Evolving consumer behaviors have dramatically impacted the way retailers deliver products. From clothing, to cars, to computers, consumers have gotten used to getting the custom product they want, when they want it. Case and point: While Dell’s business model was one of the first to create a true build-to-order and direct-to-consumer supply chain, consumers today have the ability to buy just about any electronic device customized with the specifications they want, right down to storage space, color and ring tones!
As consumer preferences have become more personalized and complex, retailers are asking their suppliers and logistics providers to step up to the plate. This means more customized orders, tighter delivery windows, and an increased focus on retail vendor compliance. Couple these factors with an economic recovery on the horizon – suppliers to retail will have to be prepared to deliver more products, with complex configurations, faster and more often. As order-to-shelf cycles tighten, suppliers are looking for their logistics providers to help them keep inventories low, and fulfill orders at the last minute to better match consumer purchasing trends.
In order for suppliers and retailers to remain competitive in this changing environment, manufacturers can no longer allow products to be fully configured in Asia (or anywhere deep in the supply chain). This strategy creates the potential for lost sales and unwanted, aged inventory within the supply chain. A growing new strategy in the hi-tech/electronics industry is to postpone the customer specific configuration of the product as late in the supply chain as possible, increasingly at the third-party logistics provider’s dock.
This trend is resulting in a new wave of Value Added Services that retail vendors and their logistics providers must be capable of providing. Let’s use a hi-tech/electronics manufacturer as an example. The lines are often blurred between outbound finished good shipments from a hi-tech/electronics manufacturer and inbound orders for a retailer. This makes the work to ensure that the product is configured accurately – exactly the way the end consumer expects it – even more challenging. Many retailers have unique product configuration and shelf displays to differentiate them from their competitors. Consumers have very specific ideas of how a product should look and be packaged before they will make a purchase decision.
As a result, logistics providers need to develop Value Added Services that address these trends, enabling warehouse operators to package finished goods inventory to match a specific retail order, helping to eliminate or avoid costly vendor compliance charges, and increase retail customer satisfaction. Some of these services include:
- Kitting: Building advance “kits” to merge with Finished Goods improves speed to shelf. By pre-building kits of components (for example, HDMI cables or specialized remotes) for a flat screen television via a “drop in the box” process, retailers can deliver TVs to consumers with the latest technology and customized peripherals.
- Bundling: Involves the creation of unique combinations of components and peripherals to meet end customer demands at the shelf. For one electronics supplier, unique retail orders are delayed until the last minute prior to shipping, to allow the hottest printer and monitor combination to be bundled with the hottest laptop or PC.
- Customization and Packaging: Encompasses the building of production runs of retailer specific configurations to meet changing demands of the end consumer, especially for special promotions of slow moving products to eliminate aging inventory. The customization and packaging process allows hi-tech and electronic suppliers to adapt to a very dynamic customer demand flow and improve bottom line performance by eliminating soon-to-be obsolete inventory.
To accurately fulfill more complex, customized orders, the best logistics providers are integrating lean principles such as continuous improvement, standardization, and quality into their operations that service retailers and retail suppliers. Further, the use of new technologies, such as voice-to-pick, are helping to improve inventory accuracy, order fill rates, shipment accuracy, and vendor compliance for retail.
As retailers become more demanding, we’ll see more top manufacturers maturing from discrete service outsourcing (Transportation Management, Distribution Management, and Dedicated Contract Carriage) to highly integrated solutions that provide end-to-end Value Added Services and technology solutions that create seamless handoffs and enhance customer satisfaction.
Steve Sensing is Vice President and General Manager for Ryder’s Hi-Tech/Electronics vertical, which serves Consumer/Commercial Electronic, Hi-Tech/Semiconductor, Telecommunication, Medical, & Appliance clients in the commercial and consumer arenas. Ryder is a FORTUNE 500 provider of logistics and transportation solutions.