The Era of First-Mile Innovation in Supply Chains Has Begun

Lauren Acoba, vice president of research at Zero100, notes that the vast majority of supply chain innovations have focused on last-mile delivery, arguing that this approach is hindering more comprehensive supply chain transformations. Over the past decade, the allure of "free and fast" delivery has propelled online retail to new heights, compelling businesses to develop creative delivery methods and extract maximum efficiency from logistics processes. During this period, numerous last-mile innovations have emerged—from roadside drones to 15-minute grocery deliveries. However, these innovations maintain high operational support costs; Amazon's expansion of its U.S. fleet to $5 billion serves as a prime example.

Within the context of complex global business operations, last-mile innovations have limited impact on efficiency and profitability, while the true innovation potential lies at the beginning of the supply chain—the first mile. The first mile encompasses product development, lifecycle management, renewable materials, and carbon reduction. Gains achieved in these areas enable companies to strengthen their entire supply chains, increase resilience, reduce carbon footprints, and mitigate reputational risks.

Most business leaders agree that future global supply chains will be supported by artificial intelligence and fully digitalized end-to-end. Smart supply chain managers and COOs prefer to prioritize their innovation efforts not on customer-facing operations, but on first-mile reinvention—the area with the broadest innovation potential. Some of the world's largest companies are demonstrating bold and creative approaches to first-mile innovation.

For example, global food company Danone implemented 20 digital solutions at its baby formula facility in Poland between 2019 and 2021. These solutions included advanced robotics, AI-powered planning and scheduling, and integrated collaboration. The facility reduced production costs by 19%, greenhouse gas emissions by 50%, energy consumption by 23%, and increased productivity by 12%. This success led Danone to roll out these solutions across 39 factories throughout Europe as part of its digital manufacturing acceleration program.

Shein, meanwhile, used artificial intelligence to restructure its entire production and planning processes. The fast fashion giant, largely led by China-based innovators, is developing highly responsive business models that adapt almost instantaneously to consumer demand. This model enables the company to generate thousands of new product designs daily. Shein's Regenerative Business Planning (RBP) approach uses a multi-layered digital platform that combines AI and machine learning algorithms to forecast demand and develop products through a lean workflow and responsive supplier network. As a result, Shein keeps unsold inventory below 2%.

Zero100's analysis shows that 16% of companies employ AI in the planning domain and 17% use AI solutions in areas such as sourcing, procurement, contract management, and supplier relationships. Artificial intelligence delivers forecast accuracy improvements of 10-50% in supply chains, resulting in significant gains in revenue, costs, and cash flow. Digital simulation and inventory optimization also prevent overproduction, yielding substantial cost and productivity savings.

Across the sector, many innovative applications are redefining supply chain operations—from low-carbon cement production to high-tech sensor-enabled sorting machines that minimize food waste. Fully digitalized, sustainable business models create a continuous cycle of efficiency and productivity gains between the supply chain (sourcing, manufacturing, transportation) and the demand chain (sales, consumption, renewal). It is emphasized that future supply chain investment must begin with first-mile reinvention; the innovation opportunities in this area are unlimited and the business impact will be most pronounced. The message to companies is clear: those who do not invest in first-mile reinvention will likely fall behind.

Key Takeaways:

• The vast majority of supply chain innovations have focused on last-mile delivery.

• Last-mile innovations maintain high operational costs and have limited impact on efficiency.

• First-mile innovations cover critical areas including product development, lifecycle management, renewable materials, and carbon reduction.

• Danone reduced production costs by 19%, greenhouse gas emissions by 50%, and energy consumption by 23% with digital solutions, while increasing productivity by 12%.

• Shein, using AI-powered Regenerative Business Planning, has kept unsold inventory below 2%.

• According to Zero100 analysis, 16% of companies use AI in planning and 17% employ AI solutions in sourcing areas.

• Artificial intelligence improves forecast accuracy by 10-50% in supply chains.

• Future supply chains will be fully digitalized and based on sustainable business models.

• First-mile reinvention forms the foundation of supply chain transformation, and failure to invest in this area will likely leave companies behind.

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News Link: https://www.supplychaindive.com/news/first-mile-supply-chain-reinvention-opinion-zero100/731115/

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