We live in an omni-channel fulfillment world where customers are increasingly demanding more. There are high expectations about the quality and speed of service. To “deliver now”, suppliers have to redesign and realign their operational activities. The entrance of online actors such as Amazon has blurred the traditional lines between B2B and B2C activities.
Companies in a range of industries are having to adapt to the new demands. For example, small businesses are sometimes called upon to compete with large corporations that are supported by a world of experience and seemingly endless resources. To compete with these deep pockets, smaller businesses must distinguish themselves through the quality of their service. One of the indicators of quality will be the speed at which they can complete their orders.
It is from this perspective that speed-to-delivery has become an industry mantra. No longer is it a luxury to deliver goods and services faster than your competitors. Instead, this has become a legitimate expectation of customers who will not hesitate to find alternatives if a business is unable to meet their needs. No wonder the just-in-time mantra has been adopted by many successful businesses.
Speed of delivery and real-time decision making
In the simplest terms, speed-of-delivery refers to the time that is taken to make operational decisions and implement them. This is a much wider concept than merely achieving same-day delivery. Instead, businesses are called upon to make decisions in a strategic way so they can fulfill their operational processes in the shortest time possible without compromising their quality of service.
Data and process analysis are part of the puzzle. You must pay careful attention to your distribution network, SKU analysis, and SKU management. This involves analyzing the cost of carrying each inventory item to ensure it is meeting the financial objectives of the business. By doing this, you can optimize your inventory levels so that you can always fulfill your orders.
Successful businesses will need to ensure that they have the right inventory at the right time. That means marrying the needs of your customers with your capacities as a business. In the past, company planning was done at monthly, quarterly, bi-annual, and even annual intervals. Today, planning must be done and updated daily because business demands change rapidly.
A dynamic market calls for an intricate knowledge of virtually every aspect of the cost-to-serve framework for your business. That means delineating the entire distribution framework and then reconstructing it in the most effective format depending on the feedback that you are getting from your customers.
Technology is a double-edged sword in this world of fast delivery. On the one hand, technology has allowed companies to accelerate their communication and delivery systems. On the other hand, technology has also provided customers with the means to make increasing demands at a very fast rate. Companies cannot escape technological solutions when they are trying to compete in the modern market.
Information expires so quickly that the only useful type is that which is delivered in real time. Businesses must ensure that they are making objective and optimal decisions using that information at the right time. Otherwise, the information will quickly decay. Ideally, all changes in the distribution channel that need to be made must be done in real-time to maximize their impact and relevance.
It is important to compare actual activity against the planned activity daily to identify where the shortfalls and excesses are. Indeed, the monitoring framework must be executed multiple times during the day to ensure that you are meeting your goals and targets. The central concern for you as a business is in ensuring that you get as close as possible to the ideal solution for the customer.
In the past, it was enough to build multiple distribution channels. However, that has since been found to be unviable and even wasteful. You now need to consider creative solutions that may be totally outside your original business concept. A case in point is the use of shared facilities when delivering goods and services.
Such approaches have been successfully used when cross-docking goods. This approach considerably reduces storage time and therefore reduces other costs such as insurance. The basic framework involves receiving inbound shipments at the cross-dock, unloading, and sorting for final delivery. The cycle is restarted when the facility is redeployed for outbound purposes in less than 24 hours.
Distribution network analysis
For all these changes to take place, you need effective distribution network analysis. This involves rationalizing your thinking behind the distribution operations including things such as location, timescales, and risk management. Other factors that you may take into consideration include the number of distribution networks you need, the size of your facilities, and product specialization.
Ideally, you should be able to ship from your vendor or manufacturer straight to the consumer without having too many in-between movements. However, all the decisions that you take should be subjected to a cost-benefit-analysis. This analysis is not just for a few strategic channels, but rather for every channel. The litmus test is where the cost-to-serve is lower than the profit margin. Using profitability and cost-to-serve analysis, you can rank your distribution channels and select the ones that give you the best mark-up.
It is important to balance the tradeoff between quick delivery and costs. There are third-party logistics providers that can help in making this decision through the provision of up-to-date information. In this way you can work out all the SKU data and link them to specific transportation modes such as truckload, parcel, and LTL.
Modern service requirements for businesses demand speed and efficiency. That means that companies have to be prepared to critically examine their distribution channels to identify the most effective solutions. These solutions may fall outside the norm including novel ideas such as sharing facilities and information with other companies. Throughout, the company must ensure that its profit margins on any distribution channel outweigh its costs.