With the rapid expansion of online ordering and shorter delivery times, retailers are facing new challenges. Customers are equipped with purchasing know-how and accustomed to wide product offerings and short delivery windows. They expect to be informed on real-time inventory levels and when they can expect their delivery or pick up. In order to stay competitive, convert customers, and keep them happy, on-time-in-full targets are set higher and higher. Retailers need to streamline and tie their operations together more than ever to meet those requirements.
This trend impacts all aspects of the supply chain, including inventory and workforce demand forecasting, pick and pack, as well as logistics and distribution. All aspects of the supply chain must be aligned to better anticipate volatility, to operate more efficiently, and to provide real time visibility. Algorithms play a very important role in the optimisation of these operations: they speed up business decision processes by making instant calculations and suggest necessary changes in plans and rosters within seconds. Using algorithms ensures that all processes in the supply chain are fast, efficient and flexible, which is ideal in volatile environments where OTIF is a key performance indicator.
Algorithms can be implemented to optimise every aspect of the retail supply chain. In this article, we’ll focus on four core capabilities: demand forecasting, workforce optimisation, pick and pack optimisation, and logistics and distribution.
1. Demand forecasting
As retailers expand their product portfolios and supplier networks to appeal to customers, they experience more complex and more volatile demand. This demand includes sales volumes, revenue and order volume. With more volatile demand, it’s difficult to stock the right products without creating big buffers. Intelligent forecasting helps retailers project accurate inventory levels with precise and short term demand forecasts. This demand forecast will not only save costs for retailers, but can also be communicated to suppliers to shorten the lead time between supplier and retailer. Forecasting can also be utilised to better align sales and marketing efforts and reduce the risk of stock outs, resulting in OTIF improvements. Simultaneously, demand forecasting also allows operational alignment in terms of logistics and workforce. Doing so will lower costs, maximise asset efficiency, and guarantee the desired service level.
2. Workforce optimisation
An essential part of realising a streamlined supply chain is workforce optimisation. Happy employees form the basis for happy customers. Depending on the business goals, revenue versus costs, workforce can be optimised to meet speed standards (where more workforce might be needed) or to cut employee costs (where less employees are scheduled, but orders might take longer to fulfill).
Workforce optimisation allows retailers to put the right people at the right place at the right time, while balancing customer service levels and costs. It adjusts and re-optimises working schedules in real-time as demand changes, while taking staffing needs and labor laws into account.
3. Pick and pack optimisation
Alongside accurate inventory levels and workforce optimisation, pick and pack processes are essential to driving higher throughput while maintaining quality and accuracy of deliveries.
Picking processes can be optimised using the batching method. Batching reduces the total travel distance without reducing quality of picked orders in the warehouse to fulfill (different) orders. Packing processes can be optimised using the cubing method, which maximises the utility of crate and cage capacity, and thus truck capacity. Pick and pack optimisation maximise order throughput and allows retailer to meet on-time-in-full requirements. They are an important part of the supply chain that could harness speed and quality to get the right products to customers on time.
4. Logistics and distribution optimisation
The final step is getting the order to the customer within the promised delivery window. To meet that promise as efficiently as possible, retailers need to look for opportunities for optimisation within their own logistics distribution process. There are two key factors to consider: building efficient truck loads, and assigning those loads to trucks and drivers. Building efficient truckloads is a complex process, that must look at a wide array of factors including delivery windows, delivery location (clustering), and loading rules (capacity utilisation). Most retailers are getting their orders out on time, but optimisation can reduce delivery costs while still meeting the OTIF targets. By integrating multiple algorithms, optimal truck loads can feed back into the pick and pack process to ensure that the right product is available at the right time for loading.
Once loads have been created, they also need to be assigned to resources (in terms of trucks and drivers). In some cases, a single driver make take multiple loads within one day. This assignment requires consideration of another complex set of parameters: truck capacity, driver rules, minimising empty miles, and reducing carbon emissions.
Logistics and Distribution Optimisation allows retailers and logistics companies to increase customer satisfaction, lower operational costs and reduce carbon emissions. They do so by automatically re-optimising schedules, including load planning, capacity planning and routing.
As the online retail landscape gets more competitive, retailers need to find ways to make their operations more efficient. Those who don’t start optimising quickly will lose their existing competitive edge sooner than later. Widget Brain offers plug-in intelligence with The Algorithm Factory, which allows retailers to start operating differently.
The Algorithm Factory (ALFA) is a cloud native platform that is a perfect fit for the volatile conditions of the online retail industry. It allows retailers to plug intelligence directly into their current systems, meaning that they can don’t have to replace their existing IT stack and optimisation can be implemented right away. ALFA also allows for rapid scaling: as a business continues to expand, the intelligence easily scales as well. Moreover, since the algorithms are cloud native they can optimise and re-optimise operational planning continuously. To give just one example: when demand unexpectedly changes, Widget Brain algorithms instantly adjust workforce schedules to meet the new demand. This type of continuous optimisation and re-optimisation is a great benefit to retailers experiencing frequent changes and volatility that can occur in the supply chain.
Rotterdam Science Tower
3029 AK Rotterdam
266 Main St
Burlington, VT 05401
United States of America
5/1 Moore Street
Canberra ACT 2601