Supply Chain 4.0: When Adidas and Amazon redefine the supply chain management rules

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Amazon and Adidas are seen as good examples in supply chain improvements 4.0. Experts claim supply chain management is providing consistent quality at the lowest cost with the agreed service level. Is this right?

Before you know the answer, let’s explore the following two examples: In Russia, thanks to a supply chain initiative, Adidas has increased sales to two-digit numbers in 24 hours in Moscow. At the same time, Amazon is currently considering the use of unmanned aircraft for delivery.

These two examples show that supply chain management is not only about efficiency, working capital reduction and inventory management, but also about increasing sales and profits. So what happened?

Adidas is the leading sports shoe brand in Russia with a system of more than 1,200 stores. As part of its customer satisfaction strategy, Adidas is deploying its multi-channel strategy – Omni Channel, allowing people to buy products in multiple ways (online or in-store) with any product available. shops in Russia (whether in the Adidas store, distribution center or warehouse) and can be received in many ways (at home, at the store or at the pick-up point). This may be due to the use of RFID identification chips, direct shipping tools from retail stores – ship from store, online shopping solutions – click and collect, and endless technology. aisle – supplier transports products directly to customers from their inventory.

Initially, Adidas launched an online shopping solution test – click and collect in Moscow in the hope that only a few consumers will choose this option to buy online and collect products at the store. They expect about 10 to 20 orders per week, but shoppers accept the idea and orders reach 1,000 per week. Adidas is forced to stop testing and build the supply chain infrastructure necessary to support customer needs. Today, up to 70% of online revenue is through this solution. Similarly, other supply chain initiatives have contributed to a significant increase in revenue, such as direct shipping from retail stores – ship from store, where goods are ordered. Online distribution from stores, not distribution centers and endless aisle – customers can place products no longer in stock at stores near them but available in another store in the system.

For Adidas Russia, the supply chain is no longer about cost reduction: Increasing revenue is important. All this is possible thanks to the technology being used in the supply chain. Most of these technologies belong to industry 4.0, a high-tech strategy that promotes manufacturing computerization. Adidas applies these technologies to the supply chain instead of just manufacturing. This is why we call it Supply Chain 4.0, an initial term coined by professional supply chain Anne Wyss.

From an administrator’s perspective

Administrators always know that improving the supply chain ultimately improves revenue. However, this impact is difficult to assess when traditional companies approve investment in the supply chain based solely on the expected cost reduction and working capital. The digitalization of supply chains, with the breadth of sales and order data, can contribute to increased revenue and profit.

Another example is the number of ADIDAS sold in Russia using the direct shipment of goods from the store. In the largest country in the world, transporting goods from one location to another in the same territory in Russia can take up to 15 days using a traditional distribution system. By delivering from a store, Adidas has reduced delivery costs and significantly increased sales.

In addition, Adidas also realized that, for certain types of products, consumers tend to return about 50% of the products they buy online, if delivery is done within 24 hours. However, if delivery takes three days, the percentage of consumers who return the product can be up to 70%. Therefore, if the delivery speed is increased, the product returns less, ie higher sales – 40% higher with a full price. In addition, by reducing the number of returned goods, Logistics costs also significantly reduced.

In short, the digital revolution is creating completely new definitions for the supply chain. Not only stop at providing products with good quality, low cost at the agreed service level; The new goal of modern supply chains is to increase revenue, create more value for customers and lead the market.

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