Smashing Linear Dependencies In the Supply Chain
Adapting and surviving during today’s turbulence is directly linked to the agility of your supply chain and visibility into real-time data. Unfortunately, linear dependencies in the value chain are gumming up the works when it comes to a brand’s ability to grow in this fragmented selling environment.
Case in point: While one retailer may report out-of-stocks, another just across the street can actually have a surplus of the same products. As online shopping skyrockets, a recent CGT webinar explored how to shatter the linearity of traditional value chains; gain visibility into sales, inventory, and sales; and leverage real-time consumer insights to accelerate profitable growth.
Read on for the transcript and the presentation slides.
Alarice Rajagopal: Good morning everyone. Welcome to our webinar “Thinking Beyond Building Demand-Driven Supply Chains.” I am Alarice Rajagopal, the senior editor at CGT and I'll be your moderator for today.
With explosive growth in online commerce and new product introductions, demand signals have become highly fragmented. Positioning inventory at the right place has become ever more critical and CGs are facing challenges in supplier identification or discovery for materials and untapped procurement savings opportunities. Today our subject matter experts will discuss how to ultimately help improve the consumer experience and build a more resilient business while we emerge out of these turbulent times to become future ready.
Our first speaker for today will be Suresh Bharadwaj, AVP lead product manager for TradeEdge, EdgeVerve, which is an Infosys company. Suresh has vast professional experience in product management strategy and business process consulting in the retail and CPG industries. He has led successful technology startups to significant value by creating globally recognized products and platforms in the areas of warehouse management, logistics and sales execution, including being co-founder of Manhattan Associates, a global supply chain solutions company. He is currently focused on driving innovation within the consumer goods value chain.
Joining Suresh will be Praveen Kombial. Praveen is the global product head of business applications at EdgeVerve, and his mandate is to leverage digital AI and other emerging technologies to build and launch platforms and products solving for specific business problems for industries globally. At EdgeVerve, Praveen leads a team of engineers and product managers in building an ecosystem of products, addressing industries such as CPG and manufacturing, focused on transforming their supply chains.
Our third panelist is David Breaugh, manufacturing business leader for Microsoft. David and his team develop and deliver business transformation strategies to empower their customers to create value and sustainable competitive advantage. David brings over 30 years of experience in several industries, including consumer goods and his specialty is leading enterprise transformation, operational turnaround and performance improvement programs enabled by technology. He is a recognized expert in value management and a founding member of the Value Selling and Realization Council. A professional organization dedicated to helping companies maximize returns from their IT investments. He enjoys leading cross disciplinary teams, developing shared visions, orchestrating execution plans and delivering bottom line results.
Suresh, Praveen, and David thank you all for joining us today. With that, I'd like to go ahead and hand things over to get started.
Suresh Bharadwaj: Thanks Alarice. Good morning everyone. Consumer goods companies have struggled with product order stock for ages. It’s very well-documented that those out-of-stocks have ranged anywhere from 8-10%.
It's even more so when you look at promotions and during the time of promotions, they actually spike up even higher. The fact that they spend anywhere between 18-20% —even higher in some markets — it’s kind of ironic that you spend money on promotions and there are a lot of stock issues. A lot of this could be attributed to your forecast accuracy.
The question is, how can I get from where I am now to maybe a 10% increase in forecast accuracy or more? Most of the companies today struggle in the mid-50s and mid-60s to somewhere around the lower 70% accuracy rates. The forecast accuracy is predominantly the key driver for these out-of-stocks.
Having said that, in the emerging markets, we have a different problem where the concept of retail is very different. There are anywhere from 25-30 million outlets and product coverage or distribution through key distributors actually provide some of their coverage of about 30-37% of those stores, which means you're less likely to have products in-stock compared to the developing markets.
While these have all been historical challenges that consumer goods companies have faced, the food and beverages segment has some problems that are unique to the segment, which is primarily around tracking and tracing products in case there is product contamination and the product has to recon. To know exactly where the product is at any point in time, whether it's in a warehouse, a factory, or a distributor or a retailer, and what the product batch number is at any point in time — to get that visibility real-time has always been a challenge.
Companies have tried to move away from what was historically a shipment-driven forecasting, which has been identified to be one of the root causes for these forecasts that have lower accuracy to more of a demand-driven forecasting.
It means you need to collaborate with your external partners a lot more than what you have done so far. For the last decade the problems have only compounded if you look at the number of new products that enter into the market, it has gone up by an order of magnitude.
Consequently, the auto stock rates have also gone up, but at the same time, the increase in e-commerce — and especially what we are seeing in the last year where they have reached the projected levels only for 20, 24 or 25, or even later — we've reached those levels within the span of one year. What does all of this mean? Your demand signals are now more fragmented than ever before.
Previously, before you had the stores open, you knew your points of aggregation of demand, which were those retail stores. Today, with most of us sitting home and placing orders online, it becomes even more difficult to predict where the demand is going to come from. Therefore, the ability to position demand rate to where the demand is likely to come from becomes more difficult. That means you can naturally and logically expect the forecast accuracy to be lower.
So what do we do about it? One of the problems is also how companies have operated so far — while visibility has been a problem, collaborating with external partners to get demand signals and inventory positions are all going to lead us to better analytical efforts.
We're trying to make sure that we use the right tools, get the right data at the right time, with the right frequency and great granularity, and therefore drive forecast accuracy. One of the problems operationally, is that most companies have operated historically on a territorial basis.
This means if I am the retailer, he's running my business and I run out-of-stock on a certain product, then I have a designated distributor or a designated company warehouse where I need to place an order. If that distributor, wholesaler, broker, or whoever it is, is also out-of-stock then they'll wait on their predecessor to make sure they get their supplies, and eventually they can get their supplies to you.
This creates a linear dependence in the entire value chain. The irony here is that while one retailer may be out-of-stock, it is quite possible that there is another retailer just across the street or in the same ZIP code who is actually having extra of the same product. It's sad that the retailer doesn't know there is someone else who actually has extra products and could potentially be a supplier to you. Similarly, it could be another distributor, but because he's out of your territory, you don't have visibility nor do you have the authority to place an order on that distributor.
This is what has perpetuated some of the out-of-stock situations that most of the solutions company and customers have been struggling to address. Is there anything we can do about it? If you really look at your value chain as a network, as opposed to a linear chain, it will allow you to connect everyone with everyone else and really form a network. Now suddenly, I'm not going to be connected to my immediate predecessor, my successor, or to my customer's customer, if you will. So if it is a company predominantly connected to a distributor, and the distributor connected to the retailer, now the company could be connected to the retailer as well.
Again, this depends on what your go to market strategy is. Nonetheless, to be able to connect to my customer's customer is a big deal. It does a whole bunch of things, including primarily disintermediating for information. In today's world there's no need for me to depend on an intermediary to get the information when I can get it directly for my customer. It actually brings visibility to all parties when we are connected in a mainly-too-many network, where we know exactly what is available in what part of the network and therefore my ability to do inventory balancing across the network becomes more comprehensive as opposed to determining a point problem, and looking for a point solution.
There are many use cases that can be enabled the moment you establish this connectivity. Primary to all of this is establishing a foundation of inventory visibility across the entire network. This is not just the key, but literally is in everybody's interest, it is not something that is likely to be looked upon as a complicated advantage or a disadvantage. The motivation to come together, at least in terms of providing that inventory visibility across the entire network is expected to be higher.
I'll take a couple examples from what a network could deliver to you as use cases. First, in the last year we have seen a significant disruption to supply lines. Primary suppliers and especially if you're in the apparel and footwear industry where your supply chains are long. They also have long lead times and some extend back to Asia or outside the U.S.
When your primary supplier is no longer able to supply because its factories are shut or people are not coming to work or whatever may have been the reasons, how do I look for alternate suppliers? Having visibility to inventory across your network will help you practice and dynamically look for alternate sources of supply, which would not have been possible without such visibility.
Today there is a great recognition among consumer goods companies that a little more cost is actually a good thing because what good is it if I'm able to get my products at the lowest price possible and the lowest cost possible, but I really don't have the product to begin with? It's important to keep that in mind. Driving supply resilience by giving visibility to alternate sources of supply and being able to mitigate the supply risk is one of the prime use cases that can drive once you are a participant in a network.
The second thing is order indication. There are companies that have always wanted to add direct-to-consumer and today the consumer taking to online like never before. This actually poses two kinds of problems. While inventory positioning has always been difficult, today taking consumer orders and then matching that to where the inventory is, is one of the key benefits that a network is going to give you. Forecast accuracies will try to predict where the demand is going to come from, and therefore you should better position inventory. In a situation like where we are today, it's actually more important to plug the gap of those situations where you don't have inventory, but the demand is there, by really taking the order to where the inventory is.
Orchestrating the order to where the inventory is, is another use case, and you could do this on your own or there are companies that started coming together as consortiums where they say, "Look, I don't want my consumers to have to go to multiple websites to find all the products by manufacturer or by category sometimes." So they mitigate the risk of their efforts to go direct-to-consumer by coming together and creating a syndicated order — it could be a multi-brand, multi-category, multi-manufacturer product catalogs that are available online for the consumer to place an order for a variety of products cutting across categories and brands. Behind the scenes, those orders then get split and orchestrated to the appropriate suppliers for fulfillment.
There are many use cases that you can look at on both the buying and selling side. This should give an idea of what the possibilities are when it comes to transforming your legacy chain value network.
Rajagopal: Thanks, Suresh. At this time, I want to bring in Praveen and David as well so we can dive a bit deeper into some of these trends that you talked about, the stats that you brought up. There's so many unprecedented things happening. Most importantly, like you said, is, what can we do about it?
Suresh, you talked about breaking the linearity and traditional supply chains. Can you expand a little bit more about what it means for organizations to be part of a multi-enterprise value network?
Bharadwaj: Sure. I just want to clarify that we are not creating the networks per se, meaning these networks have always existed. Business networks have existed from time immemorial. What we are trying to do is digitize those networks and bring a kind of visualization to the participants, to the users in the companies who are part of these networks that will suddenly open up a lot of ideas. It's one thing to be in the weeds and operating those networks, but when you really take a step back and view the network in a way that we are looking to digitize this, it opens up a bunch of doors for you.
For example, as part of the network you have the ability to discover new prospects who could then become your customers or maybe new prospective suppliers because as much as you're happy with your existing partner or ecosystem, there's always an opportunity for improvement. New customer or new supplier discovery is a benefit that you're going to start seeing simply by being on a network. As I mentioned earlier disintermediation is key. When everything is moving in real-time there is no need for you to be dependent on your intermediary, but if you're working in a market or if you have a route-to-market that goes through an intermediary you to depend on them for information. Today, you should be able to get that information flow in real-time.
You still need your intermediaries for physical goods supply and so on, but if you want to do product marketing and you want to reach your end customers without going through your channel partners to do that, then this is a way to achieve that. Similarly, when you launch new products and you want to get feedback on how the product is doing, or you want to run surveys with your end customers, you should be able to do that through the network — again, without depending on your intermediaries. So these are just a few things that the value network is going to bring, which was not there in the value chain configuration.
Rajagopal: Thanks, Suresh. Praveen, from your perspective, what does it mean to be part of this multi-enterprise value now?
Praveen Kombial: Of course. If you just take a step back from some of the points and example conservations circulating. They are about the ability to collaborate across the value chain. I think the ability of enterprises to extract value from supply chains is over and done with. The next value drivers are going to be about the ability to collect and collaborate across the ecosystem, various parties, and partners on the supply chain. Enterprises can look forward to the ability to collaborate, automate, and even orchestrate processes across their ecosystems over time to be able to drive enhanced value.
Interestingly, consulting organizations and futurists have talked about this being the endpoint of their maturity case, but this transformation is underway today. There's so many examples out there: there's a confectionary we're working with in Europe, who's looking to bring all their warehouses, PCs, and co-partners into one common ecosystem to try and create a state-of-the-art inventory hub. That's just the starting point before they get to direct-to-customer, direct-to-consumer. An OEM manufacturer in the U.S. is trying to connect demand signals from their primary buyers to try and connect back into their suppliers ecosystems and supplier's supplier — like tier suppliers to incentivize them to provide better visibility of inventory.
The ability to collaborate and orchestrate across various parties in a value chain, in a value network is what enterprises can look forward to by being on a network.
Rajagopal: Absolutely collaboration. It's always nice to say you want to collaborate, but I think with the events that have been going on it's become really emphasized now. That's a big one. You both talked about what the network consists of, but being able to connect the parties across the network can be a challenge. David, how can organizations take advantage of not just connecting to the cloud but also getting the most value out of it?
David Breaugh: Thank you for including me in this discussion, I appreciate it. There's a couple of things that have changed over the past several years. We're coming up on one year of COVID really having impact on supply chains. Let's be honest, a lot of the ideas that we're going to talk about today have been around for decades. I worked for a company called IQ Technologies back in the late 90s where we were fighting, we called it the APS Wars — advanced planning and scheduling. Really that was about trying to deliver optimized demand and supply plans that were delivered based on data that we would extract from systems like ERP, TMS, WMS-type applications.
That actually led to the birthplace of e-marketplaces, things like Trans Aura that were going to solve CPFR, WWRE. Then there were other industry-specific solutions like EDA Open and Elemica that still survive today. There's an opportunity for a rebirth around supply chain because supply chain is kind of cool again. A lot of what Suresh and Praveen just talked about are opportunities for us to rethink the operating model. How do we extend beyond the enterprise? How do we look at value chain integration? Fundamental to that, is this concept of a hyper-scale cloud application that goes well beyond computing and storage.
It really becomes the platform where you can look at multi-party collaboration, different processes. A lot of companies still operate with a single application stack and a single set of processes. Believe it or not, at Gartner they're operating anywhere from 28 to 35 different supply chains across their enterprise. As we move forward and talk about this multi-tiered network it becomes a way that we could look at new data sources, we can start to stream it and make it more real-time. Then, the key from a Microsoft perspective, in terms of where we've helped our customers unlock value, is as we look at these digital control loops between planning, execution and feedback, typically there are different technologies in most companies that control that orchestration of data.
It leads to a lot of blind spots, a lot of work that happens with spreadsheets, and it leads to a lot of latency. Companies really can't operate at the speed that their customers expect, so as we look at trying to really close the loop from an employee, a product, a supplier, and obviously a customer standpoint, those become the biggest areas where we can help companies balance the continuous trade-off between cost, capital and sales growth.
Rajagopal: Thanks, David. You brought up the data, so the next topic I want to cover is around visibility. Suresh, I know you touched on a use case around visibility. Many organizations lack visibility beyond their tier one partners. What are the implications of this lack of visibility? Praveen, what are the implications and what advice would you offer for such an enterprise?
Kombial: Sure. Demand and supply are getting more and more fragmented — we've done this to ourselves. First, of course, the consumer buying behavior is changing the demand fragmentations. We've also gone global, added more supply points, and hence there's a fragmentation data. There are implications in profitability, lost revenue and field rates, higher net sheet costs, promotions, returns, etc. There's a number of implications.
Our strategy can be simplified into three points:
1. Define your partners. Who are your tier one? Retailers, suppliers, but then you start looking at many, many more partner data points. Their house goods, DCs, distributors, 3PLs, retailers, of course. Tier suppliers, contract manufacturers, marketing agencies and data, there's a whole world out there of partners who can add value to your supply chain, visibility and transformation orchestration, etc.
2. Define visibility. This is about granularity, velocity of data. From how many of your partners today do you get near real-time access to fiscal supply chain information? Do you know what you sold yesterday, today from your partners? Our guess is that it's for a lot. It's not more than 30-35%. We've been building demand networks for a decade and our best-in-class across the globe with some 75% visibility. That's phenomenal because it's been an amazing journey. It’s really about being clear on what visibility you have.
3. Define your data needs. What you want for data and what do you want it for? What are you going to use it for? The thing is that this will data sources, modern retailers will give you data sets. You can download data on what their sales information and metric positions have been. There’s a whole area of information that you need to be clear about what you're looking for. You need to think about incentives for your partners to share the data. Will your suppliers be open to sharing their inventory availability transparently and be worried about you looking for alternatives?
So, define your partners, define visibility, and define key data needs. Now, when you put this in context, look at the data that's getting generated — you're collecting terabytes of information at a per manufacturer, per CPG level across the globe today on a daily basis.
That brings me to what David was talking about: the scalability, the ability to transform and make it ready for generating insights and driving execution. I know it's a bit of a long shot, but those are the few things that we talk about when we talk about this space of visibility.
Rajagopal: That's some good advice. David, from your perspective, what are the implications and what advice would you offer?
Breaugh: The fragmentation is definitely a key driver. We're seeing that in the B2C and B2B markets — there's not very many deliveries that are hitting loading docks. They're going to doorsteps and customers are becoming more demanding in terms of expectations around both quality of service and timeliness of service. Being able to respond to that has created this new word, a lot of us used it a year ago: resiliency. I think what is foundational is what was just discussed around visibility, but that's really the starting point. Visibility needs to go beyond the enterprise. It's not looking in your ERP system for order status, warehouse system around a pull in terms of what's getting loaded, or a TMS system in terms of what's in transit.
It becomes a continuous view. The next level is trying to understand patterns and bringing contextual analytics to that so that you can become more real-time and then predictive as things start to repeat. The moonshot for a lot of companies is, can you actually move to autonomous? Where you're taking planners and execution practitioners out of the puzzle and letting some of these technologies operate where there are bounds. But within control limits it makes sense to be able to allow them to manage the day-to-day type of work. Then you can reallocate a lot of the human capital to solving more chronic problems, to being able to look at more persistent continuous improvement initiatives.
Then, obviously, where a lot of havoc gets racked on supply chains is around bringing in new suppliers, addressing new customers, launching new products. Those tend to be very manual exercises in most supply chains today.
Rajagopal: Thanks, David. We’ve covered some challenges, talked about what the network could look like. Next, let’s discuss the art of possibility. Suresh, what is possible once you have access to the real-time sales and inventory data at the store skill level across tiers?
Bharadwaj: The first one is really an easy one. Like Praveen said, if I know what showed in a store yesterday, today at a skill level, the immediate thing I would do is replenish. We've always talked about how good it would be if magically as soon as the unit of a product is taken off the shelf, another one automatically appears there. That's just as close to that as we can get. Replenishment becomes the first and most immediate use case and benefit that we can deliver. This has not been possible because for years our customers have relied on syndicated data, which is typically at least a couple of weeks, or maybe more, away from when the actual sale took place. That latency is no longer acceptable.
A good example of having this near real-time visibility is that one of our customers was able to limit their out-of-stock for less than two days even in the height of the pandemic. In New York State where we were able to drive analytics that not just looked at sales and inventory from stores, but also looked at the number of COVID cases and correlated those two and then say, "Look, this is where your demand is going to come from." That was a very good example of how a near real-time visibility was able to help keep those stock-outs low. Daily replenishments would then become the norm. The other, not so obvious benefit, is really in how you're spending your marketing dollars.
I'm talking about digital marketing because we're talking about heightened e-commerce activity and therefore, digital marketing is where most of the money is going from traditional media spend. Remember, a lot of digital media spend is also programmatic. That means there's no one sitting and directing what should happen — it's pretty much automated. Now, provide the feed of where your products are selling and talking about store level, skill level sales I could potentially aggregate that at a ZIP code level. I can say what stores exist in this ZIP code and therefore how many products are selling in ZIP zip code. A lot of this programmatic media actually can be controlled at a ZIP code level.
That's the lowest level you can go, which means you could now — potentially and automatically — move your advertisement dollars from where you have high activity, but you’re getting a good return on investment, or take out from areas where you're not getting that good ROI and put it in areas where you're actually getting good ROI. This is not theory. At this point we're actually working with customers on enabling something like this. Those are two top use cases that I can think of when it comes to real-time visibility to sales items at store level.
Rajagopal: Thanks, Suresh. I think these cases are helpful. The low-hanging fruit is the out-of-stocks, so I want to talk about this scenario — especially since COVID really tested the resiliency and supply chain. Many manufacturers and brands observed frequent out-of-stocks. David, how do you manage such demand volatility in the case of an unforeseen event like this in the future?
Breaugh: That’s a great question. This is a seminal event, so I'm not sure that conventional forecasting models are going to be able to predict something like this in the future. What we can do is begin to recognize some of the variables and start to build them into some of the planning models that are possible with some of these integrated cloud platforms. The ability to move from 7-8 variables into literally hundreds of variables is now possible. We are working with a lot of the legacy providers that are starting to re-platform some of their existing solutions to be more cloud ready or cloud native. Then, we're working with a lot of the digital startups that are innovating around new capabilities and value propositions.
The end goal is to avoid out-of-stocks, rather than manage out-of-stocks. It becomes how do you actually recognize those shifts in demand and then — to the points that both Suresh and Praveen just provided — how do you also understand where there's readily available products, where there is capacity that may be available, and then how you close that latency between planning and execution so that you can meet that demand when it presents. And how do you do it in a way that's still profitable. You’re not working overtime or expediting shipments.
The last thing that I want to highlight is that when we talk about resiliency, it comes down to recognizing risk, providing transparency, and also presenting mitigation strategies.A lot of what we're doing is around running these types of simulations and presenting planners and execution practitioners with next-best available scenarios.
Today, as we walked the workflow across supply chain organizations, there's still a lot of time. It can be up to 30-40% of the person's time just digging through data, trying to normalize that data, and making sense of it so that they can make a decision. That becomes something that in the new world of supply chain, the work can be taken off the hands of people and presented to them with the facts so that they can make decisions and help balance that tradeoff between capital and sales opportunity.
Rajagopal: Praveen, can I get your perspective, too? How can you manage such demand volatility?
Kombial: I agree with David's thoughts about COVID — this has been an event. There's only so much that you can do to manage, but I guess seeing the patterns emerging with a lot of variables and real-time data is what is important. I know we keep saying near real-time, and that's just because by creating these networks we have learned that we have a significantly different set of capabilities than our partners — in their platform and their own IT capabilities — and so we must be able to provide as close to active in real-time as we get. So that's why they keep caveating that a bit.
There’s plenty of examples of how shipping has been affected on a near real-time basis. We just talked about one of our customers and their experience in Europe. There's another customer in Europe and the Middle East who was starting to sense the change in the demand related to some of their casual sports apparel. Their ability to sense that demand at a regional level and then redirect it to the appropriate geographies was a very interesting use case that we shared recently.
For another customer, we were running some campaigns around that time saying, "You know what, just tell us who your top 5-10 retailers are, what you're looking for." Seeing what the demand shifts are looking like, we agree to pivot some data sets to see how we can give them better demand for this ability?
It all comes down to how granular and meaningful your data is to get a better sense of your changing demand and help you react faster. If that reaction is driven by your ability to automate and orchestrate the technology instead of just having people address it, then you're probably going to be more scalable. That's the way we think about it
Rajagopal: Thanks, Praveen. Suresh touched upon this a little bit, but we can't talk about COVID without talking about the shift in demand from physical stores to online. So Dave, how can technology help to address such disruption and consumer behavior?
Breaugh: I will present our own experience from a Microsoft standpoint in terms of how COVID impacted our business. We have two pretty complex and global supply chains. One is around our data centers (think about building all of the infrastructure that runs Azure dynamics in our M365 cloud platforms). Then the second is our devices supply chain (think about Xboxes, Surface devices, Hololens) a lot of that was subcontracted to manufacturers in China. So when COVID presented, we actually saw it like January, February-ish of last year. Thankfully we were already on a digital transformation journey where we had taken a lot of the OT data in those facilities, turned it into dashboards, and started to connect that upstream to our supply base. Over time, we were able to also build an online store.
This wasn't something that we advertised, but it actually allowed us to close all of our retail locations back in the May timeframe of last year, and do that in a way where we didn't layoff a single retail employee. It became paramount for us to re-skill them, help to not only look at our supply chain and the way that we went to market, but the way that we actually launched products. We launched four products in spring of last year. We did it in a way where the product strategy was really focused more on not just transactional activity, but looking at more of the lifetime of the customer experience. It forced our leadership team to rethink what our business was and how we were going to face off against that market opportunity.
The workforce transformation is not something that I would at all deemphasize, that was fundamental to what we've been able to deliver. Then, as if you were trying to get an X-Box or the new next generation consoles, we're still sold out. I wouldn't say that by any means we are able to solve our supply chain challenges, but there is recognition at very high levels finally, which is a national challenge. As you look at some of the materials, components, and food supplies that are in short supply and where we're capacity constrained, it really is forcing a rethinking around what does the network look like? How do we look at multiple sources of supply? Then, how do we actually look at more of a regional and even local strategy to be able to rebuild these economies within the U.S.?
Rajagopal: Thanks, Dave. It's amazing what we can accomplish when we're forced to. The pivoting is just amazing to me and what we're seeing across the board. Suresh, can you comment on how tech can help during such a disruption, as well?
Bharadwaj: Sure. When things have gone online it means consumers can place an order from anywhere, any time, but we need to take a step back and say, "How do we fulfill those orders?" We can also take the same paradigm and flip it and say, "It can be fulfilled from anywhere by anyone." That's an extension of the paradigm of the ability to order anywhere, anytime.
With the network configuration that we were talking about earlier, you don't have to be limited to taking orders from your consumers for items that you physically carry in your inventory. It's unlikely that any site, any website, any online commerce site, any retailer, or for that matter, any brand manufacturer would be carrying all products in-stock at all points in time. It's extremely unlikely
Now, look at leveraging the connections that you've made through the network and therefore access to what I call virtual inventory, but it's really inventory for those other parties. Then you have access to that inventory, which means you have suddenly extended your fulfillment time to go beyond your physical facilities, your warehouses, your stores, to actually be able to leverage inventories from your parties on the network. Now your ability to take orders for items that are not necessarily in your control goes up significantly and therefore you're able to fulfill customer orders much better. That's one use case that I can think of.
The other use cases I want to relate to is, many of these CG brand sites are for information purposes only. As much as consumer goods companies want to know their consumers better, and they're all trying to make investments in B2C, yet they have not enabled commerce on their sites. The reason is very simple. They're not able to fulfill individual consumer orders, especially when it comes in small pack sizes, smaller units, and certain order values. When you want to buy something on a brand site they typically redirect you to a retailer site or to another website where you can go and buy.
Little do they know: when you end up on the retailer site, are you actually buying the product that you originally researched, or did you end up buying a competing product because that product was unsaved? To me that is not acceptable. In today's world, you could actually capture the consumer information, capture the consumer order, and transfer the shopping cart to the retailers as opposed to transferring the consumer to the retailer. Now you actually got information about the consumer that you've been so longing for and what he or she is buying. You still don't have to do the fulfillment because the shopping cart is transferred to the retailer and then the retailer does the fulfillment.
I know of instances where CG companies have actually started taking up consumer order deliveries as well, but even without going that far, you can still be in a situation where it's a win-win for both you, the retailer, and the consumer. The technology that enables something like this is all founded on the network configuration that I talked about and the ability to orchestrate an order from the point-of-capture to the point-of-fulfillment, where we are seeing the technology play a significant role.
Rajagopal: Thanks, Suresh. I want to switch gears to another buzzword when we're talking about consumer behavior — traceability. What are some of the effective ways that product traceability can be implemented within enterprises?
Bharadwaj: See all along while we have talked about inventory visibility, there are two dimensions to it:
- Analytics purposes to know what the closing inventory was yesterday. The ability to connect with your partner systems in real-time through APIs so that the recency of inventory becomes extremely important. To be able to get that visibility to real-time inventory in transit is extremely important.
- Even within a warehouse it is quite possible that the configuration of inventory keeps getting changed. Product that is sitting on a pallet is now being broken down because you've got an order for a few cases on a pallet — the product has lost its pallet identity now they're sitting in cases, you won't be able to know that.
Some of these functions are provided as part of a WMS system, but you need to be able to capture those events. It is not enough to say, "I have X number of cases, or X tons of this product in my house." You need to know exactly where it is sitting — is it on pallet number 100 or 200, or it is broken down into cases, or reaches, or whatever. If it is an active storage bin or in a reserve storage bin? So those are the kinds of things that you need to know.
This becomes extremely important because when a product is on recall, and especially if it is going to impact human health, then there are statutory requirements where you're required to not be able to pull such product out of shelves within a matter of hours and not days. So for that purpose the other time access to not just snapshot inventory, but also inventory movement becomes very important.
Rajagopal: Thanks, Suresh. Dave, can I get your perspective, how can traceability be implemented?
Breaugh: I would highlight that there's new boundaries that are possible that haven't been realistic in the past. One is upstream traceability. We talk about multi-echelon supply networks being able to distribute it, ledger types of technologies to keep track of something. I think that the token word is providence, where the experience happens has allowed both security and transparency, but also new trade policies and conditions in terms of how companies are contracting with their upstream supply base.
Then back to the changes that COVID has forced on everybody, it's that last mile traceability. There's always been technologies available to look at container loads or truckloads, but now it's actually extended to parcel-type deliveries and being able to not just be focused on within the day or within the half day timeframes. We can actually look at real-time delivery capabilities.
If you've gotten a package from Amazon, UPS or FedEx, you're seeing a lot of the innovation that's happening in that last mile. Again, I think where we're seeing value opportunity either through cost reduction or unlocking new sources of opportunity to drive customer loyalty, it's at that intersection beyond traditional enterprise functions and then extending the edge of the enterprise across the value chain. But those would be two areas that I would highlight in terms of traceability.
Rajagopal: Thanks, Dave. Suresh, just really quickly I know you touched upon this a little, but you talked about the sell-side of the value chain. Can you also just briefly talk about the possibilities on the buy-side of the value chain, or I guess what the real-world characteristics of a network are?
Bharadwaj: I'm going to keep my response short, keeping the time in mind. I think David pretty much covered the buy-side aspect of it, checking multi-echelon suppliers and looking for alternate sources of supply or reducing supply risks. So those are definitely the benefits that you get. In terms of the network itself, the main characteristic that I want to highlight is that this is not going to be a system of record. You continue to keep whatever systems you have and that is going to be your system of record. This is an OTT primarily to orchestrate visibility and fulfillment.
That is really all that we are trying to do — Uber-izing fulfillment is one of the objectives, if I can use the term. The whole message here is try as much as you can to drive your forecast accuracies up, but there's always going to be a gap. How do you bridge that gap by orchestrating orders to where the inventories are and getting full coverage? That’s what the network is trying to do.
Rajagopal: Praveen, just real quick, if I could ask you the same, what are the real-world characteristics of a network? In the interest of time, why don't I start with you as well?
Kombial: It really is from the perspective of, if somebody could take a step back and look at it, we believe that 80% of the next wave of supply chain transformation has to be across that side within partners. Whereas journey from building the ability to collaborate, whether it's on the demand side or on the supply side, the ability to collaborate on a network in an over-the-top platform to orchestrate processes intelligently, autonomously like David was talking about.
There's no such thing as a perfect data or maturity point to start. Progressive organizations are going out of it one product line, market reaching country at a time. The only way to do it is scaling of the cloud.
Rajagopal: Thanks.. David or Suresh, did you want to add anything real quick?
Breaugh: I would just suggest that we see a lot of companies that are focused on trying to take advanced technologies and use it as a way to optimize their current operation. I would challenge people to think about what their business needs to look like and support three to four years out, and really think about that next generation operating model. Too often, I think the strategy is impaired based on the existing application set and the way that the organization is structured. There is actually a breakthrough potential to be able to deliver step change improvement on traditional supply chain metrics while improving customer experience and loyalty.
That’s something that we've actually had to shift the way that we engage with a lot of our strategic customers to get them to think beyond optimization and really think about what is possible moving forward.
Bharadwaj: We've talked about autonomous supply chains and this is the other buzzword. Using the network as a first step towards that I think is more in the right direction towards getting closer to that vision. This is bringing supply side, sell side, buy side all together in a 360 degree networking.
Rajagopal: That's a great way to end, I'm afraid that's all the time we have for today. Before we go, I'd like to thank Suresh, Praveen and David for giving us their subject matter expertise today. I'd also like to thank EdgeVerve for sponsoring today's webinar and finally to our attendees, for devoting some of their very valuable time to be with us today as well.
Bharadwaj: Thank you.