Macro events such as the pandemic, the rapid growth in e-commerce, financial turbulence and geopolitical instability have created unusual fluctuations for supply and demand over the past couple of years, exposing critical vulnerabilities across the global supply chain.
For example, Forrester’s 2021 The Digital Commerce Imperative report indicated that 49 per cent of respondents faced longer fulfilment times while 45 per cent had experienced shortages of raw materials.
To remain profitable and meet customer demand, retailers and consumer goods companies (CG) must quickly stabilise supply chains and ensure they are agile, flexible and secure to ensure they can rapidly respond to changes in demands in future. According to Microsoft’s general manager supply chain for worldwide retail Mike Bassani, resilient supply chains must have three key components.
“A robust and durable supply chain needs to be modular, interoperable with source systems, and secure,” he says. “The days of retailers explicitly relying on lean principles are mostly gone. Aside from a few areas (and available capital is always a consideration) the service level agreements they are looking to achieve for their customers are (once again) driving operations decisions.
“Securing both data and intellectual property is becoming more critical and must be embedded into resilient supply chains. Firms that have made software technology investments are creating separation here. Unfortunately, however, the pandemic demonstrated that many companies have inadvertently backed themselves into a corner by relying on source systems and Excel and they are unclear where to start when it comes to moving from on-premises systems to the cloud.”
One of the common barriers for transformation is that retailers have difficulty securing leadership buy-in for the necessary technology investments. “The ROI of Supply Chain Management, a 2022 Forrester report, found that supply chain management integration and configuration costs can be equivalent to 200 per cent of the first-year licence cost,” says Bassani. “The investment perception can scare many organisations away from starting a supply chain management transformation; this puts them further behind.”
Another frequent issue is that many retailers and CGs still use static, rather than real-time reporting, to manage inventory and order fulfilment processes. “Retailers generally look at inventory as being in a static position – products are either in stock, in transit or order,” says Bassani. “During the pandemic, the in-stock position of many retailers suffered because they didn’t have insight into the inventory situation of their suppliers. However, we’re increasingly seeing that it’s more important for them to have some type of promise accuracy than to have products physically in stock.
“Suppliers that had greater control over production and make-to-order processes, or those who were more ‘vertically contained’ in software, were able to react to changes better than those using archaic methods – like emails and phone calls – for inventory status updates. The latter approach led to missed promises and ultimately caused more consumer pain than having a more realistic ‘ships in one to two weeks’ message, which is possible with connected systems.”
Implementing the right planning software is critical. “We often joke that Microsoft offers the world’s best planning software, basically because everyone uses Excel,” says Bassani. “That said, there’s been a substantial amount of progress in this area over the past five years as companies move up the technology stack and out of ad hoc workbooks. Regardless of which technology providers a retailer or CG chooses, it’s important that they consider the interoperability of the solution with their data estate.”
Bassani advises that retailers and CGs ask several key questions when choosing supply chain solutions. “Are they trying to solve a foundational or point-in-time problem? Is their current enterprise resource planning (ERP) system good enough, or do they need a full digital transformation? Would that digital transformation require a move to cloud computing? What would need to be true to make this the right time for investing in new solutions? Which companies would give the organisation the most option value down the line?”
Microsoft collaborates closely with an extensive ecosystem of partners to deliver the technologies retailers and CGs need to strengthen and future-proof their supply chain operations.
“We are committed to building market-leading solutions for businesses in need of supply chain transformation,” says Bassani. “However, it’s presumptuous to think that one source ERP system can do it all and be nimble enough to handle the changing demands of this industry. As the business continues its rapid growth, we’ve learned that bringing first- and third-party solutions onto our business application platform allows quicker time to value and reduces the silos organisations have in their traditional technology stack.
“That’s why our supply chain solutions focus specifically on lighting up first- and third-party solutions on a harmonious data layer. This reduces translation costs, improves collaboration (especially through Microsoft Teams), and drives better business decisions because everyone is looking at the same data.”
Emphasising partners’ core role in Microsoft’s supply chain strategy, Bassani cites several examples of impressive independent software vendors, including ToolsGroup, which offers an integrated solution for demand forecasting, inventory optimisation, sales planning and much more. “ToolsGroup is fantastic – it has strong planning capabilities and leverages a lot of the Microsoft Power Platform ecosystem, allowing customers to upgrade from Excel to Power BI,” he says.
Key partners on the transport visibility side include large established firms such as TMC, a division of C.H. Robinson, and emergent disruptors like Overhaul. “Both work across transport management systems and carriers to give retailers’ inbound and outbound transport teams the right level of intel,” says Bassani. “Microsoft’s supply chain organisation uses both solutions and they’re available for customers on the Azure Marketplace too.”
Transportation, e-commerce and business services provider FedEx is also working with Microsoft to develop a cross-platform, ‘logistics-as-a-service’ solution. It combines data insights from the FedEx supply chain with Dynamics 365 Intelligent Order Management to facilitate expedited deliveries, near real-time delivery status communications, frictionless returns, and more.
“We’re thrilled with the progress made on Intelligent Order Management and the excitement around it with FedEx, but there’s much more we want to do to provide customers with a robust suite of options,” says Bassani.
In all cases, Microsoft’s goal is to go beyond simply providing technology for customers and partners to use. “We aim to build symbiotic relationships where they can make each other’s products and services better,” says Bassani. “A good strategic example is US-based supermarket chain Kroger Co, which has committed to making a substantial investment to improve multiple facets of its supply chain, including stores, warehouses, and logistics. We’re working hand in hand to develop scale solutions (leveraging Azure to improve data modelling), as well as more specific software-as-a-service-based solutions. This includes evaluating first- and third-party solutions where appropriate.”
Multiple retailers and CGs have already benefited from this approach and successfully improved their supply chain operations with the help of technology from Microsoft and its partners. One example is fitness manufacturer iFit, which resolved its ‘click to first offer date’ problem by implementing Microsoft’s artificial intelligence (AI) technology.
“By using our inventory placement AI, iFit saved roughly three hours per day in manual effort and analysis,” says Bassani. “The solution provides recommendations on how much inventory to stock and where to stock it, and with this suggested data, iFit is able to strategically dispatch 1,000 additional shipments per week to the necessary warehouse locations.”
Spurred on by this success, Microsoft will continue to collaborate with partners to further evolve its solutions to empower retailers and CGs with the agile, secure and resilient supply chains they need to remain profitable and competitive long into the future. Bassani says: “Microsoft is already considered a leader in Gartner's Magic Quadrant, but we have high ambitions in the supply chain technology space, and we’re thankful for the partners and customers that are locking hands early in the journey with us.”
A variety of Microsoft partners also contributed to this feature: AVEVA, Infosys, Flintfox and Overhaul. Read about how they are helping retailers and consumer goods companies to resolve issues in their supply chains and make them more stable, agile and resilient.
This article was originally published in the Summer 2022 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.