Direct to Customer vs Reaching Customer via DCs

Reaching your customer- The 2022 way!

Companies are looking at new ways to reach out to customers that will give them a chance to stay engaged direct to customers. This gives them a unique touchpoint almost akin to grasping the customers’ hand to feel the pulse. What better way than getting a touchpoint to improve the customer experience. Thanks to digital technologies and modern material handling techniques, companies can safely implement strategies that give its end customers a good feel of the order handling process of their suppliers. A good mix of hardware and software working in harmony and interfacing with the business ERP system can ensure efficient order handling processes via Distribution Centers that could benefit all the players in a supply chain – manufacturers, wholesalers, retailers and end users.

Evolution of Digital Supply chain Networks

In the modern supply chain networks where strategies are continuously emerging and evolving all players must show willingness and agility to adopt newer techniques and solutions to deliver value not just to themselves but also to its customers. Currently companies that provide smart solutions to overcome the last mile delivery issues will gain in the battlefield of supply chains. Latest trends point to emerging practice of Direct to Customer (D2C) over reaching customer via Distribution Centers (DC2C). One must keep in mind that this strategy is not just about eliminating a middle layer in the supply chain. As opposed to this, it is to gain efficiencies just by adopting automation and technology to eliminate a dispensable layer. Economies of scale is a driver to adopt this strategy and hence large players benefit from this.

A centralised warehouse that caters to one or more of the following needs and that implements techniques and solutions using modern digitization technologies will help companies realize this ambition:

  1. Enough area for storage of a wide variety of products and SKUs.
  2. A good location that provides access to transportation of inbound and outbound deliveries
  3. Reasonable proximity to marketplace
  4. A good potential to adopt digitization technologies to automate the processes and systems with benefit from ROI

Of course, while adopting modern technologies and strategies to drive higher supply chain efficiencies benefit from ROI is a sine qua non while making investment decisions.

Benefits of D2C

Why would a company choose to deliver direct rather than through third-party distributors? The answer lies in gaining direct access to end-users that are its customers. This is especially true for large FMCG players that cry for gaining better insights into its customers’ behavior and use patterns. Companies will benefit by gaining first-hand information and data about their customers thus enabling them to better serve its customers. Data ownership, its use, and security must be respected according to local practices and regulations.

A strategy to deliver direct will demand smart warehousing and logistics solutions that may call for dramatic retooling of operational expertise – from customer service and experience to returns management, direct merchandising, direct delivery, and, of course, warehousing and logistics. Any strategy should result in financial gains as well as an edge over the competition for a business enterprise.

Implementing a D2C model calls for significant changes in the following areas of their warehousing infrastructure – Intralogistics which is the art of managing the flow of materials, products and information within the walls of a warehouse; picking; sorting; storage and retrieval. A well-designed solution combined with the efficient layout in design and technology will result in improved ROI as compared to a force-fitted solution. Hence enough ideation and planning should form an essential part of any strategy to implement digitized and automated supply chain in a Direct to Customer program.

Technology and Solutions portfolio

One of the key elements of successfully adopting this strategy is to leverage the advanced solutions that deliver efficiency, flexibility, scalability, and safety.

Some of the most automated products & solutions that a completely automated warehouse comprises:

  • Mobile robots and driverless forklifts for material movement in a Distribution Centers
  • Picking solutions using pick to light, pick by voice and pick by vision technologies
  • Dense storage of SKUs using Carton shuttle or pallet shuttle shelving systems
  • ASRS solutions using shuttle based and/or crane-based systems
  • Order Sortation using Sorting robots
  • Powerful software systems to manage all the operations like WES, WMS, and WCS

It is precisely in these areas Addverb Technologies, with its domain expertise of both technology and business processes will provide a full bouquet of products and solutions to meet the digitization program of business to modernize their warehouses and supply chains.

Adoption of technology will result in operational improvements of a warehouse, but the key differentiator is in choosing technology wisely, and here Addverb’s portfolio comes with a promise of delivering results beyond compare. By working with solution providers with a deep understanding of technology and business processes companies can realize their grand vision of D2C and gain competitive advantage.

Musings on the lockdown days

Who would have even imagined that we will be locked down to save not just individual lives but also of the community? But yes, we were dealt this hand by the cruel turn of events that unfolded on COVID 19 – the most dreaded word in the global vocabulary this lockdown.

What a black swan event this has been. Globally all governments are well equipped – meaning armed both with physical arms and ammunition, extending to nuclear weapons even and, not just these – they are ever ready with diplomatic strategies as well to counter threats. What use are these weapons and strategies for destroying the dreaded WMDs – Weapons of Mass Destruction to deal with COVID19. This has proved to be the most dangerous weapon if one were to classify that as one. As it is said, it is very tough to fight an enemy within and an invisible enemy.

Well, we have one lurking at our doorstep in this lockdown or shall we say right under our nose and we have no other choice but to lock ourselves down. Lockdown or not, we should keep the spirits soaring high to not just lift ourselves, our teams at work and our families at home, but also to respect the lives of our neighbors, service providers and the essential services teams that are staying awake to help us fight this and tide over the crisis.

How are we, Addverbians doing? Well not too bad I should say.

The teams at work are energized to keep the morale high and, be as productive and innovative as one could get under these trying times. Addverb’s tribe is rearing to contribute to the wellbeing of society by staying engaged in the lockdown with some of our customers that are operating their warehouses to keep the essential supplies going as mandated. We have even put our AMR to great use to serve the noble cause at a Govt. hospital in Noida to deliver samples, supplies, and essentials to patients in wards without exposing personnel to the risk of contracting the virus. Back in their homes, each member is contributing to the betterment of – a) the society – by following the detailed protocol of lockdown as mandated, b) Ourselves and our families to be responsible members, and c) last but not least to continue to contribute to the company by continuing to work in this lockdown but remotely and training ourselves by gainfully employing and enjoying our time.

How am I doing? Well, again not too bad.

I should say I had a few days of acclimatization to handle and get over the initial resistance to adapt. I got entrapped by watching too much TV on this epidemic and, well and truly the infodemic (the word used these days for the information on the epidemic) hit me. I spent a couple of sleepless nights being overanxious about this as we have two ultra-senior citizens at home – my Mother who is all of 88 and my Mother-in-law who is in early nineties to care for. My thoughts were mainly about what if scenarios. I worked hard to overcome this anxiety. Did I do the right things – thankfully, the answer is – Yes. How did I overcome this? By the tried and tested method of calming the nerves by accepting that I am nobody in the larger scheme of things and have no control on the events that are unfolding. Our best defence is to accept things that we cannot control and stop worrying about them. Gain confidence about the power of collective good that will eventually win over evil forces. I resorted to meditation that I was doing on and off. I am regular at that now. Most importantly, my wife and I chalked out a disciplined schedule in this lockdown. Despite missing out on our regular walks that we would have outside, we decided that we will use the space on our balcony and terrace to good use for walking. So much so, we are clocking a good number – about 5 to 6 Kms everyday by walking at home. A key takeaway for me is, my wife has taken to walking seriously now as prior to COVID 19 she was a very unwilling walker even though she is a yoga buff. Now we are very regular with both walking and Yoga. We are tending to the elders as we should be doing to keep them charged up. We are having good food thanks to variety of dishes being cooked by my wife collaborating with her 92-year-old Mother. Aren’t we blessed and lucky? We also take particular care to share whatever little we can – food, money and such with the service providers – the lady that sweeps our road everyday even in these times, our gardener who drops by occasionally out of love for his job and the plants he tends, and anyone else that contributes to our wellbeing.  I miss my swimming though in this lockdown.

It is so nice to really hear and enjoy the birds chirping as they have also regained their lost space as we have of our balcony. We do not have the unending stream of automobiles racing with their horns blaring all the time. All these nice things are visible and available for us to enjoy. I hear lots of music – classical genre. The ones which I would not have watched otherwise are the Frankfurt and New York philharmonic concerts. What a treat they were. In times like these art gains over many other things and performing arts will give a new sense of high.

Well you must have thought it is all play and no work. No not really – I am engaging as per the need to be active on the professional front to contribute to Addverb in my own way. I read a good lot of reports and articles both technical and managerial in nature and share with my colleagues via the right forums. I blogged on a few topics, participated in a few conference calls with potential customers to keep the flame simmering. I am available to contribute to Addverb in any which way in these troubled times. Keep going team.

Let me close this by quoting a nice one by Owen Arthur – a politician from Barbados:

“For he who has health has hope; and he who has hope, has everything”.

Rise of Mega Distribution Centers and its impact on Logistics

Factors driving the emergence of Mega Distribution Centers

A modern supply chain facility has no leeway to miss out on paying close attention to all the different elements in order to stay competitive and reap benefits. Companies may have to rethink and replan their strategies for designing their inbound (Raw Material – RM) and outbound (Finished Goods –  FG) in their Distribution Centers to stay nimble but yet be in a position to respond to black swan events a la corona virus – COVID 19. On the one hand, companies have far too long focussed on Just in Time (JIT) principle of managing their inventory, they will now, on the other hand, be forced to devise strategies to be able to bear short to medium term shocks that would impair their supply chain security.

Companies must be wiser after every calamity and should put robust infrastructure and processes in place to deal with shocks.  As the legendary business leader Jack Welch said, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” It is therefore important for businesses to be ahead of the curve when it comes to business strategies. Mega Distribution Centers with commensurate logistics are a class that belongs to those businesses being ahead of the curve.

Logistics and Infrastructure

While designing the best fit solution for Mega Distribution Centers, logistics and its related infrastructure form a critical pillar in the structure. The task of distribution with matching logistics could be simplified to mean products having to move from point A to point B which is the right location in the most efficient way. This again means it needs to be transported to the right location, at the right time, in the right condition, for the right price. Distribution centers should be designed with a focus on meeting all the objectives mentioned just now.

According to a research paper on Mega DCs “Factors determining distribution structure decisions in logistics” authored by Alexader T C Onstein, et al, we come across different structures as shown in figure below:

“Decentralised” distribution structures include multiple DC locations in a so-called multiechelon system (layout 4 &6 in the above image).  A “multi-country system” includes an international DC and a number of regional or local DCs.

It is evident that the nature of distribution that a business opts will drive the logistics and transportation infrastructure to meet its demands.

It is imperative for companies to drive efficiencies by digging deeper into the levers to work on, to gain advantage. Ideally an analytics approach will be needed to decide about determining these levers. Many businesses have identified it would be cost effective to have fewer larger facilities than multiple smaller ones.

Even in these Mega DCs, one should de-risk the operations from many external angles that may hamper operations in unforeseen exigencies such as fire, snow, etc. Therefore, a campus style approach where a Mega Distribution Centers could be one with a cluster of a few medium-sized buildings that total the typical area to qualify to be a Mega DC. These buildings could safely be separated by roads for mitigating the effects of fire. Of course, it is important to run a cost benefit analysis from all angles, initial investment, operational expenses and such. Operational expenses could offset the benefit of a cluster of buildings making up a Mega DC as the material handling and automation systems may add to unreasonable cost. *

What Goes into a Mega Distribution Center

Mega distribution Center, by its very nature is the Mothership and should satisfy a variety of needs. Therefore, it is a multifaceted and multitasking entity that is designed to perform end-to-end logistics demand for any business. It should have the following attributes:

  1. A large facility typically of an area around 400,000 Sq.ft. would qualify as a mega DC.
  2. Designed to suit large inbound and outbound traffic at high throughput
  3. Have very good locational advantage and be capable of handling heavy truck traffic continuously
  4. Must lend itself well to be connected to mini and mega markets to meet the demands. This will in turn make the mega DC a viable proposition
  5. Fully automated material handling system, storage and retrieval system linked with business ERP system on a real-time basis

All the above attributes will essentially mean having multiple subsystems that handle material movement within the premises in a seamlessly integrated manner.

Technology and Solutions to be built into a Mega DC

Mega DCs normally operate 24*7 and hence are ideal candidates for automation due to the continuity of service and running multiple tasks simultaneously for meeting high volume of operations.

A good approach would be to break the domains down to:

  • Business need in general
  • Structure of the mega DC – Does it serve as a Mother DC feeding cross-dock DCs to serve the needs of a mini distribution centre
  • Transportation
  • Geography – Locational aspects

Technology and automated material handling solutions are commonplace these days. They help in meeting all the demands – ease of operation, higher productivity per person deployed, unparalleled operational safety and the consistently very high throughputs and accuracy. A carefully designed combination of infrastructure, automated material handling solutions and location will deliver a good value proposition to a business in smart supply chains.

It is precisely in these areas Addverb Technologies, with its domain expertise of both technology and business processes will provide a full bouquet of products and solutions to meet the digitization program of a business to modernise its warehouses and supply chains.

Adoption of technology will result in operational improvements of a warehouse, but the key differentiator is in choosing technology wisely, and here Addverb’s portfolio comes with a promise of delivering results beyond compare.