Supply Chain Value Added Services Bring Flexibility

Inbound Manufacturing Product Flow, Packaging, Supply Chain, Technology, Value Added Services
May 3, 2012

Value Added Services Bring Flexibility to the Hi-Tech/Electronics and Retail Supply Chain

supply chain value added services

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.  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 too 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 supply chain 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.

Several supply chain Value Added Services can help solve this problem for suppliers. There are customized systems that enable 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.  Here are some Value Added Services that can help:

  • Kitting – Building advance “kits” to merge with Finished Goods improves speed to shelf.  For example, by pre-building kits of components (e.g., 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 – Providers can create 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 – This is where a provider builds 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 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. Lean warehouse operations are becoming increasingly important as suppliers have little room for waste or error. Ryder’s commitment to lean warehouse practices and 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 our customers.

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.

What other best practices does your organization follow in order to meet retailer orders and enhance customer service?

Authored by Steve Sensing

J. Steven (Steve) Sensing is President of Global Supply Chain Solutions (SCS) at Ryder System, Inc., a FORTUNE 500® commercial fleet management and supply chain solutions company. In this role, Mr. Sensing is responsible for management, operations, sales, and the financial performance of Ryder’s SCS business segment.


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