The Lab | First Things First - Episode 9: Transformation Through Technology

First Things First: October 2022 Recap

First Things First

First Things First Episode 9 Recap - October 2022

October 12th, 2022   ·   By Kayleigh Hansen

Normally the first five minutes of our First Things First episodes are filled with supply chain news and learnings…but this month, we had technology on the mind.

When we talk about technology, we’re talking about the challenges in the first mile.

The first mile of the supply chain is when an order is placed with a supplier to when it arrives to an importer. Different from the final mile, the first mile is lengthy and complicated—spanning globally between four to six months and involving dozens of different people and business entities.

And the first mile has been made even more complicated as of recent—more specifically, the past 5 or so years—as it’s been filled with volatility, uncertainty, complexity, and ambiguity thanks to trade wars, tariffs, a pandemic, container shortages, and more.

Needless to say, it’s been a super challenging time for importers.

The Digital Divide

But for how everchanging the supply chain is, it’s quite funny that the tools and methods used to run the end-to-end process are outdated and manual. In our opinion, it all stems from what we like to call “The Digital Divide.”
The Lab | First Things First - Episode 9 Overview - Before Image
On average, it takes four to six months for the first mile to be deemed “complete” for a single order. So orders placed in Q1? Probably not going to be at an importer’s DC until Q3. This requires a lot of forecasting and planning 6+ months in advance.

If you look on the left side, most companies have a good hold on planning their orders thanks to Demand Planning Systems (DPS) and Enterprise Resource Planning (ERP) Systems, helping importers plan and create a vision for what they want to get manufactured.

Systems on the right-hand side are great at fulfilling orders, typically through their ERP or a Warehouse Management System (WMS) as their systems of execution.

In the middle is the four-month time from when an order is actually placed with a supplier up until the product arrives at a distribution center (DC). Causing a pretty huge gap in this process.

This presents two main challenges to importers:

  1. Product status is pretty much invisible and is currently managed through email and excel. That’s quite a big period of time where things aren’t being managed with modern technology.
  2. The data isn’t flowing into either direction on the left or right, so there is no 100% accurate or clear depiction of supply chain data.
Even giants like Target and Walmart are having to mark down billions of dollars worth of products in their stores largely because they do not have good visibility into the production of their goods for their forecast.

Without supplier connectivity and digital execution, it’s difficult to drive great results.

Rob’s perspective

Wow, that really is crazy! A 10-12% drop in demand overnight isn’t something any business leader wants to see. Economists are really struggling to predict what’s in store for businesses and our consumers from an inflation point of view—some view it as a near-term consequence of high government stimulus injection alongside shortages driving prices higher and making the cost of living more expensive; whilst others see it as something that’s been building for a long, long time. Whatever the case, we are all going to have to figure out and prepare for this added layer of complexity in an already struggling industry.

The Digital Bridge

The solution? The Digital Bridge.
The Lab | First Things First - Episode 9 Overview - After Image
Let’s compare and contrast it to how consumers purchase products via online ordering using Bombas Socks as an example.

If I want to purchase 3 pairs of socks, I do four main things: go on their website, pick which pairs I want, choose my shipping method, and pay. Pretty easy.

If you flip the script to see how Bombas buys their socks from a supplier, however, it’s drastically different. They aren’t ordering socks directly online from a repository that their suppliers provide—they’re using spreadsheets and email to get their needs across. Which makes those four basic functions above difficult to do.

In reality, there are a lot of additional complexities in the first mile compared to a consumer buying a products online:

  • Unlike online shopping where you can either order from the comfort of your home or pick something up from a store that’s a few miles away, Bomba’s factories are most likely 8,000 miles away.
  • Bombas products are made to order, so these products are going to take roughly three+ months to make. The entire first mile process takes five months in total versus the five days to get a package shipped to your home.
  • If supply chains aren’t online and digital, there are a bunch of steps throughout the supply chain process importers are not going to be aware of because of lack of visibility when it comes to tracking. They can’t just open a notification showing where their package is like we can.
  • Products in the first mile are significantly more expensive in value than when consumers buy them. A container of socks is easily worth $30,000. More importantly, Bombas is counting on that for 2x-3x in sales.
That’s a lot of money, trust, and risk in purchasing and sales that is going on without any bridge or tech across it.

We think importers want the same result as the consumers who buy their products: they want a transparent, efficient, and timely process for their imports.

The only way to do that is digitize, connect, and automate the supply chain.

With modern technology, this can be much more easily achieved—and affordable—than even three or four years ago. Making it easier for importers to buy their products from their suppliers overseas as they make it for us to buy their products from them.

Join us on our next show!

We hope you found this recap useful and informative.

The next First Things First liveshow will be held on the 11th of October, and will feature Eric Johnson, Director at S&P Global and Senior Technology Editor at the Journal of Commerce, as the guest speaker who is sure to give us a lot of great insight into the market. Links to the event to follow!

Catch-up on the live show

To watch the full episode of First Things First, head over here.
To subscribe to the podcast (available wherever you listen to yours), click here.
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