LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

OPTIMIZING SUPPLY CHAINS — UPSTREAM, MID-STREAM, DOWNSTREAM

Omnichannel, with e-commerce, is cascading across worldwide, affecting how retailers and manufacturers sell. Omnichannel is selling duality. In turn, it requires supply chain duality. Online selling success is about meeting—and exceeding—customer expectations. It is driven by supply chain management. The one-size-fits-all supply chain cannot efficiently handle both store/brick retail or plant manufacturing and online/click sales. It is central to the global supply chain revolution.

All these elevate the need for a comprehensive total supply chain approach that reduces costs and working capital investment while improving service and market positioning, including omnichannel. This is transformation.

Manufacturers and retailers need a supply chain strategy that recognizes the differing requirements of factory/store and e-commerce. The strategy must work at the corporate level, at the division/region level, and at the local level. It should integrate these levels. The new supply chain must have strong technology and process capabilities as essential foundation elements.

Toward that end, the overriding question is--What is the goal?

There are three parts to supply chains—the Upstream, the Mid-Stream, and the Downstream. The three parts are interrelated and integrated.

  1. Upstream Scope—Areas of Consideration:

    • Stakeholders—sourcing, buyers, procurement, suppliers, manufacturers, logistics, planners, finance, risk marketing, sales.

    • Example considerations—Vendor Managed Inventory, lean as to number of suppliers, switch to near and off shore approaches, tradeoffs for lead time vs cost, revise buying terms, create upstream consolidation hubs, align buying volumes to optimal shipping modes, evaluate direct to store/market options, implement upstream Value-Added Services and Store Ready processes, centralized demand planning and transport functions, adapt omnichannel program.

    • Targets—reduced costs, increased visibility and control, leaner mid and downstream supply chains, ability to re-route/adjust to match demand, duplication, and cost avoidance.

    • Impact—Highest impact on supply chain cost, requires strong systems and supplier coordination possibly via a Control Tower type of solution.

  1. Mid-Stream Scope—Areas of Consideration:

    • Stakeholders—Marketing, Sales, Logistics, Planners, Finance, Risk.

    • Example considerations—Review inventory holding points vs flow through or direct to market solutions, optimize SKU range, create internal processes that allow for omnichannel prioritization without bin/location duplication, increase level of store/range packs at POS, allow for rounding of demand to optimize four wall activities, sell through vs returns study, invest in technology and mechanization to reduce touch points.

    • Targets—Reduced costs, increased visibility and control, leaner inventory and associated capital, ability to re-route/adjust to match demand, reduced investment in infrastructure and assets, higher velocity throughput.

    • Impact—Reduction in dormant inventory and capital tied up in inventory, assets, and infrastructure; higher service levels to demand points, reduced handling points and capability to expand the range/handle seasonal fluctuations without adding infrastructure.

  1. Downstream—Areas of Consideration:

    • Stakeholders—Buyers, Procurement, Logistics, Planners, Finance, Risk, Marketing, Sales, Real Estate

    • Example Considerations—Creation of "store ready" or "store friendly" configuration packs in Upstream or Mid-Stream processes, hub and spoke transport solutions for key SKUs, intra-store transfers and sell-through options vs returns, outsourced/shared distribution assets, store dressing/replenishment during non-trading hours, environmental packaging options to reduce CBM/unit.

    • Targets—Reduced cost to serve, reduced environmental impact from optimized routing, delivery and replenishment solutions, reduction in returns, reduced lead time to demand for high yield/key SKUs.

    • Impact—Highest impact on consumer confidence and brand loyalty, directly impacts COGS and optimization of high cost real estate, reduces costs and ensures "fresh" seasonal inventory.