GDR NRF Newsletter Mar 2019

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

Image 1 - GDR March 2019

In the second part of our two-part supply chain and logistics series, GDR’s SVP of Global Innovation Alex Sbardella outlines the opportunities provided by emerging innovations and trends.

As I covered in the first part of this series — and NRF 2019’s Supply Chain 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. It usually takes the form of optimisation: Take an existing problem or process and apply tech to optimise it and to provide an incrementally better solution. In this case, 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 a business can have the most highly optimised big-box store but in the era of omnichannel and direct-to-consumer, that will only get it so far. Whilst optimising is undoubtedly important, businesses 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:

Image 2 - GDR March 2019

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 warehouse space, 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 two-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 United States. 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.

Image 3 - GDR March 2019

2.Thinking Broader: Gone are the days when the logistics operation could exist in a silo relative to the rest of the business. It needs to be integrated higher up the food chain, and businesses 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 chain include Montreal grocery store IGA, which uses a 25,000-square-foot 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.

Of course, the dream scenario for any retailer is to control every stage and lever of the supply chain so it can continually optimise it and add value. Consider how Amazon has created the Dash Replenishment 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 1 billion orders after Singles Day in 2018.

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While every company can’t 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 NRF 2019 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.

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