Amazon Supply Chain and Logistics
Improving the Telecommunications customer experience with data-driven supply chains
As per McKinsey, few industries are shaping the world we live in today like the telecommunications industry. Working from home, or even working from anywhere, is made possible by broadband networks and technologies. Improving the telecommunications (telco) customer experience with data-driven supply chains represents an emerging industry opportunity.
Internet-connected, or smart, devices are growing exponentially, and with the latest 5G networks, this is expected to continue. The ever accelerating proliferation of data, combined with greater connectivity and innovative technologies, will be critical in improving both the telco customer experience and financial performance.
Telcos are not averse to implementing Cloud Technologies to drive their businesses forward. It is perhaps ironic that many of the companies that are creating these networks do not utilize the same cutting-edge approach to managing their supply chains as they do in creating these world-changing products and experiences.
Telcos typically operate through multiple disconnected supply chains. For example, they may have a supply chain for mobile devices and another for network equipment, but frequently they are more complex, with individual supply chains at the product level.
There are also multi-channel fulfillment needs. Telcos sell to both businesses and to consumers through a variety of different sales channels. These channels are frequently managed in separate silos, as they are managed by different teams in the business. This means that potential economies of scale are not achieved, as they operate independently and not as connected parts of a bigger enterprise.
We envisage the telco supply chain of 2030 as technology- and data-driven, with Internet of Things (IoT) devices and cloud-based services linking across the business. This would enable complete visibility into operations, using technologies such as artificial intelligence (AI) and machine learning (ML) to generate insights while improving and automating decision-making.
The future telco supply chain will be a source of business and customer value, hitting multiple competing goals, such as optimizing cost efficiency while maximizing customer service performance. Telcos have a realistic opportunity to use technology to sustainably improve how they operate, akin to the connectivity they provide society through their products. This blog post provides an overview of how cloud technology unlocks business benefits in telco supply chains.
Overview of telco supply chain
Based on our experience, telcos can radically improve their operations, leading to better customer experiences and improved financial results. They can achieve this by embracing a data-driven and cloud-based approach to supply chain management. Telcos have an opportunity to sync the technology they use to run operations with the same connected experience they create for their customers. Moving to a cloud-based model provides real operational benefits, such as linking disparate data to create visibility across the operations or enabling better decision-making in operations.
Digital supply chains are also built in a way that provides agility for changes in the future as technology and services continue to expand. We have, for example, worked with a telco that struggled with inventory accuracy and hitting delivery commitments to a promised date. This post will share more details on how to tackle the root causes of these problems, but first, let’s review a typical telco supply chain flow.
Typical telco supply chain starts with multinational suppliers, who ship product via sea and air to the country where the products will be used. The products are imported, moved through national and regional distribution centers, and finally shipped through multiple channels (retail, e-commerce, home delivery) or to network sites. There is also consideration of return and repair capability in the supply chain. Highlighted here are supply chain solution areas (Demand – applicable to understanding customer behavior, Operations – optimizing repair or service, Network Optimization – improving delivery performance in the middle and the final mile, Control and Visibility – applicable across the entire supply chain from suppliers to customers. Across the entire supply chain for telcos, there are areas where data-driven solutions are applied that are explored further in this article. Demand, Operations, Distribution, Network Optimization, and Control and Visibility are key areas where solutions can be applied, as discussed further below.
Telco supply chains typically have multiple tiers of multinational suppliers, with original equipment manufacturer (OEM) suppliers having factories globally, but are usually concentrated in countries with low labor costs. This means a long supply chain with considerable freight transit times as product crosses the globe from supply points to points of consumption (a function of a global supply chain model that aims to lower costs). This can be repeated based on different product types or business channels, often evolving over time and not necessarily designed to leverage economies of scale across supply chains.
Moving to the consumer or customer end, telcos have large footprints to maintain (warehouses, stores, e-commerce) and connect to the consumer. This level of complexity means complex middle and final mile logistics operations and inventory planning. The reverse logistics and returns capability are also important as it is a critical need for the customer experience.
Functions in telco supply chain and digital solutions
First, establishing demand for either terminals (such as mobile devices, tablets, or modems) or networking (4G or 5G or broadband infrastructure equipment) products is challenging. Component lead times are long and device life cycles can be short, with often volatile consumer ordering behavior.
The role of the supply chain is to fundamentally match supply to demand. Get it wrong, and you either do not have product to sell or are mitigating excess working capital (inventory). Historically, the sales and operations planning (S&OP) processes of telco and their OEM equipment providers rely heavily on manual inputs, experience-based intuition, and historicals, typically using spreadsheets driven from enterprise resource planning (ERP) extracts to make predictions on sales and to drive materials through the supply chain. Understanding and anticipating the demand signal is vital to operate a successful sales and operations planning process.
Demand predictions represent a significant opportunity to use AI and ML. For example, demand predictions can be facilitated using services such as Amazon Forecast. More bespoke solutions can also be built on Amazon SageMaker, enabling telcos or their suppliers to better align supply with demand and, as a result, drive material business outcomes.
The telco demand environment calls for predictability in signal and being able to react with agility, while supply chain signals are characterized by velocity in the rate of change. These make it a prime subject to benefit from the application of AI and ML and to benefit from an autonomous data-driven process. For example, AXIOM Telecom was able to increase stock availability by 20 percent and stock optimization by 15 percent through their deployment of Amazon Forecast.
Optimization and product availability may seem contradictory, but they are valuable balanced scorecard measures for telcos. Optimization focuses on cost, while availability is a measure to support customer service. In being able to achieve both of these metrics, they were also able to reallocate resources to extract insights from the new forecasts, which led to better decisions to support improved business outcomes.
With extended and multinational suppliers, there is a need to have control and visibility on what product is coming in and when. This is vital to understand operationally what is happening in the supply chain and the impact on the business. For example, providing shipping guidance can better inform the business and thereby enable it to drive actions, e.g., to issue financial performance guidance to shareholders. Typically, supplier commitments are provided through ERP systems but often based on manually maintained lead times (even sea freight or air freight durations tend to be planner-maintained fields).
With the pandemic-related port congestion, this is not an accurate means of establishing due dates, particularly when manual processes do not capture some disruptions and changes. There is an opportunity to use internal and external data points (e.g., shipping updates, weather updates, etc.) and leverage IoT technologies to improve visibility, or even RFID technologies, which can improve visibility and provide greater supply assurance to telcos and their suppliers. This visibility is critical to telcos, given their distributed geographical coverage and scale. AWS has experience in partnering to resolve visibility challenges that are applicable to many industries, including telco operators.
The next area of opportunity is in distribution. Warehousing in the era of e-commerce has made significant technological advancements to improve efficiency and productivity. In Amazon CEO Andy Jassy’s most recent letter to shareholders of Amazon, he noted that over the past 20 years, the average processing time through a fulfillment center has reduced from 18 hours to 2 hours. This change was driven by automation and technology, with AWS central to this. Consider harnessing this technology to improve the performance of a telco’s warehouse rather than being reliant on independent warehouse management systems (WMS) across the sites.
With the proliferation of WMS systems increasing as the telco introduces more 3PL partners to their network, there are too many disconnected sources of data, rendering optimization extremely difficult to achieve. For the warehouses, there is potential to build a supply chain data lake, ingesting data from multiple disparate sources to facilitate flow analysis and digital twins modeling to optimize flow rates. For telcos, having a digital twin solution would enable the next level of scenario planning, allowing them to model out decisions before taking action.
At the scale the major telcos operate, this is a game changer in operations management that can move the needle on better customer service and optimization of cost. There is also an opportunity to consider a more strategic engagement with Amazon Supply Chain to support best-in-class fulfillment, in parallel with AWS Supply Chain, to produce an outcome that is very much an Amazon-powered supply chain, e.g., for the telco maintenance teams.
Operations can also benefit from using Amazon Monitron to improve predictive maintenance that contributes to better network performance. Here IoT devices can provide real-time data to help predict future failures. Scaled across the network, this can be used to provide insight, which can mean that maintenance teams are able to proactively plan maintenance facilitated by cloud-based data insights and even use this technology to support the logistics needed to carry this out. There is also the potential to help telcos avoid downtime to improve their customer experience.
Let’s also consider how telcos tackle the sheer scale of servicing their consumer base. With channels that include retail and e-commerce, the complexity of getting the latest devices into the hands of consumers should not be ignored. Our approaches to managing network optimization complexity and insights based on an AWS data lake help our customers set up fulfillment networks to balance cost with delivery speed and maximize the efficiency of customer product deliveries using external data. This can help drive efficiencies as well as reduce the carbon footprint of telcos.
Telcos are expanding their range2, moving from being a provider of mobile devices to being the provider of a connected experience to the consumer in their home and beyond. They do this through a connected pipeline to the home and an array of available connected devices in the ecosystem. Technology is driving this, with Wi-Fi and Bluetooth and now 5G connected IoT devices creating more possibilities. There are a greater number of devices becoming connected, and the telcos want to be central to the experience and help to not only connect but to provide these goods to their consumer.
Whether it is tablets, headphones, security devices, doorbells, or a broad range of connected white goods in the home, this connectedness creates the opportunity to sell and host on the network, deepening the relationship with their consumer. However, it also creates further potential for a poor customer experience should the ordering and delivery, or reverse logistics and return process, not be up to standard.
Digital-driven visibility and orchestration can provide real-time insights into operations. In turn, this can provide crucial insights into the consumer experience, enabling actions to be taken. McKinsey3 also cites an opportunity to harness AI and ML with forecasting data to provide insights into returns, help the Telcos gauge what is likely to happen, and ensure they have the reverse logistics supply chain in place to make this process simple for their customers.
From component sourcing to after-sales service, there are opportunities for telcos to improve their supply chain performance using cloud-based technologies and solutions such as those provided by AWS. Most telco supply chains do not currently operate in this way and do not have the processes or technologies in place to leverage the benefits that are now possible. They continue to seek alternate ways to deliver value (reduce cost) when this directional change presents an opportunity to reduce costs (working capital and inventory reduction, reduction in operating expenses by reducing total landed cost to serve) and serves as a future-ready platform for supply chain operations.
The pathway to an autonomous, data-driven supply chain is available now to telcos. Those who seek to digitally transform their business can realize better visibility and better insights, which directly help drive business results. In doing so, they create a step change in delivery performance and customer experience. The time is now for telcos to jump on the opportunity that this inflection point of the connected society is creating. Their supply chains are becoming more complex, but with data and digital technology, this complexity can be mastered and value achieved from the insights obtained.
How to get started? The AWS Supply Chain, Transportation & Logistics business unit helps companies with digital transformation efforts in supply chains and can offer guidance and support on how best to navigate the journey to become a data-driven and digital supply chain. Please reach out to your account manager to set up a discovery workshop.