By Greg Zakowicz(opens in new tab), senior commerce marketing analyst at Bronto
⏰ 4-minute read
Supply chain management is critical for retailers, especially as changes to the industry make it more important than ever.
Updated customer expectations, global commerce and the race for quick last mile delivery each prompt unique supply-chain changes.
Addressing these concerns will make you more profitable and ensure sustainability for the future.
Talking about supply chains(opens in new tab) may not be sexy, but it’s a critical conversation for retailers(opens in new tab) of all types. Inefficient retail supply chain management can result in a poor customer experience, decreased customer retention, lost sales and increased costs--all of which impact growth.
Need convincing? Imagine this: You order a product online but are told it will take more than a week to reach you. You then check the stock count in the retailers’ local store for buy online, pickup in-store (BOPIS)(opens in new tab) options. You see that the product is available, order it, then travel to the store--only to find the product you ordered is not in stock after all.
How is that for a customer experience? This encounter can dilute brand trust and cause churn. To avoid it, retailers must meet increased customer demands(opens in new tab), which likely entails improving the efficiency and nimbleness of their supply chains.
Current influences on supply chains, and how to react:
Updated customer expectations and behaviors
Today’s consumers have power over retailers thanks to increased ease of ordering(opens in new tab) and product availability. Consumers can buy virtually any product, regardless of their location or the product’s(opens in new tab), and they expect delivery with speed and efficiency. They can see where their product is in real-time, which has turned the industry on its head.
And yet, many companies don’t have full visibility into their supply chains. The solution is to have the supply chain fully automated and have the ability to monitor every movement, analyze it and ultimately optimize it constantly..
Global commerce(opens in new tab) has challenged companies to think differently about their supply chains and will continue to impact retail on the whole. Even global companies must be able to get their products to consumers quickly, given consumers’ expectations of quick delivery.
In response, retailers might consider creating a distribution center near the point of manufacturing. Urban warehousing(opens in new tab) is another increasingly popular solution for quickly delivering to densely-populated areas. In this system, vacant buildings in populated metro locations are turned into fulfillment or distribution centers(opens in new tab). This allows companies to ship quickly from “the heart of things.”
- Last mile delivery
Last mile delivery(opens in new tab) and its associated costs are a challenge for all retailers. Meeting speedy delivery expectations means the product must be in the right location, systems need accurate product counts, and there needs to be a mechanism to cost-effectively deliver goods.
To reduce costs, companies are trying everything from using employees(opens in new tab), autonomous vehicles(opens in new tab), drones, and even rideshare services(opens in new tab) to deliver packages. None really seem to work that well or are scalable--yet.
Another option for retailers to curb last mile costs is to offer BOPIS as a fulfillment option, either through in-store counters or pickup lockers.
Providing this omnichannel experience is where supply chain management really comes into play. To win with last mile delivery, companies need full viability into their supply chain. (Think of the earlier example when the website showed products that were available for BOPIS, only for the customer to find their purchase wasn’t available.)
Upgrading your supply chain management system should be viewed as a revenue opportunity as opposed to one of cost-savings. The ability to provide expedited delivery or let customers know that products are readily available for pickup can result in increased orders. Meeting these expectations will result in a better customer experience and should result in increased revenue.
If your current system does not afford this nimbleness, it’s probably time to start assessing others.
Where are supply chains heading?
Global commerce and consumer expectations around shipping and delivery continue to compound.
Some retailers may respond by further decentralizing their supply chains(opens in new tab) to increase speed of delivery and more easily adapt to marketplace changes as they happen.
Others may invest more in urban warehousing, which may lead to more pop-up shops(opens in new tab) or physical storefronts (showroom or traditional) in densely-populated areas. We are already seeing a rise in showroom and physical storefronts for traditionally online-only retailers(opens in new tab). Urban warehousing may accelerate this trend by making same-day delivery possible.
The bottom line
The supply chain is not just an internal business issue, it is a consumer issue. Companies that are not trying to adjust their supply chains today may easily find themselves lagging behind only a couple of years from now, while churning customers in the process.
More on the future of retail: