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Intelligent automation allows manufacturers and retailers to optimise their supply chains relatively easily and quickly, without relinquishing control. However, 69 percent of logistics organisations have not yet fully integrated their supply chains. What logistical challenges do retailers and manufacturers face and how do they solve them?
From the supply of raw materials to the final delivery of consumer products – the supply chain of retailers or manufacturers of consumer goods contains several separate links. Often, they are not well aligned. This is mainly due to the fact that manufacturers, distributors or parcel services work with their own systems that exchange little information with each other. The result is inefficiency. This relates to high purchase costs, excessive stocks and unnecessary transport costs.
If the calculations are too tight, an inefficient supply chain can lead to dissatisfied customers and damage to the company’s image. As a result, retailers or manufacturers are unable to keep their promise to the customer. For example, a competitor’s product offer compels a retailer to lower the price of the same product. The result is a sudden spike in demand. But is this product in stock? Are enough lorries available to supply stores? And meanwhile, the customer is expecting a parcel delivery or an article in the store shelf today or tomorrow.
Many manufacturers, suppliers, distributors and retailers optimise their own link in the supply chain. However, profits remain low if they do this. For a major optimisation improvement, the supply chain needs an end-to-end approach. The logistics systems of the different chain partners are aligned to exchange real-time information.
End-to-end supply chain optimisation requires smart automation software. Preferably based on Artificial Intelligence (AI) which controls the software. The result is a system that analyses and automatically optimises all information about demand, stocks, transport and delivery periods of chain partners. This increases efficiency and customer satisfaction and results in a drop in supply management and transport costs. Ultimately, the entire supply chain represents a greater added value than the sum of the individual links.
Why automate now?
Customers’ expectations are constantly increasing. The service and price have to be right. Some retailers already work with automatic pricing and digital price tags. If a shop offers a product discount, the price of the other retailers will also drop. At the same time, many companies subcontract the last-mile-delivery to parcel delivery companies. This requires an ICT environment that exchanges information with these companies. The same applies to ‘Build to Order’ (BTO) – a trend which many retailers and manufacturers have adopted. However, their order and inventory management systems have not been set up accordingly.
Many organisations are currently investing in supply chain automation. For example, over the next three years, 79 percent of consumer product manufacturers and 85 percent of retailers are expected to switch to this automation. In the Netherlands, these percentages may even be higher, because the need for a smart supply chain is extra big here. This is partly due to the fine-meshed nature of the infrastructure. The Netherlands is a crowded country, with many roads, population living in a small area and a high internet density. Online and offline sales are increasingly merging into omnichannel and more and more retailers have small-scale flagship stores in city centers that need to be stocked.
Digital price tags, BTO, competitors investing in new systems and increasing customer demand for services, low prices and omnichannel services. Reasons enough to switch to supply chain automation. What is stopping retailers and producers? Often, this is the human factor because human input is still essential to manage an automated supply chain environment. This is particularly the case for commodity products sensitive to trends. But the need for human control is constantly decreasing. A supply chain automation solution based on AI is self-learning and recognises trends. It means this solution is becoming more accurate in its forecasts. In addition, AI can analyse all available data in a fraction of a second, without human error.
Is the role of the Inventory and Order Manager finished? No, certainly not. They still determine the frameworks. IBM Watson Order Optimizer and Inventory Optimizer allow them to set the KPI parameters. If, for example, they want to be able to meet peaks in demand in December, they will increase the ‘inventory’ section a little. In the summer they increase ‘cost’ slightly so that less is spent on transport and storage. An IBM Watson makes the underlying calculations: an AI solution that is available as part of a standard supply chain solution or tailor-made as-a-service.
Want to know more?
In the ‘Intelligent automation for consumer products and retail supply chains’ IBV Study, experts indicate the possibilities for seamless integration of the supply chain from A to Z: what technology combination is ideal for this, how do other organisations do this and what advantages does it give them? In addition, they indicate the logistical questions retailers and manufacturers have to ask themselves before they can take the next step towards an optimal, end-to-end supply chain.
Want to know how you can optimise your supply chain through intelligent automation? Read the IBV Study