Reuters Events | Supply Chain & Logistics Business Intelligence

Clarity is a critical pillar of the modern supply chain, especially in an age where high-pace operations have to contend with consistent disruption

A transparent supply chain, both internally and externally, might be the difference between efficient operations that inspire long-term customer loyalty and falling foul of your most important stakeholders, said industry leaders on a Reuters Events, Supply Chain webinar.

The webinar, which brought together experts from across the supply chain space, found common ground across the panel when it came to the importance of communicating how goods are moving across supply chains, especially as the pace of supply chains quickens further in the modern e-commerce environment.

Communication as a key commitment

In many ways the last 18 months have been a story of success, as many brands have been able to step up their e-commerce operations and meet customers’ demands through online channels, both during the pandemic lockdowns and beyond, with remarkable continuity.

Expectations of consumers have been set high

This means “Expectations of consumers have been set high,” said Thomas Kwasniok, Partner for Bain & Company, especially when “guys like Amazon have amazing lead times.” The competition is now fierce.

Whatever you promise, you have to back it up

Increasingly, “The biggest thing is to really own that customer experience and make it really easy,” commented Cristian Chavez, SVP Supply Chain for online furniture retailer Article. However, “Whatever you promise, you have to back it up.”

That is easier said that done, especially when disruptions, such as the Suez Canal blockage, occur adding another layer of complication on top of an already complex and rapidly changing environment.

A major event of this type – highly uncommon and with unpredictable fallout – alongside the consistent complications of the last mile, means that even the best prepared and backed-up supply chain will see changes to delivery schedules. It is therefore vital to keep clear lines of communication, both across supply chains and to the customer.

At the end of the day, what we firmly believe is that if you are transparent, if you communicate the lead time to the customer in a way that the customer can understand, the customer may not be happy about it, but he will understand

“I'd rather be very honest, very transparent,” when it comes to communications, remarked David Sasson, Chief Operating & Financial Officer for fashion company Bonobos. “At the end of the day, what we firmly believe is that if you are transparent, if you communicate the lead time to the customer in a way that the customer can understand, the customer may not be happy about it, but he will understand” if there is a delay to their shipment.

“Where we find that is really tricky is when you are not really transparent,” he feels. “Then the customer gets disappointed and then, at that point, gaining the trust back, it's really challenging.” This is a critical issue in an era where effective logistics is a competitive advantage and when that final delivery may be the only face-to-face interaction with the brand.

We don't want customers to be coming out to us looking for information on where their product is, right? We want to be going out to them

Mike Piza, Senior Vice President of Corporate Business Development for Apex Logistics agreed, noting that “Customers can be tolerant, as long as the information is communicated to them clearly on when they're going to receive that product.” It is also important to explain why the issue has occurred, whether that be “the Suez Canal situation, or the port situation going on on the West Coast of North America right now.”

“We don't want customers to be coming out to us looking for information on where their product is, right? We want to be going out to them,” he emphasised, “so, we really trying to stay on top of our solution and communicating … that information to them as quickly and as cleanly as possible.”

It goes both ways

The importance of transparent communication is not just outward-looking, and instead needs to encompass internal messaging across a company to make sure the right capacity is in place at any given time.

Information exchange here is crucial across the functions

“Information exchange here is crucial across the functions,” commented Bain’s Kwasniok, such as “the information from what the marketing department are doing.

“When they run a promotion, demand will obviously go up. When they know about a competitor running a promotion, demand will come down. This needs to be figured in. So, being transparent on this information, having sales-marketing understand how crucial it is for supply chain logistics to have the best possible information” is “one way to really uplift the experience.”

Anything from Singles Day in China, to a Prime Day, to any kind of flash sale on a product … could drive you up to one and a half million or 2 million packages a day

The need for this is heightened in the current era of e-commerce and its associated logistics, as “Anything from Singles Day in China, to a Prime Day, to any kind of flash sale on a product … could drive you up to one and a half million or 2 million packages a day,” from just a few hundred thousand on a typical day, explained Piza.

“That kind of scalability is very difficult,” therefore “understanding when those high peaks are going to come and kind of what they're going to look like,” is key “because sometimes it might only be double or triple the capacity, or it could be 20 times the capacity,” is vital, he noted.

Having that kind of communication constantly be on the same page is key

“We have to be talking to sales teams. We also have to be talking to our finance team, because we will have to deploy aircraft in certain locations and have the capital to be able to maybe inject additional aircrafts into a market,” in order to meet these moments of elevated demand he said.   

Similarly, the logistics team need to communicate back to marketing around the overall supply chain situation, believes Sasson. There is little point if the marketing team have worked on “Campaign product launches, and put a lot of investment behind it … if that product is stuck in port because of congestion … and that product is going to be late,” he points out. “Having that kind of communication constantly be on the same page is key,” he stressed.

Follow the data

There is then a need to get ahead of the curve, resulting in an ability to have both top-down foresight on what is planned within the company and bottom-up insight into changing customer demand patterns.

Chavez advises that it “Starts with really understanding what's going on with the customer, being obsessed about that and being data driven.”

Listen to the data that you have and what the customer is telling you

“So being online and retail only, we have the data live,” he outlined, which allows them to be “close to the customer and really use data as a starting point.” They can gain a picture of demand, as they know “what are people looking at, what are the trends?”

Sasson also advised companies to “Listen to the data that you have and what the customer is telling you.”

What you can really do in order to uplift experience is to listen to that feedback

However, he also argued that it is vital to close the loop on customer data and think about a complete picture of feedback and action that consistently enhances supply chain operations.

“I always find that there is all this data available, and companies don't necessarily have a real idea what to do with this information.” A core part of this is the “direct feedback from your customer on your product or your service.” So, “what you can really do in order to uplift experience is to listen to that feedback,” whether that comes from product reviews or NPS scores, to pick but two examples.

One of the biggest focuses for me is always to make sure that we can follow through that feedback

“Then the most important thing is how to take that feedback and through the supply chain bring it back to HQ, and then make a product decision based on that, make a service decision based on that,” he continued, “because I feel that that link between the feedback and then the action plan sometimes is broken. So, it's one of the biggest focuses for me is always to make sure that we can follow through that feedback.”

Getting ahead of the plan

The best solution, of course, is not being forced to present a problem to the customer in the first place. While it is inevitable for even the most prepared and organised player to have to sometimes communicate a shipment delay, there are concrete steps and strategies discussed by webinar participants that can reduce the likelihood of having to send that notification.

The key is to really understand how much capacity you need to build-in and to respond to the promise that you make to the customer.

As Chavez explained “The key is to really understand how much capacity you need to build-in and to respond to the promise that you make to the customer.”

Part of that is creating spare capacity ahead of time. Sasson has found it helpful in his role to move the framework of logistics back and subsequently to refine the smaller details closer to the final point of delivery, rather than to be caught short by events.

I feel that it is very important to … at least have some sort of booking, rather than try to kind of make it perfect, because if you do, you will end up never booking

“For example, when it comes to capacity, in terms of factory capacity, freight forwarder capacity, carrier capacity, the environment about booking capacity,” securing “capacity in advance is a huge help.” He advises to make bookings well in advance to your best estimate, rather than leave it late and have to handle the mark-up. “I feel that it is very important to … at least have some sort of booking, rather than try to kind of make it perfect, because if you do, you will end up never booking.”

However, he admitted that there is always a balance to be had here, especially in a rapidly changing environment like fashion. Therefore he believes that factoring in the logistics side “Early on into your product development calendar is a good solution.”

The more you disperse it out, the more inventory you will end up holding

Similarly, he recommended “Making commitments wherever you can on a raw material. If you make a commitment to raw materials, and you try to use that, even if you don't know exactly what product you're going to make with that.” This can once again reduce the product roadmap and lessen the chances of being caught out, although this does require strong planning capabilities.

Another insurance policy against disruption is to try and shorten the supply chain before it reaches the customer.

Best practice here often is to make a segmentation of your product

This is “A balanced trade-off decision” said Bain’s Kwasniok, “between how close can you be to the customer so that you have a very short lead time? And then how much inventory will you deploy? Because the more you disperse it out, the more inventory you will end up holding. While if you have it in a in a more centralised location, or in one place per region, per country, you need less of the safety stock that helps you to cover the uncertainty in your demand.”

He laid out that “Best practice here often is to make a segmentation of your product, of your SKUs. You have products with a high demand, probably in every local warehouse in every local DC location that you operate, so that you can go to customers quickly, and then some of those that are less frequently ordered you could have in only centralised locations, pooling those inventories for larger geographies, and that helps you to reduce your inventory. You can still deliver them, but you would have a longer lead time potentially.”

If you don't have the right availability at the right time online, they go to the next website

Article’s Chavez has found that this more dynamic approach has been crucial: “We have a more of a decentralised approach, to put the inventory as close as we can to the customer. So, we're building out our network to do that. Of course, there's some products that have you know, low frequency, or it doesn't have the volume, and that makes sense to have it centralised, but overall, it's more about the velocity and the customer experience and availability. Because if you don't have the right availability at the right time online, they go to the next website.”

It's crucial then to have, really, transparency of your inventory

Given this highly competitive world, “It's crucial then to have, really, transparency of your inventory. And best practice would be … to have access to all your inventory, for all your channels, and to be able to move around dynamically depending on the demand you see,” said Kwasniok.

Transparency, therefore, is very much the name of the game going forward. This transparency extends to communications with customers, with internal stakeholders and with supply chain partners, but also to key data and internal processes. Those that can institute this kind of openness alongside robust planning capabilities, are giving themselves the best chance to demystify supply chains and keep themselves in the clear when it comes to customer experience.