The backbone of Retail and ECommerce is Supply Chain. Without Supply Chain they cease to function. Goods don’t move to channels and customers have nothing to buy. It is that simple!
Not only is Supply Chain necessary to make Retail and ECommerce run, but Supply Chain is now a source of customer delightedness and competitive differentiation. Just think of same day delivery … that capability is entirely possible due to Supply Chain.
As such Supply Chain is not just a necessary function but a strategic weapon. Here are our thoughts on future ECommerce focus areas and considerations for the effective management of Supply Chain.
1. ECommerce
The fastest growing sales channel in Retail is Ecommerce with growth of Online Shopping. Further the pandemic showed that stores need a solution other than brick-and-mortar stores in order to still have a sales platform accessible to customers.
Beyond the website, the engine that makes Ecommerce runs for Retail is Supply Chain. The first of our future ECommerce focus areas requires enabling Supply Chain solutions that are needed to make this work include:
- Real time, accurate sku level inventory availability
- Real time customer verification and fraud checking
- Real time customer order commitment and delivery commitment
- Online Distribution Centre order receipt, fulfillment and shipping
- Drop Shipping partnerships, I/T and order management connectivity
- Order shipment tracking and customer visibility
- Returns receipt, processing and resolution
An Ecommerce solution also allows companies to offer many more products on their website than they are able to physically carry in a brick-and-mortar store, often referred to as an “endless aisle” offering. This means that Supply Chains must be engaged to handle the entire suite of skus that are available for sale conveniently.
Stores must also be equipped with the Supply Chain processes and training to enable in-store Ecommerce order fulfillment when ship-from-store solutions are in place to support localized online customer demand.
2. Delivery
Whether customers want to order online or from a brick-and-mortar store, they often want home delivery. Home delivery has been around for decades. But today the expectation is often for same day or next day delivery. In some cases people want deliveries in hours. Supply Chains must be able to execute quickly, efficiently and cost effectively to offer this speed of service.
The Supply Chain must make all of the contractual arrangements with delivery companies, couriers and other agencies to enable the direct to home delivery that customers demand. Delivery must be enabled for all omnichannel outlets that a retail may employ.
3. Sourcing
Merchandising is the backbone of Retail product selection and assortment. Depending on the store and its offerings, Retail Merchants curate either unique, custom products, branded products or a combination of both. Grocery chains are a good example whereas they carry both common branded products as well as generic brands or their own branded products.
When a Retailer designs and sources its own products the Supply Chain teams, along with the Merchants, need to find and select suppliers, and manage the entire Supplier Relationship Management process (eg. qualification, contracting, purchase order management, delivery, quality and performance management, etc).
When a Retailer resells branded products, they must negotiate and “manage” with the companies that own those brands, which are most often much larger than the company that they are selling to. This makes the negotiating process challenging.
With Retail being such a competitive marketplace it is necessary for Supply Chain teams to negotiate the best possible pricing, terms, and product availability.
4. Continuity of Supply and Order Fulfillment
Product availability is critical in Retail, particularly in the Ecommerce space. If a customer is looking for a product online, and it is not available, they will go to a competitors website as quickly as it takes to click a button. Supply Chain is central to ensuring product availability and continuity of supply.
Given the many issues that can disrupt delivery (eg. weather related logistics delays), Supply Chain must take all steps to ensure that product is ready for market.
Supply Chains must also optimize their Distribution Centre order fulfillment processes. Pick-to-light systems are resource intense and expensive. Retailers are best served moving to full case order fulfillment everywhere possible in order to create a more touchless Supply Chain which is both faster and cheaper to operate.
5. Inventory Management and Markdowns
The fine balance in inventory management in Retail is ensuring that there is enough inventory on hand to meet customer demand but when products are seasonal you want to have the minimal amount of inventory that is subject to markdowns.
Particularly when you are introducing new products, and there is no historical demand pattern on which to estimate demand, the Supply Chain and merchant teams must take steps to estimate demand and order placement based on similar products.
6. Digital Technology
Amazon has tried an innovative approach with their Amazon Go stores. The store has no cashiers. Customers enter the store upon which the Amazon Go app on their phone is recognized, they pick up any goods they want and leave the store, and the app is automatically updated with their purchases. All of this happens without cashiers and without the customer needing to pull out their credit cards or cash.
Recently Amazon stated that they are closing more than half of those Amazon Go stores. While innovative, the approach seems to miss the ability for customers to have some form of human interaction as the customer experience has been sterilized.
The fundamental concept of electronic pricing and automatic scanning is however here to stay. Stores spend a phenomenal amount of time and expense in changing prices with every sale or price adjustment. Distribution Centres need to scan and track inventory throughout the Supply Chain and logistics process.
Core technology requirements these days include electronic connectivity and visibility.
Supply Chains must have real time visibility as to where products are at the suppliers, with their carriers, in their Distribution Centres, and at their retail outlets. Further customers want real time visibility as to where their shipments are, when they will arrive, and when they are delivered.
Digital Supply Chain Control Tower technology, built on a backbone of electronic connectivity of every node in the Supply Chain, is required to manage the entire end-to-end retail network in real time.
The deployment of Artificial Intelligence in the online customer interface along with its use in the analytics and control tower technology required by Supply Chain will be areas of future technology deployment.
The advancement of Big Data, Machine Learning and Predictive analytics hold the promise of great usage in Retail given the enormous number of skus, transactions, product information, and other data. Retailers often manually work with spreadsheets that are so large as to be virtually unmanageable in the absence of automated solutions.
7. Supply Chain End-to-End Network Management
Retailers can have anywhere from a few locations to dozens, hundreds and thousands of locations. The bigger the geographic area that is served means that Supply Chains must establish a Distribution Centre network, whether insourced or outsourced, to serve all of those retail outlets.
Additionally Supply Chains must manage the entire set of suppliers that serve the company, including manufacturers and wholesalers and logistics companies.
Control tower network management capability is required to manage this increasingly complex web of companies that work to get products to the Retailer.
8. Marketing
The Retailer’s Marketing team and Supply Chain team must be synchronized in order to be effective. Marketing creates sales plans and promotions which Supply Chain must be aware of to ensure that inventories are on hand and positioned such as to ensure these sales and promotions are successful.
Coordinated calendar management and real time communication is vital.
9. Environmental Protection and Sustainability
Retail is an area that requires a lot of focus to ensure sustainability and environmental protection, particularly given how visible it is to all consumers. This will be one of the future ECommerce focus areas for decades to come.
Steps taken need to include:
- Waste reduction
- Recycling
- Reduction of Ecommerce overpackaging
- Carbon footprint management
- Renewable energy usage
- Etc.
10. Agility and Resilience
Retail Supply Chains must be extremely agile and responsive, able to effortlessly change direction at a moment’s notice. Further they must have a level of resilience such that they are able to seamlessly absorb the impact of any unplanned disruptions or incongruities that occur in the day to day execution of those Supply Chains.
11. Payments
Customers will be looking for ever more options in how they will make payments in the future. Aside from cash, credit cards, and debit cards, in the future customers will be looking to make payment with cryptocurrency.
As more companies, and even countries, make the decisions to accept cryptocurrency as a form of payment, even more companies and countries will be pressured to accept this eventuality. This is the last, however one of the most important, in our list of future ECommerce focus areas.
This means that companies will have to develop the processes, check and controls on how to manage this digital currency. With dozens of different cryptocurrencies on the market companies will need to decide which are acceptable (eg. Bitcoin and Ethereum are the 2 largest cryptos) and which are too risky.
From a Supply Chain perspective supplier payments will also likely undergo the same evolution. Some suppliers will want and accept payment in cryptocurrency.
Beyond that Supply Chains will continue to manage Accounts Payable terms in conjunction with Accounts Receivable terms and Inventory levels, so as to proactively manage the entire cash flow position of any Retail company.
Conclusion
There is not a single area of Retail and ECommerce that Supply Chain doesn’t touch, influence, enable, impact and determine success or failure.
Leading Retail organizations recognize this. As such Supply Chain holds a preeminent and strategic position in those companies.
Less enlightened companies don’t see Supply Chain as more than warehousing and transportation. For those companies failure is eventual and inevitable.
These future ECommerce focus areas for Supply Chain are essential. And while this list may seem long it is not exhaustive and can be embellished in much greater detail by those who understand the value and importance of this critical function.