Due to the COVID-19 crisis, shippers operating within e-commerce are facing even more volatility in customer demand for products. That means they have to pay even closer attention to inventory management and other warehouse management challenges than before. Nick Shroeger, Chief Network Solutions Officer at logistics provider Coyote, outlines six strategies to help shippers respond to these challenges in the face of this trend.
1. Ensure stock is spread out so that it is closer to the end customer
The main challenge for shippers - and especially for those with and hefty e-commerce component - is making the right decisions on how to distribute stock keeping units (SKUs) in such a way that the right SKUs are always available close to the customer without unnecessarily high inventory levels.
For fast order fulfilment, easy access to the right SKUs is important. But finding the right balance is difficult at a time when consumer buying behaviour is hard to predict. Spreading products across a network of smaller hubs, closer to population centres, is the answer here. Although more complex to manage, it makes for much faster fulfilment.
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Shippers are also currently experiencing a general increase in total SKUs and SKU segmentation. This calls for more tailored supply chain strategies for each product.
Spreading inventory, moving it closer to end-users, keeping inventory levels low and managing higher numbers of SKUs and segmentation is only possible with good supply chain visibility and good data connectivity. Achieving that requires investment in an advanced warehouse management system (WMS) that can link inbound and outbound movements.
3. Use suppliers that provide value-added services
When selecting the right supplier, location and cost are often decisive factors. But there are other issues to consider. While every shipper has a unique set of requirements based on its network, it is generally advantageous to work with suppliers that can do more than just the warehousing component. Value-added services include inbound transport from ports or rail, or outbound transport services, such as warehouse transfers or home delivery.
4. Ensure immediate access to flexible capacity
Shippers are best placed to partner with suppliers that help them develop organisational agility and flexible capability. This has never been more important than now, as shippers are greatly affected by uncertainties. When supply chain disruptions occur, it is important to ask the following questions about key suppliers:
- Do they help me make adjustments?
- Do they have alternative resources to keep my network up and running?
With budgets and strategies having lost their immediate value due to the corona crisis, it is important that a supplier can help develop a new plan of attack within hours. Furthermore, he will need to have deep knowledge of your supply chain, as well as expertise in broader, global shipper operations.
5. Leverage data to increase organisational agility
Working with flexible suppliers is a good start, but it is only part of the solution. Modern supply chains are very complex, and the only way to take advantage of opportunities and spot bottlenecks is to use data.
The related questions are:
- How is product currently moving through my network ?
- Does it make sense to build more warehouses to shorten the average delivery route?
- What are my service levels regarding my own warehouses versus customers ?
- Where to deploy different modes?
- In which places is speed more important than cost?
- Do I increase efficiency when I use a 3PL party to run my warehouse or when I am in control myself?
- Does my forecast help me better respond to demand patterns?
If you cannot answer these questions satisfactorily, you probably do not have the right systems to collect data or the right people to extract information from data. Data is becoming increasingly important as more advanced AI technologies become available in the supply chain. These are all driven by large data sets. If you cannot collect and leverage these, it will not be possible to integrate new solutions.
6. Use advanced digital solutions for better collaboration
Digital transformation will connect more and more - even very small - facets of the supply chain. This creates more connectivity between different customers and networks, putting 'sharing economy' activities within reach.
These include:
- Efficient consolidation of warehouse space
- Real-time insight into on-demand available warehouse capacity
- Better network overlays with other shippers and carriers
- Strategic partnerships for warehouse consolidation within similar sectors
- Strategic partnerships with ports to jointly serve customers
By embracing these strategies, shippers can reduce uncertainty and further optimise their supply chains.
Author: Nick Schroeder, Chief Network Solutions Officer at Coyote Logistics
