Consumers in every industry understand that firms have access to advanced software and technology, and are growing the capacity to automate their operations to promote immediacy.
Those consumers leverage this to communicate that they expect such immediacy. They want firms to address and respond to their demand fluctuations in real-time. Products and services need to be ready, available, customized, and rapidly delivered to them. With that being the requirement, firms that do not utilize the proper infrastructure to provide this will continue to lose market share.
Consequently, a hiccup in the supply chain results in a devastating revenue loss. Years ago, if one of the cogs in a complex supply chain were to momentarily be disrupted, it would just culminate on a "backorder", and customers would wait a few extra days. Now with the popularity of sites like Amazon where they can source inventory from numerous sellers, any backorders result in loss of business.
Linear supply chains no longer work the way they used to. They involve bottlenecks and inefficiencies. This is why organizations have began to look into a new phenomena to leverage the connectivity and transparency of the IoT. This new cloud-based solution uses big data and demand trends to source and purchase supply chain components.
This is the omnichannel supply chain.
This method suggests that multiple suppliers and logistics agencies can be connected through a cloud-based hub; which intrinsically is perfect for solving scalability issues. With enabling each touch point to share data on the fly and communicate issues, problems are averted at the source. Enterprises who have employed an omnichannel strategy have noted the following benefits:
Control and removal of locational barriers: Controlling orders and communication via a cloud solution results in irrelevancy of warehouse locations. With suppliers and buyers working so closely together and sharing data, third-party logistic providers are easily able to join the mix to deliver for both sides; they are able to provide the exact amount of an item required for a manufacturer at a moments notice.
Enhanced enterprise flexibility: Every company needs a supply channel designed specifically for their industry, customer base, and efficiencies as well as inefficiencies. Mass production is entering an age of near obsoleteness. Small runs of manufacturing is becoming a commonplace in many industries, with time-to-market becoming more of a pressing matter.
Real-time data and enhanced awareness: This collaboration and data sharing allows manufacturers to make more informed decisions and provides them with supplier data after every purchase order; allowing firms utilizing multiple suppliers to compare performance. Manufacturers can also mitigate the guesswork when planning production runs by utilizing real-time data and predictive market analysis.
Preparation for the future: Business leaders understands this practice is the future of supply chains and manufacturing efficiency. They are putting these omnichannel systems in place now to lay the framework of future success for years to come. This places them in a position to change their business model to a more as need-basis for consumer demand and new technology.
We at Mainspring Solutions have built a costing model that addresses the overall distribution costs of omnichannel decisions and operations. Costing includes:
- Capital equipment
- Facility (square footage, other)
- Administrative (Office)
- Labor Variable (packaging, supplies, etc.)
- Material Handling Comparison
This is all rolled up and surmised into a unit cost level. The variable inputs of this include the following:
- SKU qty
- Transportation cost
- DC costs as a percent of sell price
- Sell price calculator
This adaptation of omnichannel supply chains is the forefront of best practices in the manufacturing space for years to come. Adapting these practices will allow companies to thrive in the coming years. For more information on our view on organizational adaptation, see our article Adopting a Culture of Adaptation.