Part II: Solutions from a Kearney case-study
A comprehensive end-to-end strategy and new digital tools can address supply shortages, rising fulfillment costs, and customer experience
Customer satisfaction is an obvious starting point while building a company’s LM/FM strategy. Considering where and how consumers learn about products, what factors they consider during purchase and what act as possible friction points; what channels they use in the purchase or lease of products/services or post-purchase service/maintenance; how often servicing is necessary, and what the preferred return channels are, are all crucial to optimizing the LM/FM strategy.
In this regard, some of the key areas where managing LM/FM disruptions can aid in end-to-end strategies include the following:
- Demand and supply planning: Optimising inventory and services through advanced analytics such as AI/ML-based demand forecasting models (inventory allocation, advanced demand sensing, distributed order management (DOM)) and profitability-based dynamic supply-allocation scenario models to minimize risk are going to be crucial aspects in digitizing the supply chain.
- Customer experience: As always, the key in the supply chain optimization process, customer segmentation, and demand profiles through customer surveys are essential to successful fulfillment. The creation of a customer-facing portal for all centralized fulfillment information, for example, is a way to go about this.
“Understanding customers’ real-time shipping choices and experiences adds rich detail for demand forecasting, LMFM design, and CX enhancement. Reliable, order-specific shipment data, layered with contextual external data and analytics, can unlock valuable demand insights to precisely tailor customer communications, notifications, and offers,” according to Kearney.
- Supply security: A fully integrated, multi-enterprise supply planning program with near real-time forecast sharing may prove to be vital to stable supply chains in the future. As long as inbound planning and logistics integration is carried out to provide enhanced supplier visibility – thereby guaranteeing security – supply chains are on the right track.
- Fulfillment design: Building resilience, setting strategies and executing towards reducing costs and improving service is key. This also includes stressing on diversification during the middle- (direct buy) or last-mile transportation through transport-mode optimization and demand management.
Building network design tools to analyze forward as well as reverse supply chains to evaluate vendor and carrier partners; plan number, placement, and role of nodes and optimize fulfillment center throughput and cost based on demand are certain aspects that have been found to be most useful.
“Network design tools helped a major telecom services provider identify 25% in fulfillment cost reduction, and opportunities for a 20% diversification of transportation spend,” reports Kearney.
- Returns optimization: “A discrete returns network design that includes partner selection and consolidates reverse logistics data within the broader network will improve inventory tracking and maximize the profitability of repair/recycle/liquidation programs, in turn, driving EBITDA.”
All combined, these can lead to an approximate 2% rise in EBITDA, an approximately 20% rise on Net Promoter Scores for fulfillment-related metrics, a 10-15% increase in forecast accuracy, and an 8-15% reduction in fulfillment costs, according to research from US-based management consulting giants, AT Kearney.
It is also interesting to note that these practices have applications much beyond just the scope of electronics and telecom – such as in apparel, cosmetics and pharmaceutical sectors as well. They face rather similar operational, financial and CX challenges as well – which means they are also well-positioned to enjoy the benefits from reverse, first-mile sustainability measures and supplier partnerships as well.
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