By Tom Craig, President, LTD Management
e-Commerce is the new retailing. So why do firms use the old supply chain—and fail to deliver the customer experience? The New Supply Chain delivers the customer experiences and builds repeat business. The New Supply Chain is not a choice; it is a requirement for e-commerce immediacy.
Brick-and-mortar retailers have had the most impact so far with e-commerce. Stores, with stocked shelves, often lack true identification with customers. e-Commerce is all about the customers. Online sales have moved past just having a website and shipping orders.
New companies dominate global retailing—Amazon, Alibaba, Jet.com, and Flipkart. Walmart, the top global brick-andmortar retailer, is dwarfed in online sales by Amazon. Big retailers, such as Target and Home Depot, are making significant investments in their supply chains to aggressively grow and participate in this new world.
Online sales have created emphasis on omni-channel and multiple touch points with customers. In turn, there is m-commerce for the ways customer reach websites. And, Amazon with its immediacy—delivering orders within 48 hours (or faster) of placement—has changed supply chain management. e-Commerce immediacy is global. It is happening in the US, China, Germany, India, Spain, and more, and it can take brands to new levels.
Currently, standard supply chains were designed for a specific purpose. Omnichannel means a multi-purpose supply chain—or more accurately, multi-purpose supply chains.
The New Supply Chain is redefining supply chain management and best practices. This New Supply Chain that drives e-commerce immediacy is about:
• Inventory velocity. Many companies struggle with inventories for multichannel sales. No matter what and how many channels, inventory should flow. From both a lean view and a liquidity view, inventory that sits does not create value. Some companies have problems with stock outs. Others struggle with omni-channel with mistakenly increasing inventories and/or trying to allocate inventories across channels. Allocating is arbitrary. The best practice is to move inventory faster through the supply chain from end-to-end. It provides products to sell in the various channels. It also improves liquidity with less capital tied-up in inventory. With the New Supply Chain, inventory velocity moves to a higher level to become inventory velocity
• Time compression. Borrowing from Lean, extra time adds waste to the supply chain and hurts responsiveness. There is no value created—and customers determine if there is value made. Inventory is a buffer to uncertainty. The longer the time required, the more the uncertainty—and the more the inventory. The additional, unnecessary time occurs both inside the company and outside. Value stream mapping is a good way to see the waste of time–and its internal and external causes.
• Advanced integration:
Process. Gaps in the supply chain are holes where problems can hide and where delays can occur. With supply chains within supply chains and suppliers for suppliers, this is a challenge—but necessary. Integrating stakeholders in the supply chain—participants acting in coordination– is necessary for the New Supply Chain.
Technology. LT D views technology as a process enabler and is vital given the length and complexity of the global supply chain. Gaining complete visibility can be challenging since there can be up to 17 parties involved in an international shipment. But there is more. The technology must provide exception management—what is not happening and where is it not happening. That enables attention on potential and real problems. Extending the supply chain upstream means the technology, the interconnection, should also be extended. Technologies–WMS, supply chain execution, and more–must be used and integrated.
• Network alignment and inventory positioning. The present network was built on markets, customers, and conditions that are changing. Trying to force fit the existing network to also handle e-commerce can be a recipe for operating and customer service problems. A network for e-commerce must be created, and inventory should be positioned to support the networks. Different SKUs to support sales can be placed in respective networks. Servicing omni-channel markets can raise questions about multi-echelon supply chains and what value is created— from a lean perspective—with them and what they contribute—or not—as to time compression and inventory velocity.
The New Supply Chain brings new best practices as the above shows. These best practices are central to the New Supply Chain. They are not functional ones that reside within a supply chain. These drive growth and create opportunities.
There is more going on—robotics, possible delivery of orders by 3D printing delivery trucks, and questions on whether traditional logistics service providers can adapt to e-commerce immediacy and to the growth in e-commerce.
The last mile gets attention with e-commerce. It often arises with companies using their monolithic supply chains and trying to force them to be agile and do more than they were designed to do.
It will continue to change and evolve. The future, such as virtual reality retailing, will generate larger orders with more products. That will necessitate modifications to the New Supply Chain.
One-size-fits-all supply chain is facing its end. It served its purpose. Traditional supply chains deal with cases and pallets and with large shipments. Immediacy is often about eaches and small shipments. It is faster, leaner, and responsive.
But it was not really agile. The New Supply Chain is agile—and more. It is dynamic and fluid.
Reality is there will be supply chain duality. The present/existing supply chain is designed to serve its traditional purpose, such as retail stores, while the New Supply Chain delivers the Customer Experience for e-commerce sales. This creates organisation questions and different performance measures—since these serve different channels.
The immediacy of e-commerce will not stop with e-commerce. It will move across channels, markets, industries, and the world. Companies should choose to be leaders in this innovative change.