Published Tuesday 30th April 2019
Technology is transforming every aspect of modern business, particularly for B2C marketplaces. With the rapid development of online shopping, customers are in a position where they can purchase anything they want at any time at a very competitive price. The ultra-convenience of modern shopping has led to increased demands from consumers in all areas of the purchasing experience, from comparisons and offers to the after-sales service.
The digital experience has transformed all aspects of modern B2C business, but there is one area that has remained almost untouched. The typical product supply chain model is, for the most part, unchanged since before the growth of online shopping. This method is seen mainly in retail, where a forecast-based model is still favoured. This approach causes various problems, particularly with stock levels, and can lose companies vital sales. However, the development of Internet of Things technology could lead to widespread change in the customer supply model.
The Issues with Old-Fashioned Supply Chains
For many, supply chains still operate on a forecast and assumption basis. Even those that believe they are now using a proactive model are likely to be employing these methods at some point along the product’s life cycle.
The traditional supply chain in question usually follows a pattern along these lines, starting with the manufacture of the product. To create enough stock, manufacturers purchase the raw materials that they feel are needed to meet demand, usually a result of forecasting. The manufacturer will then make all the necessary products for a season or other period in bulk before sending them to a wholesaler. The manufacturer may also hold onto extra stock for if consumer demand exceeds expectations, if there are available raw materials in the market.
Whilst this early stage of the supply chain is taking place, a retailer will place an order with the wholesaler, assuming they have the stock to meet their forecasts. If so, the wholesaler may ship the product again to the retailer or, in some cases, hold onto it on their behalf. Finally, the customer places an order for a product, which is then individually shipped.
As you can see, this is a very fragmented and untidy approach. In the modern marketplace, consumers will always assume that the product they want is readily available. At the same time, retailers will expect that if their product sells well, more will be available to them. However, that could be challenging for the original manufacturer, who may be working towards different forecasts and be unprepared for extra production. It is in this situation that products can become out of stock, leading to lost sales and, more importantly, dissatisfied customers.
The problem with forecasting, particularly in the modern retail landscape, is that it is increasingly unreliable. Relying so heavily on this can also lead to overproducing items, taking up vital warehouse space and causing unnecessary expenses.
It is worth mentioning, however, that this supply chain method does work in most cases, hence the reliance put upon it. However, in the modern business landscape, such a model is unnecessarily inaccurate, especially when you compare it to the new alternatives.
What is the Internet of Things Supply Chain?
There is a wide range of AI technologies leading to rapid supply chain development, some of them more documented than others. One of the other significant technologies is blockchain, which will drastically improve the reliability and accountability of different parts of the supply chain throughout a distribution process. However, the Internet of Things (IoT) could have a major impact on consumer-led logistics.
IoT refers to an extension of our online connectivity through the objects and devices we use. Put simply, the IoT will lead to further integration of all aspects of our daily lives, allowing items to interact with each other to create a smoother experience.
The development of IoT in a supply chain could lead to a complete reversal of the traditional process, creating a pull-based model driven by consumer demand as opposed to manufacturers and forecasts. Put into action, a fully-integrated IoT supply chain could react to individual consumer orders, feeding them through wholesalers and manufacturers before pulling out the necessary products. This would lead to a much more efficient supply chain that avoids both stockpiling and product shortages.
Whilst, for many, this sounds like an unreachable ideal, modern technology is making such models realisable and attainable for proactive businesses.
Reducing Expenses Through Modern Supply Chains
This is but one example where modern technology is transforming business practices. By utilising the tools available, businesses can streamline their operations across a range of areas. Here at ERA, we have been working with major UK businesses to help streamline their procurement strategies. Our specialists have experience in a variety of cost sectors, from logistics and distribution to packaging and utilities, and can create substantial corporate cost savings across all industries. These modern technologies are being utilised today in many markets, so if you are interested in seeing what these developments could save you in both time and money, why not speak to our experienced team today?