Supply Chain Innovations for Your Small Business
Supply chain innovations sound cool but which ones are usable?
Even if your company makes drones, chances are you’re not using your own drones to optimize your supply chain. Innovations in supply chain are coming at all industries in wave after wave, but which of those innovations are practical to implement?
- Same Day Delivery
- Real-Time Metrics
- Radio Frequency Identification (RFID)
What are the benefits driving each of these innovations?
What about the costs?
What are the obstacles to implementing each of them?
And is there a viable Return on Investment (ROI)?
Remember, the goal of your optimized supply chain is to deliver what your customer wants, when your customer wants it — and do that by spending as little money as possible. Some of these supply chain innovations may eventually help you deliver on-time, but how long might it take to get there and at what cost?
Drones, Same Day Delivery and Really Fast Response
Not too long ago, my wife ordered a new space age toothbrush for my daughter from Amazon. She placed the order on a Sunday morning. Before my daughter brushed her teeth at bedtime that night, Amazon delivered the new toothbrush.
My wife placed an online order and Amazon delivered it within hours. Same day.
They did not use a drone to deliver our order. They didn't need to. We'll cover how they were able to pull off the same day delivery—and what you can do to mimic that—in a moment. In the meantime—drones.
Is drone delivery (either from your customers to you or from you to your customers) a transportation mode you want to spend a lot of time researching? No.
But do you want to buy your kids drones for their birthdays so that one day they'll figure out how to mobilize the drone air forces for the power of good (and commerce). Probably. If you don't, your kids will end up behind the tech curve.
So how did Amazon pull it off? That same day delivery of my daughter's toothbrush. There are several areas of Amazon's supply chain innovation that you might emulate, if you can afford to.
When you place an order with Amazon, that order hits one of Amazon's warehouse floors at the speed of light. Can you say that about your customer ordering process?
How are your customers placing orders on your business?
- Phone Call
- Electronic Sales Order
If your sales orders are manually processed—and any one of those four options above can mean that you are manually processing your orders—then order processing supply chain technology is an area of innovation you might benefit from.
When a customer places an order on your company (and also when you place an order with one of your suppliers), if that order has to be handled by a customer service rep or an order processor — you're adding unnecessary time and dollars to your order processing system. Even some electronic sales order systems require a manual download and handling.
True electronic data management means that your customers enter a sales order into a portal (or otherwise directly into your order processing system). Then, that order drops straight through to your warehouse management system — while at the same time recording the order in your financial backlog.
If your company already has an enterprise resource planning system (ERP) then you probably have access to an order processing module that will allow for true electronic data interchange (EDI). It may be affordable to upgrade or to bolt on the EDI module to allow for faster and more reliable (less chance of human error) order processing.
If your company doesn't have an ERP system, then the dollars, time and resources necessary to get to automated order processing might be too much to justify getting to same day order processing.
Another reason that Amazon can deliver same day has little to do with supply chain innovation. However, holding enough inventory to make sure you can supply every customer order is one way your company can make sure it can meet customer demand.
But holding inventory equals spending money.
It costs money to acquire inventory. It costs money to ship that inventory to you. It costs money hold that inventory (rent, utilities, etc.). It costs money to protect that inventory (insurance, security, etc.).
So you can spend money building and holding inventory or you can spend money on supply chain innovations (or you can do both, if you have pockets that are as deep as Amazon's).
Are there supply chain innovations that can help your company reduce inventory and, at the same time, allow you to optimize your reaction to customer demand and supplier changes?
If you're lucky, your company tracks supply chain metrics on a regular basis. Many companies scrutinize supply chain metrics on a monthly, weekly and even daily basis.
But one very usable, somewhat affordable supply chain innovation is the use of real-time metrics.
As philosophers are want to note, no one acts in their natural state while being observed. And that's very true for supply chain. With real-time supply chain metrics, you can put a screen on in your warehouse pick area or your shop floor or your customer service area. Real-time metric software allows you to pull your own data from your ERP system (assuming you have one) and generates a visual dashboard.
The value of having your hourly or daily goals on a screen with how you're progressing can be a great motivator. Let's say your warehouse has a goal to ship one hundred orders in a day and they can see that with thirty minutes to go, that they've only shipped eighty-seven. That gives them a very clear goal for their last thirty minutes on their shift.
More and more software providers are offering a real-time metric solution that can integrate with most ERP systems. Some are relatively affordable and prices are dropping, as demand increases. In terms of supply chain innovations, real-time metrics are one of the more usable options. As opposed to...
Automation and robotics are a reality in supply chain, logistics and manufacturing. Robots are picking and packing parts in warehouses. Robots are moving goods across shop floors. Robots are manufacturing our cars, consumer goods and industrial equipment.
Does that mean you should get yourself an R2D2 or BB8 to move your supply chain into the future? (Astute supply chain pro's will note that R2 and BB8 from a time long, long ago.)
The answer depends on your ROI. Robots and other automation costs money. If you have a redundant or otherwise programmable function that you can see a robot doing—ask yourself these questions:
- Is this a function that is going to need to be done for years?
- How much will I pay a person (or persons) to perform this function over that time?
- How much will a robot cost to acquire, program and maintain during that time?
If you have a manufacturing or warehousing step that you know will need to be done for the next five years. And you figure you'll have to pay someone $30,000 per year to do it (and if you add in pay increases, benefits, etc.—say that pencils out to $200,000 over the five years).
And you learn that a robot will cost you about $60,000 to have and maintain over that time.
You've got a two-year ROI. Is that worth it to you? You'll save money over the long term, but you won't have as many people at your office Christmas party.
Do you need to know where your products are all the time? RFID chips can be embedded in your products or the packing tray or the shipping container. If the product you sell is very high value or is crucial to national security or is otherwise highly pilfer-able, then you can use RFID and GPS to keep track of every part in your supply chain.
The costs of RFID have gone down over the past several years, but if it's a nice-to-have and not a must-have, you might not need to invest in that particular piece of supply chain innovation.
Remember, your optimized supply chain is one that is delivering what your customers want, when your customers want it—and doing that by spending as little money as possible. Consider the ROI in any of these innovations before you step into the future.