GDR NRF Newsletter Feb 2019

GDR’s Alex Sbardella at NRF 2019: Retail’s Big Show’s Supply Chain Workshop

 

Image 5 - GDR Feb 2019

In the first part of a two-part series, GDR’s SVP of Global Innovation Alex Sbardella explores the challenges created by complicated modern supply chains

In 1906, Sears, Roebuck & Company ushered in the modern era of supply chain when it opened a cavernous merchandising centre in 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 that it needed its own power station.

Since then, supply chain has been the engine of retail — quite obviously, if a business doesn’t have anything to sell, it’s not a retail business.

Last month I spoke at NRF 2019’s Supply Chain Workshop about the challenges and opportunities of modern supply chains. The difficulties of modern supply chains can be boiled down into four key areas.

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1. Complication: Compared with the heyday of big-box retail — where retailers delivered mass volumes of stock to a single location and customers flocked there in the 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 do a lot more work. The good news is, there are a lot of potential solutions to these problems, but this creates another issue: There were more than 800 different vendors at NRF 2019 alone; if a retailer doesn’t know what they’re looking for, it can be extremely overwhelming.

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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 detailed 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 mistakes and weaknesses are visible and exposed like never before.

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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 — the smartphone — means that 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 when shopping for groceries on a phone.

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4. Pressure: There is an inherent tension between what external people (customers) want and expect and what 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 is always right” model is still fit for purpose. In an era where customers are fickler 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 a retailer can doesn’t necessarily mean they should. There is a growing unease about how sustainable the current delivery picture is, and retailers must be sure their supply chains really work for them (not to mention the planet).

Having now defined the challenges, in next month’s newsletter I’ll outline the opportunities provided by a huge range of innovations and emerging trends.

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