Supply Chain Product Innovation With Data and Analytics
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The pressure to innovate to launch new products and solutions emerged as a top business imperative in response to the recent SAPinsider survey on data, analytics and automation in the supply chain. Data points from the survey will help us formulate our storyline for the upcoming February research report, Building Resilient and Agile Supply Chains Leveraging Data, Analytics, and Automation. This has emerged as a top driver in some of our previous SCM research, like July 2022 research Supply Chain Planning in The Cloud. The emergence of this specific business driver highlights that data and analytics in the supply chain can not only help organizations streamline their supply chains but in some industries, can help launch innovative or new products and services as well. A good example is the logistics and transportation industry. This article discusses how this industry can use data and analytics beyond building efficient logistics and transportation networks.
Logistics services is one industry where the opportunities to leverage the treasure trove of data collected for decades can be used to transform the way many of their clients operate their supply chains. Unfortunately, that is not the case with all logistics providers. And that is a major missed opportunity since these companies are sitting on a goldmine- decades and decades of data.
An example is FedEx. Back in 2020, when I was a pro-bono advisor with a start-up, I was interviewed by the USA Today network for their article on FedEx and Microsoft. That was a massive opportunity for both FedEx and Microsoft to generate innovation. In addition to serving retail consumers like us, FedEx services major corporations worldwide in fulfilling customer demand. Chances are extremely high that FedEx will deliver the iPhone you ordered from AT&T or your new Galaxy phone. Companies like FedEx have had the unique and highly lucrative distinction of possessing industry and end-consumer data for the last few decades. With the collaboration with Microsoft, I expected that the next couple of years would see a revolution in the industry that has not been seen before. However, this massive opportunity to leverage data and analytics to revolutionize the supply chain did not take off as expected.
FedEx should have come out from the pandemic ready with solutions and services that would have given a whole new dimension to logistics services. It did not happen. We saw some more announcements of new platforms a couple of years after the original partnership announcement. That did not translate into substantially transforming the struggle that the giant has been in for the last few years. With the kind of data it collects, adapting to changing market conditions is a skill FedEx should advise its clients on. If you think it has only been a few years since the collaboration was announced, you are missing the whole point of the pace of evolution in the digital age.
Was the issue that Microsoft’s gamut of solutions was not transformative? Certainly not! Azure cloud services and solutions are at par, if not better, than competitors with relatively newer infrastructure since they joined the race later. The adoption and growth of Azure have been high as well. The opportunities to leverage Microsoft’s gamut of technologies were vast. This is another example where technology as an enabler was not leveraged to its full potential.
The challenge is the way we view innovation. An organization with might, like FedEx, can transcend beyond leveraging the tools and technologies available today to go beyond “Logistics-as-a-service” platforms. No matter how many fancy things that platform can support, it still lies within the hard constraints of what FedEx has been doing for a long time in an increasingly competitive industry.
So what can be an example of innovation beyond the core competency? Think about consumer behavior. When we think about consumer behavior, we think mostly about buying decisions. But a key aspect of consumer behavior today, one that companies struggle with, is how they want their products delivered.
In the case of innovative products, like the launch of a new Galaxy phone, FedEx may have years and years of data on how Samsung fulfilled launch day orders. Planning new product launches for innovative products is challenging, from forecasting to fulfillment. FedEx may have the data to address that challenge. For some e-commerce companies that sell home furnishing products online, fulfilling large form factor (and heavy) furnishings is a major pain, specifically inefficient from a cost perspective. FedEx ground may have data that can help these companies determine what and how much incentive they can offer their customers to select a lead time that can help them significantly reduce their fulfillment cost and customer satisfaction.
The gist is the opportunities to leverage data and analytics for many industries go beyond their core offering. While for FedEx, making customer interaction with FedEx’s offering seamless and smooth is the key focus, the chances to innovate using data and analytics to go beyond the core competency is immense. And it is not that these logistics companies have made a foray into this before. UPS offers consulting services as well. But the kind of success that likes of FedEx and UPS can attain with the insights they have, has not come their way.
I think a great aspect of data and analytics-based innovative products and services is that you may not always need a major investment if you already collect relevant data points. What is needed is a mindset and willingness to erase conventional boundaries. We talk about Industry 4.0 (and now Industry 5.0) frequently. However, these terminologies are essentially about leveraging technologies to develop new capabilities. It is not just about manufacturing or smart supply chains. Industry 4.0 is a mindset that transcends beyond functions. It is high time we start seeing it from that perspective.