Value Added Services Bring Supply Chain Flexibility

Consumer Goods, Lean Guiding Principles, Retail, Supply Chain, Value Added Services
April 11, 2017

Value Added ServicesEvolving consumer behaviors dramatically impact the way retailers deliver products.  From clothing, to cars, to computers, consumers want customized products, as quickly as possibly.  This means more unique orders, tighter delivery windows, and an increased focus on retail vendor compliance.  These factors coupled with rising customer demand force suppliers to shift supply chain strategies. The result brings a greater focus on value added services that retail vendors, and their logistics providers, must be capable of providing. 

As order-to-shelf cycles tighten, suppliers need their logistics providers to help them keep inventories low and quickly fulfill orders to meet the demand.

In order for suppliers and retailers to remain competitive in this changing environment, fewer manufacturers allow products to be fully configured deep in the supply chain.  This strategy creates the potential for lost sales and unwanted, aged inventory. Postponing customer specific configuration of products as late in the supply chain as possible combats this issue. Increasingly, postponement occurs at the third-party logistics provider’s dock.

Using an electronics manufacturer as an example, blurred lines between outbound finished good shipments from an electronics manufacturer and inbound orders for a retailer make it more challenging to configure products accurately. Many retailers have unique product configuration and shelf displays differentiating them from their competitors.  

Several value added services help solve this issue. Customized systems enable warehouse operators to package finished goods inventory to match a specific retail order. This eliminates costly vendor compliance charges, and increases customer satisfaction.  Key value added services include:

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 deliver TVs to consumers with the latest technology and customized peripherals.

Bundling – Providers create unique combinations of components and peripherals to meet customer demands.  One electronics supplier delays unique retail orders until the last minute prior to shipping, allowing the most popular printer to be bundled with the top selling PC.

Customization and packaging – Providers build production runs of retailer specific configurations to meet changing demands of the end consumer. This occurs during special promotions of slow moving products to eliminate aging inventory. The customization and packaging process allows suppliers to adapt to customer demand and eliminate soon-to-be obsolete inventory.

To accurately fulfill more complex, customized orders, the best logistics providers integrate LEAN principles such as continuous improvement, standardization, and quality into their operations. LEAN warehouse operations increase efficiency as suppliers have little room for waste or error. As demand increases,  more top manufacturers turning to highly integrated solutions that provide end-to-end value added services. As well as evolving solutions that create seamless handoffs and enhance customer satisfaction.

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