Role of technology in supply chain and customer satisfaction
Many experts predict that India will be the next global economic powerhouse by 2025. The growing economy and the evolving environment come with their own set of opportunities and challenges. There are several critical elements that shape the future of supply chain.
Traditional supply chain billing, which is inflexible and prone to human error, is a major setback in the entire process. An ideal billing software of the future would enable real-time communication between all the components of the supply chain. Automation is the need of the hour, easy access to data can bring down the retailer’s cost during each step of the supply chain cycle. Modern billing solutions eliminate human intervention, decrease chances of error, help meet quality standards, enhance customer experience and are cost-effective for the retailer.
The supply chain goal for any retailer is to simplify and maximise the effectiveness of the whole process for enhanced customer experience.
Customer experience and supply chain
Customer experience is intricately linked to the supply chain. Unless the retailer fuels his supply chain with new and innovative products, he will end up with a disappointed customer who will quickly change his loyalty to a retailer who keeps pumping new products in his stores using the latest technology.
With an increased demand for faster and more accurate order fulfilment, IT tools can help offer better customer service by precise tracking. Artificial Intelligence is also making its way into the supply chain industry to provide advanced customer service.
To ensure stock availability, retailers should define an inventory level as the threshold beyond which the SKUs need to be replenished, and this can be done using technology to track the SKUs. Verma mentions that a successful supply chain depends on discipline and exigency management. Despite the pipeline inventory and a great strategy, if the customer does not find a product on the shelf, it is a stock-out. On-shelf availability during business hours is vital for great customer experience.
Talking about the FIFO maintenance, Verma says, “FIFO implies that oldest items are sold first with respect to their manufacturing date. None of us likes to buy old-fashioned apparel or a near-expiry product. We are inherently in love with freshness around us and expect same to be considered by our service providers. FIFO is a powerful tool to differentiate a retailer from others, and it must be applied and followed across the supply chain.” With the two tasks handled well, a retailer converts a happy customer into a loyal ambassador for the store, he adds.
He further adds that customers today need the right product or service within the right time, at the right cost, using the proper process and technology. Getting this right ensures customer expectations are met. If any of this fails, it causes a problem by not meeting customer expectations. The primary focus of the retailers should be to exceed customer expectations and offer a distinct experience, but it is essential that the entire process be fully automated, as having a combination of manual and automated systems is not scalable. Manual processes tend to fail and impact the entire supply chain ecosystem.
Empty shelves or poor on-shelf availability is a major deterrent in winning customers. “With thousands of SKUs being sold, retailers today face the massive challenge of accurately forecasting their demand at the store level. This could happen due to low technology adoption by the retailer. Having proper historical data, as well as analysing the same, keeping in mind the ever-changing consumer demand patterns, is the way to go,” Kanaujia points out.
Safexpress offers Express Distribution services ideally suitable for the requirements of e-commerce, offline retail, department stores, malls, hypermarkets and omnichannel retailing. The service ensures minimum transit time for the movement of goods to any part of the country. “Our fleet of over 6,000 vehicles traverses over 8 lakh kilometres every day, and covers every square inch of India, thus enabling retailers to spread their business in newer geographies,” says Kanaujia. A majority of Indian retailers avail the supply chain and logistics services from Safexpress. The list includes brands like Benetton, Tommy Hilfiger, Arvind Lifestyle Brands, Aditya Birla Fashion & Retail Limited, Raymond and many more. Express Distribution and 3PL services like warehousing are the services that are most commonly used by Indian retailers, he confirms.
He further adds, “Our 3PL services are also hugely preferred by these segments. These services are backed by 34 state-of-the-art Logistics Parks spread across all key industrial hubs in India. Many of these 3PL services are tailormade as per retailers’ needs, like store-ready delivery, mall delivery, and so on.”
Changing customer expectations
Verma of Snapdeal says customer aspirations have seen a drastic change in e-commerce. In the past, pricing and shipping information clarity was number one reason for cart abandonment, 50 per cent of people wanted to have a “search feature” on e-commerce websites while 41 per cent shoppers were actively asking for “customer reviews” among other expectations.
“But, can we imagine an e-commerce business without these features today? Whatever is relevant today may not be valid in the coming years. As a business, we put our best efforts to fulfill today’s expectation and gear up for tomorrow.” Listed below are some of the trends in e-commerce industry which come across as an opportunity for online players.
a. Omnichannel: Very often we start browsing products on mobile and end up ordering through laptop and vice versa. This is primarily the result of a change in customer’s lifestyle. Every e-commerce company must have its presence in multiple channels.
b. Social commerce: Social media has become an important part of our lives. According to a recent survey, over 20 per cent of shopping happens post checking of products on social media. E-commerce can embrace these trends and can integrate online shopping with social platforms.
c. Effortless ordering experience: Gone are the days when running a batch or updating inventory at an interval was cool. To remain in the game, retailers need to buckle up and make some major technological changes to give customers an effortless experience.
d. Wide assortment: “Jack of all trades” is racing ahead in e-commerce. Customers expect businesses to have everything available on their portal. If a business has opted for a niche segment, it must have the widest possible assortment to stay relevant for customers.
Multiple fulfilment models as below should be looked at:
i. Quick delivery: Having FCs in demand zones, building own logistic arms and mushrooming last mile companies make for speedier product delivery.
ii. Brick and mortar experience: Consumers are used to “touch and feel” factor before purchase and expect the same from e-commerce. There has been a rise in open delivery and easy returns to give a brick and mortar experience.
iii. Pricing: Customers expect all sort of convenience for free, and most of the time they expect e-commerce businesses to offer additional discounts.
Retailers who have the bandwidth to predict these demands and build a solution, will rule the market, concludes Verma.
Automation of supply chain
Sharing his views on automated supply chains, Verma agrees that automation is establishing its hold in every industry of the economy and supply chain is no exception. “Robotics and artificial intelligence can handle repetitive tasks with superior productivity and reduced errors. Growing use of IoT and new software applications are reducing the need for administrative and clerical jobs, Sensors, RFID tags, robots, cameras and smart solutions are reducing the need for manual inventory counts, and cloud-based solutions are eliminating the need for some accounting and order entry positions.” Though need of automation is primarily driven by scale and business complexity; he feels he would prioritise the following for automation:
1. Routine clerical tasks – Updating inventory, calculating order quantity, data entry in inventory systems, managing item files manually are some of the examples which consume thousands of hours of the workforce. Over a period of time, routine clerks start losing focus and businesses end up paying for it. Anything routine must be automated, and person-hour should be used for more productive tasks.
2. Warehouse operation: Warehouse executes most of the tasks in supply chain starting from receiving, quality control, returns, waving, picking, packing and shipping. All these activities are repetitive in nature and hence should be automated as early as possible.
3. Transportation: Transportation is an integral part of the supply chain that plans, implements and controls the efficient, effective forward and reverse flow of goods and information. Automating stock movement planning can strengthen the brand image and bring positive impact to bottom-line of businesses.
The automation requirements vary according to several factors, but the core objective remains the same, i.e. tackling repetitive tasks through technology, adds Verma.
Preventing/ minimising transit damage
A lot of SKUs are damaged during transit in the supply chain process. Retailers can reduce or prevent the transit damage by using technology. Sharing his views on the subject, Mayne adds that ShopClues uses technology to categorise products for transportation. When a merchant uploads a product and enters the catalogue based on the product type, the merchant is trained to ensure safe packaging using the ShopClues university portal, while the Decision Support system (DSS) allocates the order to the right 3PLs for reliable transportation. “This technology-based process greatly reduces the transit damages. We also design and provide a range of packaging on our portal that is available to our merchants to ensure safe transit of their product,” says Mayne.
Verma highlights that mom-and-pop stores have dominated retail for centuries and manufacturers and distributors have controlled the supply chain and related damages in a traditional manner. However, with the advent of modern retail (chains) retailers have started making use of technology in their own distribution network. To understand this better, one must look at the retailers’ distribution process to know about the nature and cause of the supply chain damages. “A retailer either takes product delivery at a store or a distribution centre. Further, delivery accepted at a distribution centre (DC) is either stored or cross-docked for store delivery. From the stored inventories, DC segregates the inventory required for every store, clubs the segregated inventories with cross-docked inventories and prepares a container for dispatch. Now imagine this, there is a container filled with 100s of SKUs of uneven sizes, different quantities, with and without master boxes and plenty of air… Every time there is acceleration, break or jerk; internal movement and friction are inevitable,” he explains.
He then adds that arresting supply chain damages needs a combination of strategies and thorough cost-benefit analysis. “I practice and recommend the following measures to curb supply chain damages – use standard vehicle, crate and air cushions to restrict internal movement and friction; SKU rationalisation to avoid break-pack shipments to store; assorted SKU packaging by manufacturers; predefine SKU fragility and opt for a loading strategy; train and retrain product handlers i.e. loaders and unloaders and infuse discipline among the people involved in supply chain process.”
Specific challenges faced in an e-commerce supply chain
E-commerce is evolving with every passing day and hence throws a new challenge to its supply chain managers every minute, says Verma. New customers, new geographies, new sellers and new competitors together make supply chain environment of the e-commerce very exciting. According to him, supply chain challenges specific to e-commerce are:
1. Planning – Everything in e-commerce demands planning, but most of the e-commerce retailers do it on an ad-hoc basis due to unavailability of historical data. The challenge is expected to stay till the market matures and uses technology to capture data.
2. Order cancellation and returns – To gain customers confidence, e-commerce companies offer easy returns. Returns and order cancellation together contribute ~ 18% of total order which stresses supply chain and reduces productivity.
3. OEM (Original Equipment Manufacturer) packaging – Manufacturers designed packaging to cater to traditional market followed by redesign by retail chains to serve modern trade. The current product packaging is a complete misfit for e-commerce, leading to secondary and tertiary packaging on every shipment.
4. Right-fit secondary packaging – E-commerce is the marketplace which enables sellers to reach customers across the country/ globe. This model entails product travel at length, which raises the need for secondary packaging. Companies deal with millions of products and having a one-size-fits-all approach is next to impossible.
5. Postal shipments – Multiple orders and multiple deliveries leads to mobilisation of significant resources and thus increases the cost. In several cases, fulfilment cost is more than the product value.
6. Multiple fulfilment models – Customers expect delivery as soon as they place the order. Fulfilment centres (FC) managed by the company manage meeting customer expectations while third-party suppliers lead to disappointments. Companies cannot work without third-party fulfilment models till demand matures.
7. Transit and handling: The product changes many hands in the order-to-delivery journey. Some handle the product with caution while some are careless. Frequent damage and pilferage is a result of multiple handling in e-commerce.
Use of right technology can address the above problems and help find long-term solutions. “We can expect the market to mature in the next two decades and e-commerce supply chain at par with modern retail supply chain,” says Verma.
Mayne also agrees with Verma that the critical supply chain challenges faced by e-commerce retailers include lack of technology. He adds that transportation reach beyond tier 2 locations is another challenge. He feels that while it has dramatically improved over the last few years, much more needs to be done to make the supply chain more efficient and cost-effective. To maximise effectiveness in the supply chain, ShopClues uses system-designed processes, algorithms, decision support systems, machine learning and keeps up with the latest technology trends.
Commenting on the critical supply chain challenges faced by retailers, Kanaujia says, “Due to the significant increase in customer expectation and demand over the last decade, time-definite delivery of goods has become the biggest challenge for the retail supply chains today. Also, the demand for last mile delivery continues to be an uphill task for the industry. Among the retail segments, food and grocery, as well as fashion and personal care segments face a higher number of supply chain challenges.”
Verma adds that with the globalisation of manufacturing processes, retailers entering newer zones, e-commerce pampering people to get online and information flowing at lightning speed; global key supply chain challenges that all retailers encounter are:
1. Dynamic market – Consumer behaviour is impacted by social, cultural, psychological and personal factors that are quickly changing due to technology and globalisation. Social media is adding pressure on consumers to conform to changes and pushing companies to utilise various digital sources of information.
2. Globalisation – Amid the trade war between US and China, India imported products worth $426 billion in 2017. The rapid yearly growth of global import is due to globalisation in the supply chain. Companies are open to manufacturing in a foreign land if it leads to savings. Not just manufacturing, having a supplier base in different countries further complicates the supply chain.
3. Compliance (state and nation) – GST has brought great relief to honest retailers/ brands as otherwise having business in multiple states of India was much more complicated than having business in numerous countries. The challenge yet exists for retailers and manufacturers with business in various countries.
4. Environmental concerns – We recently juggled through the plastic ban in Maharashtra, Sikkim has banned plastic for the last couple of years, and we expect many more states to come up with similar or stricter reforms. Managing P&L and environmental concerns together adds to the complexity of supply chain systems.
5. Organisational priorities – Supply chain is often considered a support function in retail and consumer goods industry. Often supply chain teams are pushed to follow plans prepared by other functional managers who have a shallow understanding of the value chain.
While fast-changing market, globalisation and compliance are part of KRAs; environmental concerns and organisational priorities are often neglected. A focused group working on last two will support seamless sailing of retailers and brands, says he.
Mayne believes that for many retailers a large part of the supply chain system still depends on very basic technology that uses PC at the operational locations. The methodology is no longer viable if end-to-end real-time monitoring is required. Technology, such as using Apps working on mobile devices, having wireless connectivity using Wi-Fi or 4G network connectivity to link the entire end-to-end process, needs to be adopted in the supply chain. Similarly, a lot must be done to ensure reliable 3/4G wireless data networks cover small towns and villages across the country to support the use of technology in building an effective supply chain.
Tackling supply chain challenges in the post GST era
Safexpress also offers solutions to help retailers facing supply chain challenges in the post-GST era. According to Kanaujia, the company has been GST ready for several years. “Over a decade ago, we had kick-started a warehousing revolution in India, in anticipation of GST. During this period, we have created 34 Logistics Parks, spanning over 13 mn sq.ft., at key industrial hubs across India. Our Logistics Parks have been strategically developed, keeping in mind post-GST operations. Today, these Logistics Parks are playing a big role in enabling the economic growth of the country. We have supported several retailers in the consolidation of their warehouses post GST. Safexpress is also helping them develop new supply chain models for their retail business, which involves direct distribution to retail outlets all over India. Further, we are helping retailers penetrate into the earlier unexplored areas like Northeast, due to our strong presence in even the remotest parts of the country,” he says.
Ever since the implementation of GST, Safexpress has been offering direct delivery to retail outlets across the country. The solutions are well automated. “That said, automation is a continuous process, and as industry leaders, we strive hard to bring in the best practices in automation at all our logistics facilities,” mentions Kanaujia.
A vertical supply chain is the answer to supply chain woes?
Retailers are now going omnichannel to offer a seamless experience between the online and offline space. Successful omnichannel retailers must identify the inventory level in the warehouse and the retail store, evaluate the order fulfilment cost and customer location for delivery without any stock-outs for other customers. While modern retailers and e-commerce are betting big on digital technologies, digitisation poses the biggest challenge of cyber risk that steps in considering the interconnected networks. This can be overcome by developing in-house infrastructure/ software and close coordination between all the parties involved in a supply chain. In this age of Big Data and AI, retailers need to up the ante and use the latest technologies like robotics to point out empty shelf space.
Vertical supply chains (a company owned supply chain) can also help in preventing stock-outs. Retailers like Zara and Adidas use RFID tags on all their items, and this maintains an updated inventory count and reduces shrinkage. Having a vertical supply chain, the two retailers overcame the “who pays for the tags” obstacle in implementing RFID.
The vertical and modern supply chain model banking primarily on technology will be the major catalyst for an effective and smooth supply chain.