Many companies invest heavily in time, talent and money to increase efficiency in the last mile of their supply chains. It makes sense. After all, some industry experts estimate that as much as 28 percent of the total cost of getting products to market is in the last mile. Entire cities are even getting on board with initiatives such as New York’s Smart Truck Management Plan and Seattle’s Urban Freight Lab.
Now that we have gone to such great lengths to smooth out the journey to store shelves, a new objective is taking shape: Optimize the first mile to create even more cost savings and efficiencies.
There is immense opportunity in improving first-mile efficiency when products are being designed, materials are being sourced and production is taking place. Consider Thread International, for example. The start-up fabric company tracks every step of its manufacturing process to ensure responsible practices throughout its supply chain from start to finish. When brands such as Timberland, Kenneth Cole and Kelly Lane use fabrics from Thread International in their end products, these companies aren’t just delighting customers; they’re keeping corporate social responsibility top of mind.
The first and last miles of the supply chain have a lot in common. In both cases, it’s all about the flow of materials — specifically, about having the right materials in the right place at the right time. In both the first and last miles
- materials need to move quickly and accurately from source to destination
- cost-effectiveness is paramount
- digitally enabled processes are automating and streamlining workflows.
The benefits are similar, as well. Optimizing the first mile makes it possible to improve production processes, accelerate time to market and strengthen competitive positioning with well-priced products.
There is at least one compelling difference, however. In the case of the last mile, the buyer-supplier relationship is heavily focused on the product manufacturer and logistics partners. In the first mile, optimization strategy relies on strong relationships with everyone involved in product creation. This includes the designers who create the products, suppliers of raw materials and production capacity — all the way to the logistics companies that move components and finished goods.
A community-based model
No retailer stands alone. In today’s environment, supply chains are supported by an entire ecosystem with inherent interdependencies. A new dress design may be fantastic on paper or in a virtual showroom; however, if the right material can’t be found, a production center doesn’t have capacity or a shipment is stuck in a storm, it won’t make a single cent. Apparel megabrand American Eagle collaborates with more than 500 suppliers in 29 countries around the world. In order to unify product design, sourcing and merchant processes, the company implemented an order management system. This fully integrated tool enables all supply chain participants to work from single solution.
The three D’s
Realigning thinking and action to match the work being done and providing more opportunities to innovate require discovery, development and delivery. One company with more than 150,000 fabric, arts and crafts stock keeping units needed more visibility into trends around commodity pricing, currency fluctuation and other factors affecting its margins. Only with full visibility and clear communication with industry partners was the business able to efficiently manage the process from beginning to end. By working to optimize efficiency from the very beginning of the product life cycle through to the final step, organizations will develop supply chains that are more agile and less costly.
First step, best step
Product differentiation is essential for competitive excellence in retail. In the global marketplace, discovering what’s new takes skill, courage and relentless curiosity. A collaborative model that gives local designers tools to share inspiration and receive feedback on everything from color to shape to ways to customize for local markets will accelerate the design stage. When an idea germinates in the mind of the designer, the ability to test it and invite other stakeholders to contribute lowers the risk of bringing a failure to market. This kind of cocreation brings greater mindshare to the discovery process and is enabled by digital platforms. With such a digitally enabled process, it’s possible to quickly and easily
- adjust the design for any market and channel variations.
- apply criteria for a wide range of post-design needs, such as packaging, sizing and test thresholds to multiple designs
- automate localization.
The result is the best possible product, ready to be produced for markets likely to receive it enthusiastically.
Likewise, there’s a growing movement among manufacturers toward colocating production operations with local markets to reduce risk and lower total supply chain costs. Colocation makes it possible to evaluate options; modify choices based on current conditions and requirements; and ultimately make smarter decisions about where, how and when to produce the product. Supply chain partners can
- evaluate samples and collaborate in real-time
- get a complete picture of estimated landed costs, including components
- drill down to evaluate and modify total cost estimates using what-if scenarios at the component, material, style, product and purchase order levels
- view cost comparisons and recommendations for products destined for any location, channel, franchise or customer.
Conducting business globally is full of both opportunities and potential pitfalls. Consumers increasingly want sustainably sourced products brought to market by socially responsible organizations. Government regulations require careful attention to how, where and with whom business is conducted to ensure compliance and avoid both fines and public relations nightmares. These realities and more can wreak havoc on supply chains. It’s essential to proactively address these issues with immediate visibility into quality control and supplier compliance measures. Ideally, the supply chain team should be able to
- consolidate testing and inspection, factory compliance and regulations data in one place
- automatically link the right tests to the right products
- ensure that the proper regulatory and customs documents are being used.
Product life cycles are extraordinarily short today, as consumers’ appetites for what’s new and now are voracious. This trend requires retailers to scale production up and down frequently in just weeks. The agility necessary to thrive in a state of flux is made possible with technology that can
- align sales orders to purchase and production orders to maximize fulfillment and meet demand
- automate order updates to alert everyone on deliveries and delays
- make last minute updates and change or move delivery dates, transportation and destinations
- stage purchase orders for products and markets, even as plans are being finalized, and then adjust as needed.
Markets evolve. Consumers are fickle. New technologies arrive. The physical act of getting the right product on the right shelf at the right time is the only way to succeed. Early adopters of the principles in this article are finding that they get to market 40 percent faster and are 30 percent more efficient when expanding into new markets.
The days of high-volume production and cheap goods are gone. By treating the first mile of the supply chain as strategically as the last mile, companies will experience fewer surprises, more opportunity and better results.
Kamal Anand is chief technology officer at Bamboo Rose, where he drives product technology strategy. He may be contacted at (617) 969-9192.