In the second article of our two-part supply chain and logistics series, GDR’s SVP Global Innovation Alex Sbardella reveals the opportunities that emerging innovations and logistics trends provide for retailers.
As I covered in the first part of this series – and at the NRF Big Show 2019 Supply Chain and Logistics Workshop – supply chains are becoming more complicated and fragmented, which creates huge challenges for retailers trying to keep customers happy, while also remaining profitable.
Luckily, innovation possibilities are everywhere. This usually takes the form of optimisation: take an existing problem or process that you have, and apply tech to optimise it and to provide an incrementally better solution. In this case, though, there is a caveat: optimisation tends to work very well until the world moves on and suddenly it doesn’t – as Sears, a leading supply chain innovator in the last century, sadly found out. Today you can have the most highly-optimised big box store but in the era of omnichannel and direct-to-consumer, that will only get you so far. So, whilst optimising is undoubtedly important, you also need to include a healthy dose of change and reinvention.
I think there are two core ways that all retailers can reinvent their supply chain operations:
Trend 1: Marketplace Dynamics
Retail logistics operations need warehouse space, delivery vehicles, and workers – but not always for long. Now, following the success of brands like Uber and AirBnb in the consumer space, there are a whole suite of marketplace-style solutions emerging that offer retailers greater flexibility to scale up and down as required. Flexe and Warehouse Exchange match warehouses that have empty space with companies who need it, while Transfix and Cargomatic are like Uber for freight, offering brands on-demand space in delivery trucks. Amazon has been using the flexibility of the gig economy to its advantage for years as it struggles to keep up with 2-day delivery promises, and all retailers should consider how these more fluid marketplace dynamics could benefit their operations.
Within this conversation it’s also worth bearing in mind drones, which are quietly becoming key parts of the delivery network outside of the US.
Zipline in Rwanda is using drones to make important blood deliveries by air, while online marketplace Aha is using Flytrex drones to make deliveries in Iceland. Once the social and regulatory environment catches up with their technical capabilities, drones may well offer another flexible and scalable last mile delivery solution.
Trend 2: Thinking Broader
Gone are the days when the logistics operation can exist in a silo, disconnected from the rest of the business. It needs to be integrated higher up the food chain, and you need to consider how strategic logistical innovations can improve efficiency and cut costs. For example, a traditional supply chain project might be concerned with how to make the returns process as efficient as possible. But why not also try to reduce the amount of returns needed in the first place? When UK bookstore chain Waterstones gave local store managers control over what books to stock, publisher returns dropped from 25% to 4% almost overnight. Other retailers taking a broader approach to supply chains include Montreal grocery store IGA, which uses a 25,000sq ft roof garden on top of its store to grow 30 types of organic produce with next to no transport costs. Elsewhere, Shanghai sneaker store Runner Camp is very open about its unique logistics model. The physical store has no stock and only a small stable of test products, swapping stockroom space for a running track and a gym. Purchases must be made online and delivered to customers’ homes, creating a much more streamlined operation.
Full stack solutions
Of course, the dream scenario for any retailer is that they are able to control every stage and lever of their supply chain so that they can continually optimise it and add value. Consider how Amazon has created the Dash Fulfilment Service so that, theoretically, it could detect a need for product replenishment, send a message to a robotic warehouse for picking, and deliver it using a drone, completing the whole process without any need for human intervention. Alibaba is another retailer aiming for the “full stack” solution, which enabled it to deliver a staggering one billion orders after Singles Day in 2018.
While not every company can become an Alibaba, the Chinese retail giant’s founder Jack Ma believes “every company can become an Amazon”. In an interview with Bloomberg he famously said: “Amazon buys and then sells products. We’re a platform…We think if Amazon is a great apple, then we’re an apple tree.” Anyone at the NRF Big Show this year will have noticed Alibaba’s strong presence amongst those 800+ exhibitors, offering a variety of solutions to help retailers take a step closer to this goal.
With innovation opportunities available everywhere, there is no one-size-fits-all-solution. But a more dynamic, integrated, sustainable supply chain is undoubtedly a good place to start.
If you’d like to talk to us about how your brand could learn from these principles and use them to improve your service offer, this is exactly the type of project we work with our clients on. Drop me an email at email@example.com