Analytics and Multichannel Fulfillment Top Supply Chain Innovations
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- Lewis Lamb
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1 Analytics and multichannel fulfillment are top priorities for supply- chain executives, but talent shortage and a focus on cost reduction are inhibiting growth for some, says a new report on innovations that drive supply chains. In the 2014 MHI Annual Industry Report, MHI and Deloitte surveyed over 450 executives from large and small businesses in numerous sectors to assess their views on innovations like supply- chain analytics, mobile supply chains, additive manufacturing technologies (also known as 3- D printing), supply- chain sustainability and multichannel fulfillment. Supply- Chain Analytics At the top of the priority list for executives is analytics, with about 80 percent of respondents stating that this is at least moderately important for their companies, and 85 percent planning on continued investment over the next three years. The right data can provide important businesses insight on how they can gain a competitive advantage, by showing where performance is lacking and suggesting where operations can be improved, in real- time. The growth rate for analytics adoption can be attributed to the fact that the technological ability to obtain and analyze data is simply getting better with time. Supply chain professionals now have access to a larger volume of important statistics and better tools for interpreting the information. In addition, storing the data is much less expensive than it used to be, and the processing power of hardware resources is faster.
2 Despite the heavy interest in supply- chain analytics, less than 50 percent of respondents have proper strategies in place for determining and measuring key performance indicators, and many don t have high- quality data to analyze. In order to overcome this obstacle, MHI recommends that executives first determine which areas of the supply chain can benefit from analytics, then decide which metrics are necessary to make improvements and which tools are required to obtain that data. Key Takeaway: With high volumes of data available to show strengths and weaknesses, virtually every aspect of the supply chain can be optimized and help companies gain competitive advantage. Multichannel Fulfillment The number- two priority innovation is in multichannel fulfillment, a result of the increased demand from consumers for a seamless purchasing experience. About 90 percent of respondents in the Retail sector plan for continued investment in this area in order to improve the back- end fulfillment process. Optimizing speed and responsiveness, and creating better inventory visibility (with companies that manage multiple fulfillment centers, the ultimate goal is to operate as a single unit ) are important components of this priority. What seems clear for the industry is the need for omnichannel operations, in which the distribution center can provide same- day and next- day service alongside ordinary replenishment and other operations, said Kevin Gue, editor- in- chief of the U.S. Roadmap for Material Handling & Logistics. Order- to- ship response times will be the new metric for distribution center design and operations. What stands in the way, however, is the integration of new technology, a difficult task with old systems that becomes even more problematic with the heightened focus on cost reduction. In fact, controlling costs is a major priority for over 70 percent of respondents, which in turn may be limiting growth and competitive advantage. According to the report, while many companies are making investments in supply- chain innovations, due to pressure on controlling costs, the investments are just enough to stay afloat and do not contribute to long- term performance and competitiveness. MHI recommends companies should take a holistic approach to supply- chain innovations, treating them as integral parts of a comprehensive program, rather than focusing on the ROI of individual initiatives. This is truly a case where the whole is greater than the sum of its parts.
3 Key Takeaway: Supply chains should have a goal of synchronizing operations at multiple fulfillment centers, but focus on cost reduction inhibits many supply chains from meeting consumer demand for fast and seamless service. Sustainability
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5 Sustainability is another innovation put on the back burner due to cost- reduction barriers. While about 80 percent view sustainability as important, a similar amount of respondents said that it is a low priority because of gaps in capability and inability to measure ROI. MHI suggests that despite its low priority, companies should pursue investment because these types of initiatives (i.e. renewable energy sources, fuel- efficient vehicles, or redesigned packaging) reduce waste and have a very direct tie to cost savings. In our experience, the tangible cost savings and operational efficiencies resulting from sustainability initiatives are in and of themselves generally more than sufficient to justify the investment, the report states. Additionally, sustainability is as much about increasing the value of their overall brand. Key Takeaway: Sustainability initiatives prove helpful with long- term cost reduction for supply chains (and creates positive associations with the brand), but are not implemented due to short- term focus on controlling costs. Mobile and Machine- to- Machine (M2M) Technology
6 Gaps in capability are a major barrier for many companies when it comes to implementing innovations, including mobile and machine- to- machine (M2M) technologies. Approximately 70 percent of respondents claim that these gaps are holding them back from embracing this technology, with the highest being in the Warehouse Operations, Inventory Management and Transportation sectors. The main issue is their existing infrastructure, which will need to be overhauled in order to properly integrate new mobile applications with end- to- end solutions. Supply chains in these sectors have created training programs, and about a fifth of them plan on hiring mobile- savvy talent.
7 Key Takeaway: Most supply chains are held back from employing new time- and money- saving mobility technology due to lack of training and trouble integrating with current infrastructure. Talent Shortage Talent shortage is a major issue in supply chains that is expected to progress as the field grows. The report notes that there will be 1.4 million additional supply- chain jobs by Why are supply chains having such a hard time finding the right kind of people? Technology is swiftly changing, and the differences between younger and older workers are stark. While younger staff may be more tech- savvy and able to adapt more quickly than older staff, the latter has the knowledge and experience that the younger set lacks. Taking this disparity into consideration, MHI recommends taking a team approach to talent, mixing and matching professionals with various required strengths rather than delaying innovation in a futile search for the perfect person. To begin, executives should look three to five years ahead for the organization (accounting for pace of innovation and attrition ) and assess capability gaps and the skills required to close them before seeking out new talent. Key Takeaway: Older employees and younger staff have a mix of knowledge, experience and ability to understand new technology. They make up for what each other lacks, thus executives should assess their talent as a team and hire based upon gaps in the team s capability. Additive Manufacturing Technology (3- D Printing) While sustainability and M2M technology are high- interest innovations that must be low priority due to cost and talent, additive manufacturing technology (3- D printing) is low priority simply because most executives agree that it is not strategically important. Although it has very useful applications in medical and dental sectors, only about 5 percent of respondents see 3- D printing as very important. Despite its sustainable qualities (3- D printing helps reduce waste by manufacturing items to order rather than having the possibility of over- producing products), the study shows that only 16 percent of respondents that could use the technology are enthusiastic about the innovation. However, MHI encourages companies to monitor the growth of this technology and prepare to invest when the technology matures and additional practical applications become available. Key Takeaway: 3- D printing is an interesting innovation, but executives are not yet sold on its necessity in the supply chain.
8 Conclusion The report makes it clear why analytics is the number- one concern for supply- chain executives it can be used to determine the value of each of the other innovations discussed in the report. We are now able to obtain a high volume of data about virtually every aspect of the supply chain, allowing executives to make informed decisions in real time about how they can optimize multichannel fulfillment, determine whether sustainability initiatives are helping to control costs, and discover how mobility can enhance supply- chain efficiency.
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