Smart home technology is a growing market, with revenue from the category set to surpass $19 billion in the US this year, according to Statista, which expects market volume to exceed $34 billion by 2022. The excitement around this technology has more manufacturers of traditional home products looking for ways to incorporate smart home features into their offerings.
One such feature that is growing in popularity is app-based technology that allows consumers to remotely manage housewares, small appliances and other home devices that have historically been offline products. This introduces significant complexity for consumer products manufacturers who not only need to embed the electronic controls and Wi-Fi accessibility in their products, but also develop apps to manage them. So, what do these types of product enhancements really mean for the supply chain?
Bringing smart home technology into the supply chain and transportation network
Incorporating smart home technology into a traditional supply chain takes careful planning. The process usually begins in the warehouse setting, and manufacturers must consider every step to determine how to get goods ready for sale.
For instance, adding one piece of smart home technology to an item means the manufacturer must build the electronics into the product during assembly, print new user instructions to be put in the box before shipping, develop and set up mobile apps associated with the product, train customer service personnel how to help consumers enable their smart products after they purchase them – and the list goes on.
“We’re seeing a whole new array of supporting product and accessory needs from housewares and consumer products manufacturers as they try to introduce smart technology to their products. That means a lot more value-added services and retail-ready configuration activities are now taking place in the warehouse,” said Dino Moler, executive vice president of client solutions at LeSaint Logistics, a national supply chain solutions leader in Chicago.
An example of a value-added service that many smart home manufacturers require is flashing technology. Many times, an item with a technology component is made in the manufacturing stage, but an update to that technology needs to be implemented before the finished product goes to the consumer. LeSaint receives those products in their warehouses, connects them to a PC and flashes (or updates) them with the new technology.
For instance, consider smartphones and how apps and software are pre-loaded before consumers purchase them. The same idea applies to smart home goods. In fact, postponement manufacturing is a capability many warehouses have now taken on, where flashing, parts and other sub-assemblies are installed to make a finished product, and those updates are postponed until right before the product ships to a store or consumer.
Building smart home technology into the supply chain takes on additional challenges when configuring for retail readiness becomes part of the equation. In addition to setting up the manufacturer’s own supply chain to support smart home-enabled products, being retail ready means that the retailer’s supply chain has to be part of the process, as well.
Retailers, for example, often run promotions on products that have smart technology built in, which can have many implications on the supply chain. Manufacturers must be prepared to ship higher quantities than normal to get goods onto physical store shelves in time and in higher quantities to meet the demand generated from the promotions. They must also be prepared to get products into stores and consumers’ hands fast and meet delivery promises made by online and brick-and-mortar retailers.
This is where transportation becomes a critical part of the smart home supply chain.
“Meeting consumer demand for smart home products relies heavily on an efficient transportation network that can reach and deliver those goods to consumers as fast as they can order” LeSaint’s Vice President of Transportation Keith Warren said. “In today’s transportation environment, that’s easier said than done, because industry statistics for major markets show that there’s only one truck for every 16 product shipments that need to be made. This imbalance of supply and demand for transportation services has consumer goods manufacturers scrambling to find creative transportation solutions from providers like us.”
And beyond meeting the needs of the retailers who are selling smart home-enabled goods, manufacturers must consider the preferences of the consumers buying the products. What types of packaging do consumers prefer? What are the other specifications that must be met when trying to appeal to consumers? Can they enable consumers to build or customize their own personalized products to have the exact features they want? These are important questions that every manufacturer must now consider.
In addition to these pre-sale questions, there is one more that manufacturers must answer when it comes to their smart home supply chains: What happens when a consumer buys a smart home product and it doesn’t work?
Setting up the smart home supply chain as a two-way street
Unlike many traditional products, manufacturers must have a robust and specific plan in place for returns management (also called reverse logistics) of smart home products. For example, consumers will likely return a smart home-enabled product if the technology doesn’t work or they have trouble with the associated apps, and because these products typically have high price points, buyers often want them repaired fast, or a replacement item shipped to them in short order.
The most common path for this transaction is the consumer returns the product to the retailer, the retailer sends the product back to the manufacturer and the manufacturer fixes or replaces the product. It is on manufacturers to plan for this situation and know their capabilities when dealing with defective smart home products.
“In many situations, we are seeing our clients co-locate their returned goods with their regular inventory in the same warehouse. This allows the processes, staff, training and customer service teams who get goods retail-ready to effectively transfer those skills to refurbishing or repairing returned goods. This co-location model also helps companies better understand their total refurbishment costs, which helps them make smarter decisions about disposing of returned goods altogether if that’s more cost-effective,” Moler said.
Getting all the pieces of the smart home supply chain in place is no easy feat. From the physical installation of the technology onto products to preparing the supply chain for the demands of omnichannel retail and managing returns, smart home manufacturers must be ready to handle it all to be successful at delivering a great customer experience.
This blog post was sourced in collaboration with Smartbrief, a leading e-newsletter and media channel for the Housewares industry.