Formula 1 in E-commerce
In the past decade, about the same timeframe that a boom in E-commerce has been witnessed, I have become a fanatic fan for car racing and in particular Formula 1. I have seen drivers lose by fractions of a second due to minor slack by some team member or a small fault in the car systems. Many a time I couldn't help but compare the relevance of strategies used in these races to the business world we live in.
In years after the break of the new millennium, the boom in e-commerce has created an exponential growth in consumer requirements and expectations, while businesses face an even greater challenge with increase in the complexity of their supply chains. How will businesses remain relevant with ever-changing dynamics in customer demands while maintaining a cap on suffocating costs that come with these?
Having a Ferrari does not set you in a class of your own among other high profile sports cars in the latter mentioned races. However, a Ferrari with the right engine tweaks, right team at the pit stops set it apart from competition in a very fast changing environment.
Staying in the race - slow and high movers
Gone are the days when having huge inventory levels stored up in a warehouse brought benefit from discounted supplier prices.
Seasonality and changing customer preferences and behaviors mean that we can only offer the best and the latest to stay relevant. Increased flexibility and the ability to react, even, within hours, in some cases, plays a key role in facing these shifting dynamics in trends. Businesses can utilize their resources to create flexibility anywhere along the supply chain, however few successfully do this with their inventory. Outsourcing warehousing operations is not enough to achieve world class inventory management.
The concept of a hybrid and virtual warehouse converts a traditional warehouse into an "engine" that continues to perform regardless of the environment. Picture above is the classic inventory ABC analysis curve.
A traditional warehouse would normally have all the above classified goods on the various shelf and warehouse spaces. What a hybrid warehouse (#1 on the pic) does is increase the capability of a warehouse by combining the traditional warehouse with latest in picking and packing technology for extremely high moving goods. High movers are then stored in likewise automated warehouse areas consequently making picking & shipping much faster.
Pit stop team to optimize inventory levels
Virtual warehouse (#2 on the pic) enables a business to increase its product portfolio, consequently increasing sales, without having to invest in any physical premises or tie up capital in inventory as the supplier owns inventory. A business sells products that will be delivered straight from the supplier to the customer.
This is typically for high value goods or seasonal goods that are slow movers. Most if not all businesses dealing with moving or selling products have the above curve.
Given the dynamics of the environment we operate in, wouldn't it then be worthwhile to outsource warehousing operations to a partner who understands your product lifecycle and has the competence to continuously optimize inventory levels while scaling them accordingly? This is proverbial F1 pit stop team that knows exactly what to do and what to fix to stay in the race.
Winning the race
We now have the team to keep us in the race. However, there are so many moving parts and systems in play, how does the team know what to fix, when to fix and how to fix? One unnoticed error could be the unfortunate start of a domino effect of faults.
Complexity in the supply chain increases with increase in number of suppliers and
and diversity of customer base. Customers want to know exactly where their products are and exactly when they will be delivered. Can we have complete visibility in the supply chain to be able to predict errors before they happen / as they happen and take corrective actions all while keeping our customer promise? Can we reroute deliveries, pre-inform suppliers and update consumers all while keeping logistics cost under control? Absolutely yes.
The possibilities that a hybrid and virtual warehouse offer, reach unfathomable heights especially when combined with a Control tower. Control tower simply enables time control which is the difference between a successful or failed supply chain. Resources & time are the most valuable elements of a supply chain regardless of one's position on the supply chain.
Many businesses are already in the race vying to become e-commerce power houses. However, to stay and win the race it requires collaborating with partners who understand the environment and have the competence to continuously pro-actively adjust to changes in complex supply chains.
Senior Development Manager
Supply Chain Solutions