Even before the COVID-19 pandemic began earlier this year, the expectations of consumers had significantly evolved in an era of mobile and online ordering. Whether it's the two-day shipping that's now expected from retailers like Amazon and Walmart, food delivery services like GrubHub and UberEats, grocery shopping services like Shipt and Instacart, or the same-day delivery with Amazon's Prime Now, consumers now expect to receive goods quicker than ever before.
We have seen the demand placed on manufacturers increase exponentially during the COVID-19 pandemic, which turned the convenience of same-day delivery into an essential service during quarantine and increased social distancing and remote work. Consumers don't want to leave the house if they don't have to, but the need for food, personal products, and other household items has only increased.
The unpredictability of seasonal food supply and demand, as we wrote about last week, only adds to consumer expectations, especially this year as the dual health and job crises have created even more uncertainty in the marketplace. As we have seen throughout the year, the pandemic has created interruptions in the supply chain, and items such as hand sanitizer, paper goods, and frozen foods have all been in short supply at various times.
This surge in demand, along with the expectations consumers now have due to the ubiquity of same-day delivery, has placed more pressure on manufacturers to get things out in time. Manufacturers want to be able to offer goods to consumers when they expect them, but they also don't want to overproduce perishable goods that have a shorter shelf life.
The “Amazon Effect”
Before Amazon introduced Amazon Prime in 2005 (and with that, free two-day shipping), it was not unusual to wait for five to seven business days for a package to arrive. The "Amazon Effect" has greatly changed customer expectations. The "Amazon Effect" is defined by Investopedia as, "the impact created by the online, e-commerce or digital marketplace on the traditional brick and mortar business model due to the change in shopping patterns, customer expectations, and a new competitive landscape.”
In a survey conducted by CNBC in 2017, 43 percent of respondents stated that the most important factor of online shopping for them was free shipping. With the advent of the smartphone all the way back in 2007, people began to order online around the clock, which created even more expectations for an “on demand” experience.
Pressure on Manufacturers
These expectations have put additional pressure for manufacturers to ramp up production, even as the pandemic has thrown new challenges in the mix due to increased safety protocols and limitations on resources. Nonetheless, many retailers will charge suppliers fines if their orders are delayed. For example, Kroger has a $500 fine for suppliers if an order is delivered more than two days late, and Walmart charges suppliers three percent of the price of purchase for each order that is delivered late or incomplete. And for both retailers, the delivery window for full truckloads has been shortened from four days to one or two.
According to analysis from McKinsey & Company, if the consumer packaged goods sector doesn't improve delivery performance, these penalties could add up to more than $5 billion a year across the United States. Improving productivity and managing the supply chain won’t just help suppliers avoid fees, but it can also help manufacturers to stand out and be seen as more reliable.
So what can manufacturers do if they don't have the processes or infrastructure to support the productivity demands placed upon them? How can suppliers ramp up their productivity to meet the expectations of retailers and consumers? Here are a few suggestions.
Just-in-Time delivery is an inventory management process and also a lean manufacturing technique in supply chain management, and it can significantly improve efficiency within manufacturing. It can also reduce inventory carrying costs, free up cash flow, and minimize costs for warehousing. The process involves ordering and receiving inventory for production and customer sales only as it is needed.
Effective employee training can significantly improve productivity. Each employee needs to clearly understand everything that is expected of them. Better training can boost the confidence of employees as well, which makes them more productive. If there is a focus on adequate employee training, employees will be more satisfied, and there will be less turnover, which also increases productivity.
A Focus on Maintenance
A great deal of productivity can be lost by poor maintenance, which leads to equipment failure. Shifting the focus to preventive maintenance as opposed to reactive maintenance can be incredibly effective. Organizations need to plan and schedule maintenance at regular intervals to ensure everything is running smoothly, and employees don't have to worry about equipment failure on the shop floor.
Improving productivity is a process. But what if your organization needs to see vast improvement as soon as possible? This is why we have created the Productivity Sprint program, which lasts six to eight weeks. The program is a high-value, low-cost solution that will increase the productivity in your organization so that you can meet the demands that are only increasing. Learn more about the Productivity Sprint.
At POWERS, we are committed to helping your organization improve your productivity and efficiency so that you can keep up with the same-day expectations consumers now have. Reach out to us to learn more.