April 20, 2016
strategic insight | Visibility & Control

Retailers sharpen supply chain visibility with improved technology

Retailers sharpen supply chain visibility with improved technology

To meet the challenge of rising e-commerce sales, businesses are pushing visibility beyond their own warehouses, to include suppliers, partners, and goods in transit.

By Ben Ames

E-commerce as a proportion of total retail sales is growing fast, and that constantly changing landscape is forcing many retailers to seek tighter control over their inventory levels and deployment. In order to keep up with the quick fluctuations of online commerce, retailers need precise visibility over their goods at all times.

Now, leading retailers have found a promising solution, as improved technology allows them to track every item in their inventory, whether it sits in their own warehouse, in a supplier's factory, in a partner's DC, or even in a tractor-trailer or shipping container.

This level of precise visibility leverages improvements in computing, sensors, storage, and big data. The result is important to retailers because it allows them for the first time to react to changing market conditions in near real time.

VISIBILITY IS CRUCIAL IN E-COMMERCE

Although U.S. e-commerce sales in 2015 accounted for just 7.3 percent of the nation's total retail sales, that picture is changing fast, U.S. Census figures show. E-commerce sales grew 14.6 percent over 2014's figures, to $341.7 billion, compared with growth of just 1.4 percent for total retail sales.

Much of the pressure to improve visibility throughout the supply chain comes from that explosive growth of e-commerce, which is more sensitive to market fluctuations than traditional in-store sales. Online markets can explode or collapse seemingly overnight in response to triggers like weather, fashion, current events, or social media.

Supply chain visibility is one of the crucial capabilities a company must master in order to respond to those swiftly changing conditions, according to "Keeping Up with the Retail Consumer: 6 Supply Chain Disciplines Retailers Must Master," a 2015 market study by Adelante SCM and Legacy Supply Chain Services.

The study defines supply chain visibility as "having timely, accurate, and complete data and information related to orders, shipments, inventory, sales, costs, assets, and other supply chain-related items."

That may sound like a tall order, but for companies that can achieve it, the rewards are vast. Armed with sharper visibility, retailers can better answer daily questions about order status, shipment location, inventory counts, and forecast accuracy, the study says.

To reach that goal, most companies must overcome challenges such as data stuck in silos, infrequent batch communications, low-tech shipping processes, and frequently changing trading partners, the report concludes.

SHINING A LIGHT ON "BLACK HOLES"

For many years, those hurdles were too high for the average retailer to clear, but recent technology advances have given them a boost, says Jim Hayden, vice president of solutions at Savi Technology Inc. Data can finally flow freely and swiftly among the links in a supply chain thanks to cheaper computing and data storage, along with sensors that boast greater transmission range and longer battery endurance.

Those devices permit users to constantly monitor the status of each shipment, instead of waiting for drivers or dock workers to check a shipment in when it arrives at a terminal or crosses a border, as had long been the case.

"What we've seen in the supply chain is that the definition of visibility is milestone-based—just asking, 'Was it picked up from the factory?' or 'Has it arrived at the warehouse?'" Hayden said. "But there was nothing in between, so that was a black hole."

But that's all changing. Retailers with sharper visibility can finally peer inside those black holes and see exactly where they need to tweak their processes in response to changing market conditions.

Armed with granular data about the movement of goods, both shippers and receivers can make adjustments while the goods are still in transit. For instance, a company could delay a manufacturing shift if a shipment of supplies is going to be late, or hold a departing delivery truck until a cross-docked item arrives at the DC. This strategy also enables retailers to keep up with the frantic pace and volatile demands of e-commerce. And it provides a crucial tool for retailers engaged in omnichannel operations—that is, taking orders from both stores and online sites and fulfilling those orders from either retail shelves or warehouse racks.

"In an omnichannel world, with the dynamic way orders are coming in, retailers are using different channels to fulfill orders," Hayden says. "That includes extending their warehouses to include goods in transit."

A retailer that can monitor goods in transit can pinpoint each incoming shipment while it is still on the road, allowing the company to react to sudden changes in demand by diverting a truck to a retail store instead of the warehouse for which it was originally intended.

BETTER VISIBILITY WITH CONTROL TOWERS

Generating data is key to achieving better visibility, but companies gain the greatest improvements when they translate that data into "actionable planning," says Vikram Balasubramanian, senior vice president of product management at MercuryGate International Inc.

"Visualization itself is not a solution, unless it's tied to the business process it enables," Balasubramanian says. "For the supply chain, it's what you do with it once you gain visibility that matters."

Although many users have expressed interest in a "control tower" to manage their supply chain data flow from a central hub, the term is loosely defined, Balasubramanian said. At the basic level, users simply practice exception management and respond to missed deadlines or late shipments after they occur.

A more advanced version of a control tower provides sharper visibility by empowering users to make decisions earlier, Balasubramanian said. Such a system could, for example, automatically alert a truck driver of oncoming weather and offer him or her an alternative route.

CLOUD COMPUTING OFFERS A CLEAR VIEW

Unlike weather forecasters, supply chain managers say clouds can actually improve their visibility ... cloud-based computing platforms, that is. Instead of hosting a software application or database on servers located in their own buildings, users of cloud-based platforms rely on providers to host the apps remotely and provide access over networks.

Hosting data in the cloud can make it easier for supply chain partners to both provide and access information regardless of where in the world they are located, and thus combine global visibility with business practice engines such as predictive and prescriptive analytics, says Jim Hoefflin, president and COO of supply chain software developer Kewill.

All of these changes have helped to reduce or eliminate the frequent information gaps that shippers saw just five or 10 years ago, when supply chain visibility was restricted to pickup and delivery milestones, Hoefflin says.

That improved visibility has evolved just in time to help retailers who are under pressure from the increasing complexity of global trade and are keenly aware that a large portion of their inventory is locked up in the supply chain in motion, he says. Applying the tools of advanced visibility allows companies to alter that inventory in process, steering certain shipments to new destinations in reaction to real-time information about changing markets.

What's next in supply chain visibility? While a few top retailers have begun to practice advanced visibility, future improvements could makes it easier for all retailers to extend visibility beyond their corporate walls to include collaboration with supply chain partners and, someday, to see all the steps of shipping, planning, and fulfillment at once.

About the Author

Ben Ames
Senior Editor
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.

More articles by Ben Ames

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