In the second article of a two-part series, supply chain expert David Shillingford considers some of the solutions to the challenges raised by the Black Friday sales period, highlighting the emerging role of technology and the ongoing central importance of the human factor.
For consumers and the retail sector alike, the Black Friday sales are a high point of the year, creating pre-Christmas opportunities on both sides of the shopping experience. For the supply chain, they offer handsome rewards to companies who can tap into customer trends and manage their internal processes and teams in the most efficient way. But what are the keys to that success and how can businesses best prepare for such an intensely busy period?
The starting point is for the supply chain to have an accurate forecast of consumer demand, according to David Shillingford, Co-founder and now an advisor to Everstream Analytics, who argues that firms should move away from traditional, historical forecasting models and embrace the use of ‘outside in’ forecasting.
“It’s based on the use of more external and more dynamic market data to drive forecasting models,” he explains. “It makes them fresher than the models you get from historical sales data and they can also have additional contextual layers to them, such as weather and other events. Ideally, they will provide that information in as close to real time as possible. Companies who have invested in this dynamic planning capability will have an advantage going forward.” At the same time, there is also room for ‘demand shaping’ by retailers, who can use a combination of discounting and marketing to attract consumers to certain products – and particularly any languishing post-Covid inventory.
The benefits of integrated platforms
Once orders have been placed, various technologies can be harnessed to take goods to their final destination. The common theme is the advantages of integration and synchronisation between different platforms – so that the right data and insights can be passed between different teams and the best decisions can be taken. “For example, both the planning and execution within the warehouse needs to be connected to what’s happening outside, i.e., at the dock, and with the arrival and departure of trucks,” says David Shillingford. “If a truck is late and nobody knew that in advance, it’s going to impact what’s happening at the dock and the team that was planning to unload it. Now, trucks will always be late. But knowing that as far in advance as possible is an example of the need for connectivity between in-transit, in-yard and in-warehouse planning and execution. And that’s even more important when you’re dealing with the pressure of Black Friday.”
By integrating different platforms, companies will have the agility needed to tackle problems and seize opportunities. The technology that underpins that agility ranges from sensors attached to containers to complex algorithms embedded in planning and execution platforms. Thanks to the plummeting cost and soaring popularity of intelligent sensors, the Internet of Things already provides supply chain managers and logistics providers with real time visibility about the position and state of goods in transit. GPS tracking can deliver location data and indicate delays/arrival times, while the temperature of chilled/frozen foods inside refrigerated trucks can easily be monitored remotely.
But there’s more.
“Going back to the example of the truck being late, what’s even better is being able to predict whether or not it will be late - before the truck even sets off,” argues David Shillingford. “And that's where Artificial Intelligence comes in, with models that take into account who's moving it, where they're moving it to, when they're moving it, the condition of the road, and any other types of
potential delays. What’s more, by continuing to train that model on historical and real-time data, AI can really enhance the level of synchronisation and orchestration between different functional teams, both inside and outside the organisation.”
The rise of the digital twin
AI’s strength is its ability to harvest data from a myriad of sources - from IoT and GPS data to news stories from national and international media, carrier information, and weather reports – and then turn that into business insights and alerts. For particularly large and complex supply chains, a future step will be to combine AI with a ‘digital twin’ of the physical assets and processes. More prevalent in the field of architecture and infrastructure, ‘digital twin’ technology in the supply chain will enable companies to model different scenarios and then optimise warehouse inventory levels, for example.
The warehouse, with its growing sophistication, is an inevitable focus for busy periods and the solutions for improving its efficiency are not limited to robotics and racks. For David Shillingford, there are three key factors for success on Black Friday. “The first is the existing workforce and how well trained and motivated it is; the second is hiring the right number of temporary workers and training them properly; and the third is ensuring that both the permanent and temporary workers are integrated with the processes and automation, because there are very few examples of full automation. Most are a mixture of humans and robots - and when they work well together, you get a significant ROI from automation. And as always, workplace safety should be number one on the list.”
To keep warehouses running efficiently for the longer term, he recommends switching the electricity supply to DC microgrids, thereby eliminating the need for AC inverters – and their associated fire risks – while also facilitating the use of solar panels, which deliver DC power. Meanwhile, the demand for high bandwidth connectivity will require replacing copper cable with fibre optics. Beyond the warehouse, the final preparations for Black Friday should include checks on the last-mile/middle-mile logistics, as the closer any disruption happens to the point of purchase, the harder it is to intervene.
The opportunities created by Black Friday for the logistics industry are clearly wide-ranging. Its growth has helped supply chain executives to reach senior corporate positions, as companies realise that service is now almost as important as price for many consumers and that service levels are determined by the logistics. Meanwhile, the volume of goods being bought and sold will provide a welcome lift during an inflationary period, and while challenges remain, there are also solutions to tackle them. “It's all about people, processes and platforms,” sums up David Shillingford, who is upbeat about this month’s prospects. “Platform integration, process optimization, and motivated people with the right skills and information.” As for Black Friday this year, I’m more bullish than most people about consumer spending - and I reckon there’s more robustness there than people think.”
Disclaimer: This article was written by an external expert contributor to CEVA Insights. The perspectives and ideas are the contributor's and do not necessarily reflect the views of CEVA Logistics.