Cutting Supply Chain Costs With Technology

Oct 08, 2020 • Features • supply chain • BT Final Mile • Parts Pricing and Logistics

Each step of the supply chain is important in its own right. But they all contribute to the one thing that every business needs to control: cost. BT Final-Mile’s Mark West explains more...

The most effective place to make savings is the last mile. It accounts for 41 per cent of supply chain costs. For companies that rely on their deliveries arriving on time, this could save thousands of pounds – if not millions. But how can technology actually help businesses make these changes? And how much of an impact does it really have on cost?

SMALL CHANGES, BIG RESULTS

Across the supply chain, optimisation plays a key role in reducing costs. Managing time is the biggest and best way to make an impact. But if you’re trying to hit a two-hour delivery slot or deliver something the day after a customer or engineer orders it, it’s harder to optimise.

When a business knows upfront where and when they need to deliver something, they can plan driver journeys, they can group deliveries together, and even pack delivery lorries and vans more efficiently. These steps bring two major benefits. Engineers can spend less time being van drivers and more time being engineers and fewer miles on the clock means savings on fuel.

SIMPLIFYING RETURNS

Optimisation can also help with managing the returns supply chain, which is particularly important for business-to-consumer companies. “For some organisations, 50 per cent of what they send out is then returned,” explains Richard Wilding, Professor of Supply Chain Strategy at Cranfield University. “So, your biggest supplier becomes your returns supply chain.” Working out how to handle returns is an important part of simplifying your operations.

AR, MR and VR have proven to bring value to the business of those companies adopting them, both in terms of reduced time for work execution, thanks to faster maintenance procedures, improved staff productivity and efficiency, as well as of increased workforce safety, thanks to hands-free activity, remote training and collaboration.

Products based on such technologies are key factors for all companies, regardless of the sector they are operating in, their size and business turnover. Utility and Industrial Manufacturing sectors are currently leading the way in this digitalization process, due to the intrinsic nature of the activities their operators are always exposed to. AR, MR and VR are able to “extend” the resources’ capabilities. supporting them through guided procedures while carrying out maintenance activities on production lines, arming them with pertinent information on plant assets and, last but not least, connecting them with other colleagues to receive or give real-time assistance. The continuous transfer of corporate knowledge is therefore now a reality.

THE POWER OF ARTIFICIAL INTELLIGENCE

It all comes down to the algorithms. And they’re powered by artificial intelligence and machine learning. “What you’re trying to do is optimise the variables within the algorithm,” says Professor Wilding. “The algorithm is always looking to meet a particular goal, and they’re always looking for the best overall ‘score’. ”There may be many parts of the process to think about – from travel time to inventory. The algorithm will use these to find the best way of achieving a particular goal. “But these are learning algorithms,” continues Professor Wilding. “So, it’ll look at how it’s performed over a time and adjust the variables accordingly.”

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"Supply chains are carefully balanced and run effectively when they can predict behaviour. But when that behaviour changes, they can't adapt easily..."

“Aside from optimisation algorithms, the critical thing about technology in the final mile is transparency,” says Professor Wilding. “For business customers, you’ve got to make sure you know where things are. That means you need to have GPS on that final mile, and real clarity on when it’s going to arrive. That helps in terms of serving the customers’ expectations. And by having that data, you can be more adaptive in terms of where you want to take things, and how to ensure that a delivery is taking place. It gives businesses an opportunity to plan the best route in that final mile.”

But to improve, it’s really important to understand the link between time, transparency and trust. Supply chains are carefully balanced and run effectively when they can predict behaviour. But when that behaviour changes, they can’t adapt easily – and that drives up costs

Supply chains experience similar surges on a much smaller scale every day. An engineer might need a part by Friday, but they’ll order it for Monday in case it doesn’t arrive. Or they need 100 items, but they order 120 because they don’t trust they’ll get them all. With better supply chain visibility, those fears wouldn’t be there. It would build trust. These three elements – time, transparency and trust – are all closely linked. The more we understand about time, the better the transparency. That helps to build more trust. Bring all these together and it’s easier to keep costs down.

LOCATION, LOCATION, LOCATION

Today, one easy way to help users understand timing and improve transparency is with location and positioning services. It could be as simple as giving drivers smartphones with GPS switched on. Or guaranteeing a delivery time and sending messages to engineers when their parts arrive at their pick-up locations, with directions to help them get there faster. Once a business has this information, it’s easier for engineers to work more efficiently – by bringing the parts they need closer.

That’s why smart lockers, like those run by BT Final Mile, can help. The team has lockers at more than 1,800 locations across the UK. Engineers are only ever 15 minutes away from the nearest one. That means journeys can be shorter, and because the drivers get messages when their parts are ready, they don’t make pointless trips before what they need has arrived. Plus, the team can deliver parts before 8am, so engineers know that they’ll have what they need for their day.

Optimisations like this have already helped companies cut costs. EDF Energy is using Final Mile lockers to roll out millions of smart meters to customers across the country.

We have had customers who needed to move away from the old way of engineers picking up equipment – by going to a depot or going to a wholesaler. The solution they have received from BT-Final Mile was the ability to take all of the stock in and be able to get that delivered to the right location. So, it was easy for their engineers to pick it up, then get on and do their job.

THE FUTURE OF THE LAST MILE

Technology has huge potential to cut supply chain costs. “I really think there’s going to be a drive now to address the issue of how we can make our operations less dependent on people” says Professor Wilding. “If you’ve got a highly automated facility that doesn’t have many people, it’s far more resilient than our current facilities.”

This drive for automation could also help drive efficiency during normal working. Automation has the potential to change every part of your supply chain strategy. “When we talk about smart lockers, you might have small additional manufacturing facilities positioned near the lockers to make certain components,” says Professor Wilding. “If an engineer needs a specific part, it can be 3D-printed in a short lead time for them, and then picked up.” This kind of technology could help speed up delivery, reduce carbon emissions and reduce the number of delivery vans on the roads. Whatever the future holds, it’s clear that taking control of your supply chains today is key.