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E-Commerce: Personalization Driving Innovation

Feature Article | December 5, 2016 by Andreas Schmitz

Customers are “configuring” their personal orders online, and expect their deliveries to arrive the next day. This means new challenges for warehouse and transport management.

Whether it’s licorice, Uncle Ben’s rice, fresh broccoli, or cherry tomatoes, there are many online markets offering the same products as supermarkets. This presents new challenges for processes and IT.

“Customers expect their fresh produce to be delivered correctly, and within their desired time frame,” explains Franz Hero, senior vice president for Supply Chain Management and Logistics at SAP. E-commerce involving perishable goods puts retailers under greater time pressure.

The process is as follows: Customers order their desired products on a Web portal, add them to their shopping cart, and specify the time when they would like the goods to be delivered. In that same moment, transport management, which serves as the main system, processes the sales orders, plans the routes, and specifies the order in which the delivery trucks should be loaded up. The system then informs the warehouse when the trucks will arrive, and which products are to be dispatched. The goods are already positioned in the correct order when the truck arrives at the warehouse. Finally, the driver sends a notification to the system as soon as the goods have shipped.

Challenges for Warehouse and Transport: Smaller, and More Personalized Products

“Our systems have to become even more flexible,” says SAP manager Hero when discussing the demands facing the new generation of transport management and warehouse solutions. The market is becoming increasingly customer-oriented, and products are becoming more personalized and varied. “There are now fragrances for shampoos targeted at sporty Mediterranean women between the ages of 25 and 35,” says Hero.

What’s more, e-commerce accounts for an increasingly large share of purchasing. In Germany, for instance, figures from the German E-Commerce and Distance Selling Trade Association show that e-commerce has grown by 12%, compared to the brick-and-mortar trade which has only grown by 3.1%. Aside from the increasing order numbers, e-commerce companies have to deal with the fact that some customers may not be satisfied with their ordered products, and send them back. For the clothing industry, as the reigning supreme of online shopping, this is a particularly big problem.

“Depending on the industry, it can be that up to 50% of goods are returned,” says Hero. Supply and transport chains need to prepare themselves for this reality.

SAP TM and SAP EWM: The Trends

Here is a selection of the current and future possibilities available with SAP Extended Warehouse Management, SAP Transport Management, and SAP Event Management.

Creating Transparency with Business Network
Companies involved in the supply chain process are interlinked through a cloud platform. In reference to the relationship between customers, subcontractors, and sub-subcontractor. Hero explains: “If a company like Nestlé places an order at Cargill Weizen, the latter commissions freight forwarders such as DHL and Panalpina to handle the transportation, who in turn arrange for the freight to be transported in Maersk Line containers.”

It is crucial that all businesses, and particularly the customers, can track the status of the orders. For this, SAP Cloud Platform is particularly effective: The cloud solution facilitates the traceability of all production steps. “This is important for product safety”, explains Hero, who uses a beta version of this platform for his own work.

Optimized Loading and Route Planning
When trucks arrive at the warehouse, it must be apparent which products need to be loaded first, and in which order. The packages are selected by a simulation, the cargo space in the truck is assessed, and the load-up is planned to ensure an optimal axle load, so that the space is utilized in the best way possible,” explains Hero. “This saves space, and reduces costs for companies.”

Hero expects an increased efficiency of 10% thanks to improved loading and pallet planning, together with optimized route planning. “Close interaction between transport and warehouse processes is crucial”, says the logistics expert, “as this reduces truck waiting times, and optimizes processes in the warehouse.”

Industry 4.0 Monitors Deliveries
Sensors in the vehicles enable customers to track their goods via the IoT platform, and control special delivery conditions, such as constant temperatures and specific humidity levels. If the temperature in the truck is too high for a particular delivery, meaning that it cannot be dispatched, the planning must be adjusted accordingly. “This information is available in real time, and it is therefore possible to reschedule deliveries,” says Hero when explaining the possibilities of so-called “adaptive planning” which allows for interventions during delivery journeys.

This is also useful if a new order comes in, and a truck is already out on a similar journey. “The system determines if it makes sense for the truck to take a small detour to make full use of the loading space. The system also makes it possible to gauge from afar if there is space for additional loads,” says Hero.

There are many small innovations in the new transport and warehouse solutions. Whether it’s optimizing pick-by-voice connections, handling legal requirements such as the UN convention SOLAS (International Convention for the Safety of Life at Sea) through transport management, who then inform the authorities how heavy the containers are, or even virtual reality glasses that facilitate material flows – the fact that SAP EWM is now available based on SAP S/4HANA demonstrates how flexible our system has become, according to Hero, who is already working on cloud versions for SAP TM and SAP EWM.

One of Franz Hero’s dreams is still in the making – for drones to fly through the warehouse, and carry out automatic inventories. It’s currently in the pilot phase, as the SCM and logistics expert Hero believes that the technology still needs more time.

Top image via Shutterstock

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