Building Resilience in Your Supply Chain

Optimizing the First Mile as You Diversify and Scale Operations

As the expectations and behaviors of consumers shift, any brand that fails to adapt to its shoppers’ evolving needs will be pushed to the wayside. Just look at Bed Bath & Beyond’s bankruptcy and closure, which many attribute to it being ten years too slow to embrace ecommerce.

It is important to have a fully-fledged omnichannel strategy to meet rising consumer demands. Thankfully, 73% of businesses we surveyed say they’re planning to scale into a new channel in the next 6-12 months.

While expansion has its benefits, it also adds complexity to organizations’ supply chains and the partnerships they have with their retailers. This creates new challenges for merchants managing their supply chain’s first mile. As you scale to new channels, you may be increasing the:

• Number of purchase orders to submit
• Volumes suppliers produce
• Shipments to track
• Locations to ship
• Number of SKUs to track

Teams need to manage and track all of these aspects as they work to hit tight deadlines. This requires collaboration with suppliers to validate that they can handle the volume increases, and may change the nature of supplier relationships as you renegotiate contracts, payment terms, and more.

This added complexity highlights the need to have the necessary systems and processes to meet the new requirements for these channels in order to capitalize on the opportunity expansion presents.

We found that only 25% use purchase order management software – a highly-effective centralized system designed to manage the entire order lifecycle – to track purchase orders (POs). This indicates that there is still a need for companies to invest in their supply chain systems and processes to meet the new demands of the omnichannel strategy. The use of order management software helps streamline the process, increases visibility, and reduces errors in the supply chain.

Interestingly enough 23% of respondents say they use ERP systems and 17% use other centralized systems (not an ERP) to track purchase orders. While ERPs are essential for the efficient running of your business, they aren’t optimized for supply chains on their own. They need to be supplemented with additional tools built specifically to handle different areas of the supply chain, such as a purchase order management platform or a complete supply chain management software that acts as your single source of truth for your entire global supply chain.

The survey also revealed that 57% of the respondents have 3+ external partners (suppliers, shippers, freight forwarders, warehousing, etc.) involved in a PO for their organization. As the number of external partners increases, so does the complexity of managing the supply chain. That’s why it’s important to have a supply chain management system that can efficiently keep all external partners in one place.

The key to long-term brand success is a balanced omnichannel portfolio. Merchants that expand product availability across channels drive scale and profitability, while providing customers with a consistently satisfying experience.

But as omnichannel strategies proliferate and brands expand from ecommerce to retail, managing data and information across sales channels, partners, and platforms becomes a crucial, complex aspect of the business.

For example, retail partnerships, once eschewed by DTC companies, are now a mark of accomplishment and an essential component of an omnichannel brand strategy, opening up broad opportunities for growth and expansion. Per Forrester senior analyst Sucharita Kodali, retail availability is a “huge deal” because it helps a brand achieve tremendous volume and scale.

While lucrative, retail distribution is also complex, and brands must be equipped with the operational capabilities and fulfillment technologies required to support it. Each retailer has its own distinct set of requirements, which can be difficult (and expensive) for brands to manage. Target, for example, has various sets of standards for inventory fulfilled to a distribution center versus inventory shipping directly to a consumer.

Maintaining customer satisfaction as you expand

Seamless order fulfillment and delivery is essential for maintaining customer satisfaction, but becomes increasingly complicated as omnichannel strategies expand. One way to manage this complexity is to focus on connectivity and interoperability across the retail tech ecosystem.

By leveraging platforms that integrate sales channels and partners across the supply chain, brands can centralize real-time visibility into inventory, orders, and fulfillment activity, reducing the chance of errors and inefficiencies.

Brands should also consider whether their supply chain partners can provide flexibility as their business scales and needs evolve. When it comes to product fulfillment, this means working with partners who can accommodate both direct-to-consumer and retail fulfillment methods.
Key considerations to maximize success in retail

Expanding into retail is a significant undertaking, and there are several considerations that brands must keep in mind.

Harnessing the power of omnichannel

The omnichannel consumer has never been more powerful, spending more often and more frequently than those who shop exclusively in stores. They have also never been more exacting, demanding product availability and delivery information instantly, regardless of where or how an order is transacted.

Brands that will succeed in expanding from ecommerce to retail will understand the importance of navigating supply chain complexities, and will invest in flexible, scalable solutions that provide the visibility and control they need to optimize omnichannel operations.

The global supply chain has always had a level of unpredictability to it. Merchants consider external threats and unpredictability when choosing a transportation method for their first mile, which includes air or ocean.

According to our survey, 45% of businesses opt for the (usually) reliable and cost-effective ocean freight as their preferred method for importing goods from overseas. On the other hand, 38% of respondents use air freight, which is known for its swiftness and efficiency. The choice of freight method can significantly impact the delivery time and cost of the goods, making it a critical decision for any company involved in international trade.

For example, our survey found that companies today are having severe issues with excess inventory: a staggering 66% of businesses report being overstocked at present. This represents a significant financial burden for businesses, tying up capital and potentially leading to losses. What are they doing with this extra inventory? 22% are offering sales and discounts, 24% are donating excess inventory to charities, and 28% are selling excess inventory to liquidators or other third-party buyers.

It’s important to implement a robust inventory management system that can accurately forecast demand and manage inventory levels, to avoid the financial risks associated with overstocking. Especially considering: 28% of respondents plan to increase inventory significantly over the next 12 months, while 35% plan to increase inventory slightly.

Companies are using these Top 6 tools, in order of popularity, to manage stock levels:

1. Automated inventory management systems: 31.55%
2. Safety stock inventory management: 17.64%
3. Just-in-time inventory management: 16.02%
4. Manual tracking and analysis: 12.62%
5. First in, first out (FIFO): 9.22%
6. Last in, last out (LIFO): 7.61%

Additionally, 45% of brands are using revenue generated per unit or profit margin per unit to prioritize which products to stock when facing supply chain constraints.

Overall, brands should be focusing on a system that can give them the ability to manage inventory, accurately predict demand, and optimize logistics operations.

In times of economic uncertainty, managing predictability and risk becomes crucial for businesses to maintain stability and profitability. One essential aspect of this process is effectively managing stock and product margins as related to supply chain best practices. This article explores various strategies and tools to navigate these challenges, covering topics such as first mile options, inventory management, and various pain points associated with maintaining optimal stock levels.

First Mile Transport

First mile transportation options, including air, ocean, and freight, play a vital role in supply chain logistics. Each option has its advantages and disadvantages, impacting margins differently.

Air Transport: Offers speed and efficiency, reducing lead times by up to 50% compared to ocean shipping. In addition to this, air freight can be more predictable as you are relying on fixed airlines schedules to deliver your product. However, it can be far more expensive to receive products by air, impacting profit margins.

Ocean Shipping: Provides cost-effectiveness for bulk shipments and large volumes which is why this option is typically more popular. But, longer transit times can affect time-sensitive inventory and cash flow. In addition to longer transit times, disruptions due to weather and port congestion can be disruptive to keeping delivery dates on time.

Something to consider if you are deciding between an air or ocean shipment is the decreased variability in cost as the shipment sizes decrease. Ocean shipments are typically billed at a flat rate by container, or by cubic feet for LCL (less than container load) freight. If you are planning to ship a small amount of product, it’s important to look the de variable cost between your options to ensure you are picking the least impactful option to your margin.

Freight Transportation: Offers versatility and flexibility for different cargo sizes and shipping distances. However, it may incur additional handling costs and require efficient logistics planning.

Understanding the cost-effectiveness and profitability of each option helps businesses determine when to use specific methods, aligning transportation decisions with business objectives.

Effectively Managing Stock Levels

Proper inventory management is essential to avoid overstock situations that can negatively impact profitability, cash flow and funding. Being overstocked results in high storage costs, space constraints, and potential write-offs. On the other hand, experiencing stockouts can have equally detrimental consequences, resulting in missed sales opportunities and customers seeking alternatives elsewhere to fulfill their needs. Maintaining adequate inventory levels is crucial to meet customer demands, retain sales, and prevent potential revenue loss.

Approximately 67% of supply chain managers report using Excel to manage their inventory.  Unsurprisingly, these manual processes and reliance on outdated systems contribute to errors and lack of real-time visibility, hindering effective stock level management.

Efficient order and inventory management strategies, such as automation and centralized systems, help minimize delays and errors. Warehouse management software is designed to help businesses optimize their warehouse layouts and operations, in addition to having real-time visibility into their inventory. When inventory is received in a warehouse, warehouse management software enables businesses to receive product against a specific purchase order, and then efficiently put away the product with guided put away processes. As orders are fulfilled and shipped, these platforms help businesses manage picking and packing processes, while capturing order and tracking details. With streamlined picking processes and integrated shipping functionality, businesses can enhance their operational efficiency and meet customer expectations by providing real-time shipping updates.

Order management solutions empower businesses with end-to-end visibility, insight, and control over their sales channels and fulfillment network. These automated and centralized platforms give brands a clear view of inventory levels, order status, and customer information across different channels, eliminating cumbersome manual processes and enabling operational efficiency. For omnichannel businesses operating out of multiple warehouses, order management software becomes invaluable for order orchestration, intelligently routing orders to the most suitable center to optimize cost savings and expedite delivery. Additionally, these systems can help businesses stay on top of inventory by triggering low stock alerts, highlighting inventory discrepancies, and helping businesses automate the purchase order creation processes.

By adopting best practices, leveraging technology, and staying proactive in stock and product margin management, companies can position themselves for success.

In an increasingly omnichannel environment, it’s crucial to consider the many variables across sales channels, inventory locations, and your supply chain.

But juggling factors like seasonality, competition, supplier MOQs, freight costs, and lead times can make maintaining optimal stock levels seem like an insurmountable challenge.

The following levers can help you raise your inventory game from good to great.

1. Elevate your visibility for optimal inventory control

Online retailers often prioritize scaling their brand through marketing, advertising, and new product releases, neglecting the significance of inventory and supply chain visibility in the process.

Contrary to popular belief, the key to mastering your inventory isn’t solely reliant on AI and cutting-edge technology. Instead, it boils down to a single concept: visibility.

To get a clear picture of how many days of stock you have, start by feeding your forecast with clean data.

2. Preprocess your data for better forecasting

Forecast accuracy is crucial for managing stock levels effectively, yet many e-commerce brands still struggle with stockouts and overstocks.

For most, the default move is to rely on forecasts that are based on some kind of moving average, where the average amount sold over a specific time period (for example the last 30, 60, or 90 days), dictates your forecast.

But this can lead to costly mistakes in your inventory planning. For example, if your forecast is based on sales data that includes past stockouts, it’s easy to view that as a seasonal pattern rather than an outlier and fail to order enough replenishments, leading to further stockouts in the future.

No matter how sophisticated your forecasting models, if you want an accurate forecast — you need to start with accurate data.

Begin by pre-processing your sales and inventory data to review and take action on the following factors:

3. Finding success with inventory as you scale

With every new channel comes new inventory complexities. While sophisticated algorithms and calculations have a role to play, it’s visibility that makes the real difference.

Questions to consider:

• Do you know how many units are sitting in your warehouses or fulfillment centers? 
• The number of units in open POs? How many can still be rerouted or delayed if needed?
• How many are already in transit to storage and how many are in production?

Full visibility of your past, current and future inventory means knowing how much inventory you have in every node of your supply chain.

Integrate your sales channels and inventory locations to:

• Gain full visibility into your inventory and supply chain positions
• Make educated replenishment decisions using advanced data insights
• Free up more time for collaboration and innovation

With a strong forecast and clearer insights across the value chain, you’ll be able to pinpoint profitable opportunities for new products, markets, and supplier agreements leading to increased profits and cash flow as you scale.

As brands scale to omnichannel, they’re having to diversify their product sourcing and establish relationships with new suppliers in new locations. 71% of surveyed brands have multiple suppliers for the same item and 71% are also looking to add more suppliers in the next 3-6 months.

Why is this? 19% cited a goal of reducing supply chain risks, while 18% said it was to de-risk a potential impact from geopolitical tensions. By diversifying their supplier base, brands are looking to reduce their exposure to risks such as trade barriers, export restrictions, currency fluctuations, and political instability.

These findings indicate that companies are diversifying their supplier options to tackle problems like supplier redundancy and cost efficiency. Modernized and centralized supply chain management platforms help diversify and improve supplier networks by:

74% of businesses tell us that they feel their relationships are at least somewhat optimized. But that still leaves over a quarter (26%) who think they’re not. This suggests that there is room for improvement when it comes to how brands can improve their supplier relations.

When assessing supplier performance, respondents ranked the following in order of importance:

1. The quality of products or services delivered
2. Compliance with regulatory requirements or industry standards
3. Cost of products
4. Responsiveness to issues or concerns

This hierarchy suggests that companies prioritize the quality and cost of goods over immediate supplier responsiveness.

Overall, the survey findings provide invaluable insights into the dynamic world of supplier networks, highlighting the importance of diversification, relationship management, and performance assessments.

Conclusion

Our findings show that the biggest area of investment in the supply chain over the next 12 months will go towards finding the right tools and systems to effectively manage inventory, forecasting and demand, logistics, and purchase order management.

By directing resources towards these key areas and identifying the right tool stack that seamlessly integrates with solutions like Anvyl, Flieber, Flowspace, and Extensiv, consumer brands can diversify their supply chain, improve visibility, and successfully scale their operations.