For consumers, the purchasing experience continues to merge the digital and physical, and retailers are adapting to keep up. Now, the supply chain extends beyond the store shelf, connecting to consumers' mobile devices and computers. Buyers expect products to be available through whichever channel is convenient for them.
KPMG says it expects that by 2020 leading retailers will shift away from on-shelf availability metrics to on-demand availability to fulfill customer orders anytime and anywhere.
The new model will shift from the familiar forecast-driven supply chain to a demand-driven supply chain. Retailers will be empowered to respond to the unrelenting pressures to deliver products via consumers' preferred channels at the lowest cost.
That's the kind of evolution industry leaders are talking about at events such as the D3 Retail Supply Chain Summit that focus on "Dynamic Distribution Disruption."
Retailers redesigning their network to support an on-demand, omni-channel-oriented supply chain are coming to grips with a new level of complexity. The proliferation of channels available to consumers, and the desire for one- or two-day shipping, creates challenges throughout the processes.
Old-school supply chains typically have enough cushion built into them to withstand minor disruptions, keeping a reasonable supply of product stocked in a few large distribution centers. That system worked due to uncertainty in demand forecasts and slow information flow. With a few large distribution centers, retailers could reach most of their customers with two-day shipping, but expectations for one-day service have made the large DC model less than optimal for supporting e-commerce.
At the start of the e-commerce boom, retailers often bolted on separate solutions for their online businesses, leading to poor coordination across channels. That needs to change. In-store and online inventories should merge into a single inventory pool, with an integrated procurement and supply chain organization that operates across channels.
Big data and advanced analytics leverage information must faster, delivering more in-depth visibility that can help automate decision making to align the supply chain more closely with actual demand. A leaner, more nimble supply chain can reduce the redundancy built into many networks, reducing inventory and shipping costs while delivering better service.
However, there's no single strategy to solve these problems for every retailer. Some are revamping stores to serve as fulfillment centers for e-commerce; others are transitioning from a few large regional distribution centers to smaller operations located closer to urban areas. Dark stores and the backrooms of others will become miniature shipping outlets, and in-store pickup operations will grow as well. Returns are an integral part of e-commerce, so reverse logistics are a vital part of the service experience. Optimizing the distribution footprint to align with parcel shipping networks can save significant costs as well.
How do you know what the best options are for your operation? Engaging with an experienced Enterprise Logistics Provider can deliver profound insights to help manage your distribution disruption.
For example, Transportation Insight helped a global distributor of time-sensitive retail supplies optimize its distribution center footprint to reduce operational expenses and improve inventory control and inventory turns. By analyzing the client’s historical data, our team of logistics engineers was able to help drive future growth, reduce time in transit, and redeploy resources to other initiatives focused on improving customer experience. Newly implemented parcel and freight solutions further improve transportation cost management by aligning customer order cycles and shipping patterns with the carrier network to improve shipment consolidation.
By leveraging technology-enabled data analysis with deep domain expertise, Transportation Insight works with shippers to engineer omni-channel strategies that improve their on-demand distribution model to build long-term customer loyalty through all channels.