in fact to such an extent that their use and the areas for their deployment seem to have no limits.”
Mobile technology can be used within the warehouse for processes such as picking and packing, it can be used in transit for pick-up and delivery instructions or status updates, and it can even be used at management level for decisions on supply chain disruptions and event management.
However, Umney is keen to point out that generally these devices are still required to feed back the data they gather into a central system for further processing, distribution, data completion and archiving.
She says: “Even though the role of mobile devices and mobile computing has gained greater importance in recent years, to support efficient supply chain processes, their most valuable feature continues to be the capability to integrate into the respective ERP/operational systems and to gather and share data in a variety of forms and formats.
“So, while it’s possible and – in some areas – crucial to deploy mobile devices to support IT processes throughout the supply chain, mobile computing at this stage cannot fully replace existing ERP/operational systems, which offer more complex functionality, customisation options and stable system environments.”
While that might be the case, the use of mobile technology does create other notable benefits.
RedPrairie’s supply chain industry director Michelle Campbell says: “The increased use of tablets and iPads for supervisors allows them to spend more time on the floor and is maximising their efficiency which is helping the businesses who invest in these increasingly popular devices. Most applications are web-based anyway so can be accessed and controlled from smart mobile devices allowing control of warehouse functions from anywhere.”
Plus, Stephen Szikora, IT director at NFT, reckons: “Mobile computing on phones and tablets is fundamental going forward to provide visibility of operations and KPIs to management on the move.
This brings other considerations into play, such as information security, accessibility and availability, as well as the varying platforms that we need to deploy to, given that we have no control over customers’ platforms.”
However, he points out that the lack of standards between manufacturers in this area is a concern, and he doesn’t expect long periods of platform stability due to the rapid rate of product development.
Sean Sherwin-Smith of Pall-Ex reckons we can learn a lot about which devices might be most suitable from consumers, as mobile computing has accelerated considerably in the consumer market in recent years.
“We need to learn how users interact and which devices and functions are the most popular because of ease of use, and apply this to business applications,” he says.
“The consumer market is driving graphical user interface standards and user interaction with devices, and business app developers need to embrace this.
It’s a massive advantage when deploying new operational systems if users are already familiar with the basic user principles.”
Networking: The social chain
Social networking is making the transition from the consumer market to the business world.
“With the increasing ubiquity of social networks, technology underpinning platforms such as Linked In, Twitter and Facebook will become embedded within warehousing and other supply chain execution applications to enable the social supply chain,” says Jez Tongue of @logistics Reply.
“From within these applications, users will be able to communicate in real time within the warehouse or enterprise and across the supply chain network to ask questions, raise issues, share discussions and exchange knowledge and best-practices.”
Steve Keifer of GXS, agrees: “One thing we’ve seen demand for is a Linked In-type model that would enable sales representatives to keep up to date. Another big focus will be getting accurate data on suppliers because you don’t always know who your suppliers are in say Japan.”
Keifer reckons social networking could also be used to run contests among suppliers on how to improve certain aspects of the supply chain, because “suppliers are often best placed to see which areas aren’t working correctly”.
Kelly Thomas, senior vice president, manufacturing, JDA Software, says: “Social networking is something which people are definitely leveraging downstream but not yet leveraging into the manufacturing and logistics area and I think our next big step is to understand that.
“Big data is the next revolution – and customers are asking how can we leverage this unbelievable volume of data out there and actually drive value in the supply chain from it.”
Logistics Manager, December 2011