Gaining Insight


Not so long ago, the term supply “chain” seemed a perfect analogy for describing the process of moving products to the final customer: products flowed from origin through manufacturing and distribution steps, and each stop along the way was, well, a link in the chain. Today, though, a dramatic shift is taking place as companies compete for online shoppers. The shape of the supply “chain” is changing. Although functionally the “chain” concept still exists, physical flows have changed. Companies are streamlining and getting faster, eliminating touches, combining functions and even bypassing processes. Today we see linkages that never before existed, such as former B2B suppliers who previously dealt exclusively in truckload supply orders and now deliver small orders directly to consumers. The Uncoupled Chain I’d like to propose a thought that may help in explaining the challenges and opportunities of competing for online customers today: the traditional supply “chain” has come uncoupled. Today it seems shaped more like a “net” than a “chain”. (Diagram on page 2) The first great challenge of this new “net” is that it has lost its structure. An extremely complex question arises - where to place inventory? From a national or regional fulfillment center, an urban warehouse, a store, or direct from the vendor? The process flow has shifted from a serial to a parallel process, meaning that inventory can exist anywhere. The potential to become more responsive with this new shape is awesome – for example, it offers the chance to rush a quick delivery from a local store, or save a sale from another. This also means that optimizing order sourcing is significantly more complex, because we confront other cost, revenue and service issues that we rarely dealt with before. Can we avoid end of season markdowns with store shipping? But are we introducing costly split shipments with multi-line orders? Can we source from least cost fulfillment option and still meet service requirements? Or source from alternative locations during time of peak capacity constraints? Are we cannibalizing higher margin store traffic if shipping from store? Is vendor ship more or less expensive than internally? Does the vendor’s service record uphold our brand image? The need for speed and seamless customer experience are also huge online retail challenges making it harder to compete and even harder to be profitable. Nevertheless, resolving this structural question about inventory placement and order sourcing is a fundamental issue. Our take: we see companies at various stages of moving through this evolution and most have more design work in front of them. This transformation is a long multi-year process. It typically begins with the ability to engage consumers from different fulfillment points, to save a sale, get faster, or reduce markdowns. This first step creates the capability to execute customer orders from practically anywhere. Then comes a greater focus on inventory performance, to eliminate expensive split shipments and improve customer experience. The optimal balance between inventory and speed is a tremendous challenge, which ultimately defines store shipping strategy, inventory structure, and delivery options. Advanced designs employ various segmented flows and node strategies for greater efficiency. This re-structuring effort will ultimately re-couple many of the process links and a new structure created (although it will not resemble a chain).

By Bill Loftis

Senior Director, Integrated Solutions Transportation Insight 2018 Supply & Demand Chain Executive Pro to Know

2018 Food Logistics Rock Star of the Supply Chain

More than 35 years of supply chain experience that includes consulting to some of North America’s largest companies across a wide range of industries Known for his ability to focus on the underlying business problem to help clients integrate supply chain data to better support business processes and improve performance Specialties include strategic network design and flow strategies; transportation cost, practices and systems benchmarking; transportation planning assessments, network modeling and business intelligence; and collaborative distribution solutions




1990s Supply CHAIN

Today’s Supply NET

The Big Deal - Profitability The big issue with this new complex commercial ecosystem is how to do it profitably? In early 2017 PwC released a survey of 351 global retail CEO’s, and only 10% of global CEO’s thought they could fulfill omnichannel orders profitably . Companies are figuring out how to engage online shoppers, but most aren’t making money from it. The profit challenge is not only due to complexity, speed and customer experience previously mentioned; it’s also because the seller has absorbed the two most costly fulfillment processes: individual piece picking and small package delivery, previously born by the shopper. Most online shippers spend more than $8 on orderpicking and delivery, which is equivalent to adding at least a 20% cost to a $40 order. • Measure and understand your fulfillment profitability; measure what works, what doesn’t work, what can be changed, and institutionalize the measurement process for all stakeholders. • Prioritize understanding the infrastructure and capabilities necessary to provide excellent fulfillment cost and service performance, and implement them. In our client work we see that most companies are literally awash with potentially valuable data, yet business users are hard pressed for time and unable to use it. It’s a noticeable gap and needs to be filled. Companies typically lack three critical pieces to fill the gap and create a competitive advantage: • Connect the data and enable a measurement technology. This involves building a BI platform and determining the critical measures for executives to guide the business and business users to make informed decisions. • Institutionalize a measurement process to serve both executives and business users. The key to institutionalizing the process is senior executive visibility. Users are aligned when executives prioritize the measures. • Invoking analysis, insight and observations into the process to sharpen the saw. This is going beyond the KPI’s to understanding what the information means for the business. Putting these pieces together is actually a straightforward, practical initiative, with little risk, and affordable. Although it sounds a bit like Big Data, actually not so – little more than the data associated with typical business transactions like sales orders and carrier bills are sufficient for the bulk of this information. Our eCommerce Order Intelligence Platform Our work with hundreds of companies selling to online customers has given us a chance to conduct detailed research into the online commerce ecosystem. During the last year we’ve engaged with clients in new ways and have developed a new eCommerce Order Intelligence Platform to help them become more profitable, and provide valuable, rapid insights for their evolving fulfillment strategies. We would suggest two critical priorities:

The platform has two main components, customized to fit the client stakeholders:

The Total Insight eCommerce Order Intelligence Platform

In fact only 10% of CEOs say they have refined thier offerings and are now able to make a profit while fulfilling omni-channel demand.


Margin Management

E-Score Consortium


How profitably achieve customer How to continuously improve service objectives eCommerce solutions

Targeted Users


SVP Supply Chain, SVP eComm

- CEO Viewpoint 2017: The Transformation of Retail PwC


• SKU level profitability

• How your order cost and service performance compares with peers

• Profitability across multiple

• Individual KPI performance comparisons


with peers

• Institutionalized measurement process

• Strengths, weaknesses and where to prioritize

• Margin Management: this analytical capability measures the net profitability of your fulfillment operations down to the SKU level. Customized to measure net profit by various order dimensions, such as promotion strategy, customer type, assortment, SKU, category, order type, etc. Outcomes reveal profitability winners, losers, points of impact, issues to address, things to change. • e-Score Performance Consortium: what is your average performance in terms of cost and time to serve consumer orders? How do you compare with peers? Structured around a framework of four key capabilities required to excel with online commerce, over a dozen performance metrics are displayed to show how you compare with peers and reveals strengths, weaknesses, and where to prioritize. This combination of services offers a balanced approach to the advancement of eCommerce fulfillment strategy for our clients, by answering the fundamental business questions:

• Financial: how do we look to shareholders? • Customer: how do we look to customers? • Process: how is the business running? • Knowledge: how can we improve and create additional value?

The benefits of these analytical services are valuable and quick. The random flow paths of an evolving supply “net” produce an enormous variation in cost and service performance. Margin Management reveals a wide range of net profitability results by SKU or other dimension. It becomes really easy to identify the winners versus the losers, and clients can quickly make pricing, promotion or operating decisions that directly impact the bottom line. The e-Score output is extremely impactful and enlightening and properly used can provide quick wins as well as speed up the evolution of your fulfillment strategy. Designed as a membership consortium, participants have access to aggregated external industry information so they know how they compare with peers. Individual company data is kept private, or if desired your data can be kept private and not shared.

About Total Insight Total Insight is an enterprise improvement consulting firm with a distinctive advantage in enterprise risk management and mitigation. Leveraging our expertise in global trade regulatory compliance, integrated supply chain data analysis and our proprietary Extended LEAN® continuous improvement methodology, we shed light on potential and existing supply chain risks, transform your supply chain data into business intelligence and recommend process transformations to better position your company going forward. Our market leaders in global trade compliance, supply chain analytics and LEAN consulting combine rigorous auditing practices, complex data modeling techniques and deep application of the entire LEAN toolkit to uncover fact-based realizations about your end-to-end supply chain, from factory floors across the globe to your end customer’s door. Our unique perspective of introspection, redirection and execution provides the valuable insight you need to achieve enterprise excellence.

Where are you in restructuring your uncoupled supply “chain” into a profitable order fulfillment system for the future? Please contact Bill Loftis at ___________ if you would like to discuss.


310 Main Avenue Way SE • Hickory, North Carolina 28602

2018 Total Insight, LLC. All rights reserved. GIR1-6.2018

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