Mar 27, 2022The global supply chain is evolving—quickly. Many point to the pandemic as sparking change, with the seismic shift from B2B2C to B2C. Driven by this drastic change, the sheer number of parcels has increased a shocking 27 percent since 2020. At the same time, technology has moved forward to meet the moment and prepare for the future.
The exponential change in the retail landscape has forced supply chains to take a step back and holistically examine operations. Executives are looking to implement technologies and processes that not only enable resilience to address the current landscape, but also can be future-proofed for the next set of challenges. It is inevitable that supply chains will increase in complexity as consumer expectations for speedy, accurate delivery continue to escalate.
In order to alleviate supply chain pressures, the industry is moving toward solving challenges through a digitally connected supply chain. While it may seem intuitive to connect each link, the unfortunate truth is that the supply chain has been built silo by silo over time. While it is obviously impossible to physically connect the points along the supply chain, it is absolutely possible to digitally connect them. A digitally connected supply chain will meet current and future challenges.
Digital Identification at Source
Call it the power of "one." When a digital ID is given to each item at source, it has a ripple effect all the way across the supply chain to the end-customer. A digital ID is created at the manufacturing facility utilizing intelligent labels such as RFID. Intelligent labels give a unique ID to the product that carries data and acts as a trigger for automation as that product moves through the supply chain.
With RFID labels, no line of sight is required so products can be scanned passively by deploying automated reading technology, such as a tunnel placed along a conveyor belt or an overhead reader placed above a dock door. Whatever type of label is utilized, the result is the same: a true record of the chain of custody for every item as it travels to each subsequent touchpoint on the supply chain.
Digital IDs on every product directly address the increasing volume and complexity of supply chain partners by allowing all operators to have full transparency on what is coming inbound and going outbound. The verification process is triggered by the digital ID at every touchpoint. This benefits the warehouse responsible for receiving orders and then sending them out, as well as the shippers that need to account for what comes into the trucks and what goes on the road. Further on, a retail store has accurate expectations for product count upon arrival, enabling them to plan for operations from stocking to replenishment to promotions.
Digital IDs created at source enable another essential attribute: brand authentication. Although digital IDs can be assigned downstream, greater accuracy is achieved the further upstream the digital ID is created. Maintaining the chain of custody deters counterfeiting, tampering and entry of products into the gray market. There is also the issue of overproduction—a digital ID reveals where the unsold merchandise goes and how it gets there.
Making Digital Connections
The objective of a digitally connected supply chain is to make the parcel more efficient through the shipping network. A large part of that efficiency is reducing the huge amount of errors that happen across a multi-touchpoint supply chain and costs brands and retailers millions of dollars each year.
For starters, by digitally connecting products throughout the supply chain, retailers need not pay for items not received from suppliers. It is not a secret that a manual spot-check of inbound and outbound parcels is neither efficient nor accurate. By mass-reading parcels, a palette or a truckload, a connected digital ID solution automatically spots the numerical difference and communicates the gap to the supplier.
The advantage of RFID is immediately evident in both shipping and inventory control. People running around with clipboards and the errors that manual processes generate should be relegated to history. RFID accomplishes inventory control without a line of sight, much less a pencil and paper. Not only do intelligent labels allow operators to manage inventory faster and more accurately, data contained in the label flows through the entire ecosystem.
Data Drives Downstream Automation
Whether inbound and outbound operations deploy intelligent labels for parcels or for pallets, an important aspect of streamlining and automating supply chain operations is having the accurate data they contain. This data is more important at every point downstream because any network error will be magnified at each subsequent point.
For example, LTL shipping takes many steps starting at pickup, through the carrier network and on to the last mile. If something goes awry upstream, the error is magnified and becomes more costly downstream, because all the touchpoints become invalid until the discrepancy is corrected. The simple fact is every misrouted parcel wastes time and costs money. Avoiding routing errors and having accurate data enabling visibility translates to a much less error-prone process. Studies show that in digitally connected supply chain processes, operational efficiency increases by 20 percent.
Data sharing across what were previously siloed operations is happening across the supply chain industry. Connecting data and ensuring that it flows from one player to the next goes even beyond routing and inventory. Consider the potential and insights to be gained in knowing the condition and location of all parcels and items—both to and from the customer. For instance, for returns, is the parcel going to a warehouse? Being remarketed? Heading back to a main facility? Clearly, there is endless possibility for gathering data and huge potential for connectivity between points of the supply chain.
The Labor Shortage Conundrum
Labor shortages in supply chain operations will continue. In response, there needs to be a technology edit, not a labor edit. A labor edit will not be the way of the future, not only because the future labor supply is an unknown, but also because it is not efficient. Adopting a connected environment and automating processes is the clear path ahead. In the past, supply chain executives relied on labor-intensive legacy technology. Removing the burdens of legacy technology leads to automated processes that are focused on collecting information about a product and utilizing that data to automate supply chain processes.
Parcel volume will continue to increase and, in the past, there were a predictable set of touch points where data was collected. There are many, many more touch points these days, and as supply chain moves toward automation, the conversation is shifting to how to use data to automate robots. There just isn't time or labor to allocate human resources to check and re-check parcels. Time is better used toward making better decisions to drive accuracy, velocity and sustainability.
The Consumer Counts
Like merchandising and marketing, supply chains are now consumer-facing operations. With ever-increasing e-commerce shopping, there is a mountain of real-time data that businesses now need to aggregate to meet customer expectations. Partners and consumers alike are interacting with tracking processes, and there just isn't time for packages to wait for line-of-sight, manual scanning.
Consumers are demanding to receive their packages even more quickly and want precise knowledge of where their goods are at every moment. They also want to know their products' origin and ensure they aren't counterfeit. A connected digital ID inspires consumer confidence—tracing where an item is in real time, validating its origin and preventing fraud (all business benefits as well, of course). The tangible result for retailers is that the data collected using connected digital IDs connects consumers back to the brand in the most personal way possible: the package they ordered in their hands.
Toward a Sustainable Supply Chain
Digitally connected supply chains advance velocity, but they also enhance sustainability. In fact, the more efficient your processes, the faster your product can route through the system, and the more sustainable your supply chain is. Making processes more efficient means making better decisions about getting things where they need to go, faster. That leads to optimizing truck loads and intelligent product routing: digital connections enable faster decisions about how to get more volume and weight on each truck, leading directly to alleviating the number of trucks on the road or planes in the air. The more optimized the transportation, the better sustainability in the supply chain can be quantified.
Digitally connecting IDs will be even more critical in the future for consumers, who increasingly demand information about where their product came from and how it was made, as well as how it was transported and stored. Currently, it is the payment providers who are providing more information to those consumers who are taking an interest in the environmental impact of products they purchase. Brand and retailers can seize this opportunity to use a digital label to "speak" to consumers who want to understand the footprint of their item, from end-to-end. By using connected digital IDs, brands get speed into the supply chain while providing a measure of each product's carbon footprint.
On the Road to the Future
Consider "inventory" as the item itself and "routing" as the journey of that item. Supply chains are de-siloing systems and networking them together to reduce redundancy and labor in validating each item, its path and its custody, while having confidence that the right item is going to the correct location at the proper time. The result is an end to what were seemingly endless verifications: inbound, outbound, who has it where—with no need to continually revalidate and scan again and again, and again.
Relying on connected digital IDs to create the future of the supply chain means data will be shared and processed more efficiently and accurately to drive greater velocity, transparency and sustainably. That is the future of automated data collection and where the evolution of supply chain is going—fast.
Michael Kaufmann is the global market development director of logistics at Avery Dennison Identification Solutions. Avery Dennison Corp. (NYSE: AVY) is a global materials science company specializing in the design and manufacture of a wide variety of labeling and functional materials, including radio frequency identification (RFID) solutions serving retail apparel and other markets.
