In the first article of a two-part series, GDR’s SVP Global Innovation Alex Sbardella explores the challenges created by complicated modern supply chains.
In 1907 Sears, Roebuck & Company ushered in the modern era of supply chain when it opened a cavernous merchandising centre just outside of Chicago. Using pneumatic tubes, conveyor belts and a team of 500 typists to fulfil a staggering 40,000 mail orders per day, it was so advanced, it needed its own power station.
Since then, supply chain has been the engine of retail – quite obviously, if you haven’t got anything to sell, you haven’t got a retail business.
Last month I talked at the NRF Big Show 2019 Supply Chain and Logistics Workshop about the challenges and opportunities of modern supply chains.
I would boil down the difficulties of modern supply chains into four key areas:
Challenge 1: Complication
Compared to the heydays of big box retail – where retailers delivered mass volumes of stock to a single location and customers flocked there in their thousands to buy – the picture has become a lot more complicated and fragmented. Omnichannel retail, direct-to-consumer models and even trade wars have led to all retailers having to a lot do more work. The good news is, there are a lot of potential solutions to these problems, but this in itself creates another issue. At the NRF BIG Show alone this year there were more than 800 different vendors, which, if you don’t know what you’re looking for, can be extremely overwhelming.
Challenge 2: Visibility
Supply chains are more visible than ever before. We see the physical trappings of this every day through delivery trucks, branded boxes etc. But more importantly, retailers are also expected to provide customers really fine grade insight into all details of the supply chain: who made the product and where, what is it made of, how many are in my local store, where is my delivery on a map right now? This means we’ve created a system where our mistakes and weaknesses are visible and exposed like never before.
Challenge 3: Expectations
Customer expectations about how long delivery should take and how much it should cost have been completely skewed by Amazon Prime. In addition, the fact that we buy so many products and services now through the same interface – our smartphone – means that our expectations of experience are blending together. If we have a really great, seamless experience with Uber, or access to limitless choice on Netflix, it’s hard not to expect the same level of service next time we shop for groceries on our phone.
Challenge 4: Pressure
There is an inherent tension between what external people (our customers) want and expect and what our internal people, who look after the bottom line, think we should do. Trying to keep a balance between keeping customers happy and staying profitable has become almost impossible, so we need to start questioning whether “the customer’s always right” model is still fit for purpose. In an era where customers are more fickle than ever before – is it always worth shipping something at a loss from a store across the country, just to keep a customer happy? Just because you can, doesn’t necessarily mean that you should. There is a growing unease about how sustainable the current delivery picture is, and retailers must be sure that their supply chains really work for them (not to mention the planet).
The second part of the Spotlight on Supply series explores the opportunities provided by emerging innovations and trends. Click here to read it.
If you’re interested in discussing this topic further, you can email Alex on firstname.lastname@example.org