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The world of retail has never seen the degree of change that’s being experienced today. Through the rapid growth of digital technology, consumers have acquired the power to demand what they want, not only when, but where they want it. Retailers have little choice but to respond, often without the luxury of breathing space in which to reimagine or repurpose their supply chain networks. The majority of retailers that have been successful in capturing consumers’ hearts and minds of late, are those that took a “just do it” approach to bringing online sales and home deliveries to consumers.


What is Supply Chain


Over the next 10 to 15 years, these “multichannel” leaders will need to innovate, if for no other reason than to take the expense out of playing the multichannel game. The laggards too, will need to get on top of their game. Perhaps they will have the benefit of learning from the leaders, but a copycat approach may well be a path to disaster. There will be no such thing as a one-size-fits-all model for retail supply chains.

For that very reason, innovation will be a constant quest for retail supply chain owners over the next decade or so, with three primary areas of focus likely to be:

  1. Multi/Omni-channel supply
  2. Collaboration between retailers, suppliers, and partners
  3. The technology required to provide retail supply chains with the agility and flexibility to meet consumers’ “I’m here so bring it here” expectations.


1.  The Omni-channel Challenge

It seems that multichannel retail has undergone a metamorphosis. Consumers no longer wish to choose between online ordering/home delivery and purchasing in-store. Now they want to choose from any combination of ways to purchase and receive the goods they want. Over the next decade, there is every reason to suspect they’ll stretch supply chains even further by wanting their purchases to be placed in their hands wherever they happen to be.

Retail companies will need to innovate not only in fulfilment of Omni-channel purchases, but also in how they manage the increasing rate at which products will be returned. Retail in the future will be about the experience, rather than simply the product. If a garment for example, is ordered online (where the customer can’t try it on for size) and the customer wishes to return it, the expectation will be that the customer can do so without question and by whatever channel is most convenient. Indeed, returns represent perhaps the toughest challenge in what will already be complex supply chain networks.


A Whole New Network Landscape

In order to meet the forward and reverse supply chain demands of the future, retailers are going to need to get inventive about their use of the entire chain, including numbers and locations of distribution centres and the way technologyin which they utilize existing and new retail stores. Perhaps stores will become more like showrooms with shopping floor space turned into mini-warehouses, from which online orders will be locally fulfilled.

Returns might be handled through a new breed of dedicated returns handling agents, which provide drop off points for consumers to hand over items they wish to return. These agents might triage returned items and buy/sell them, return them to a retailer’s local store or ship them directly back to suppliers, depending on which proves to be the most cost-effective option for the retailer.

However retailers meet the logistics demands of the future, they can expect to factor in the costs incurred by their choices, as consumers will be unlikely to pay for shipping. Except that is, when they are given a choice between free next-day delivery and same-day at a premium. In such cases, some consumers might be prepared to pay for same-day delivery if their need is urgent and the item they want is not available off the shelf.


2. The Keys to Collaboration: Trust and Technology

As can be imagined when considering the complexity of meeting Omni-channel retail demand, the supply chains of the future will become even more split and fragmented than they are today. Meeting the fundamental tenets of retail supply; availability, price, speed, and flexibility, will require retailers and suppliers to engage in unprecedented levels of trust.

For example, the challenge of getting consumers’ online orders delivered to the home, office or wherever else the consumer wishes to receive them will best be met via drop shipping arrangements. However, these will not be arrangements with a single supplier. Somewhere along the way, products will need to be merged together to complete multi-item orders, meaning the retailer will need to work closely with multiple suppliers to achieve satisfactory order-fill levels.

Retailers and suppliers together will need to innovate to develop ways in which they can sustain relationships of trust, where they are not afraid to openly share data with one another. Together they will need access to one single version of the truth which spans not just one or two, but many dynamic supply chains.


More Meaningful and Expansive Partnerships

In fact, management teams will need to more closely reflect the reality of the supply chains for which they are accountable, meaning they should comprise multi-party representatives. It will no longer be sufficient to talk about partnership in fluffy terms, tentatively formalised in written agreements. Intercompany management teams will need to work together according to agreed frameworks of performance goals and measurements.

Retail supply chain success in the next decade will not come to single commercial entities. Groups of companies that find innovative ways to collaborate meaningfully will eventually kill off the enterprises that try to stand alone.

Doubtless some will try to achieve the same aims through mergers and acquisitions. However, that may well prove to be a limiting, rather than liberating approach. Collaboration and domination are not the same things and don’t serve the same ends. M&A however, may still play an important part among large retail players, as they seek to capitalise on technology. We may see more of these companies acquiring software and hardware interests, as Amazon did when it purchased robotic firm Kiva Systems a few years ago.


Getting Ahead in the Cloud

Technology will clearly be an important facilitator in a future where retailers and suppliers trust one another and can work together for Omni-channel success. While robotics and automated warehouse systems assist supply chains to move faster, cloud computing will help retailers, suppliers, customers and partners to play nicely together.Cloud Technology in Supply Chain IT

Trust will be important here too. There will be no room for indulging fears about data security and integrity. Cloud providers of course, must play their part to inspire confidence and allay cynicism. However, in the main, cloud data storage is already safer than occasional, massively publicised breaches may have us believe.

Innovation in cloud computing is still only scratching the surface of what’s possible. Supply chain operators and cloud providers will together find ways to ensure only relevant and valid data is shared and that noise is filtered out. Real-time and predictive analytics will also play a vital role in processing shared data; ensuring supply chain partners have the visibility to maintain a dynamically shifting balance of demand and supply.


3. Technology for the Last Mile and More

While talking technology, retail companies will need plenty of it to meet the challenge of last mile distribution in 2026 and beyond. Consumers will have the same deep visibility into the supply chain as their suppliers and will use it to get products into their hands wherever they happen to be.

For the consumer, it will be as easy as opening an app, checking the ETA of her order and, if it’s still more than say, 30 minutes away, confirming or changing the exact location for delivery, which might be at home, at work, at a friend or relative’s house, or perhaps even to a purpose-designed locker in a public facility.

For the retailer, this is the toughest and most expensive part of the supply chain to get right, with the cost contributing perhaps 50% of the overall cost to serve. Deliveries must be made in sometimes highly congested areas, yet must somehow be planned to arrive within a very narrow time window or perhaps even at a precisely specified time.

If ever there was a supply chain area that needed innovation, it’s the last mile. There’s little doubt that it will receive sufficient focus from innovative thinkers, since in-house fleets or parcel service deliveries are unlikely to be feasible or affordable for many retail operations.


The Future of the Last Mile: Automated or Uberised?

Will drones be the main retail solution for last mile delivery in the next ten years? It’s unlikely, given the varying sizes of retail goods and orders. The thought of white goods being carried above our streets by self-piloted helicopters is enough to make anybody anxious. Aviation regulations and safety concerns will probably make widespread use of delivery drones an unrealistic proposition for a good few years yet.

Autonomous vehicles are probably more likely than drones to see the light of day in last mile delivery scenarios, although many of the same safety concerns will need to be addressed. Still, with many city centres seeing restrictions or even prohibitions on motorised traffic, slow-moving electric self-driving goods vehicles might make earlier inroads into the last mile concept.

Many pundits though, are starting to put their money on some variation of crowdsourcing being seized by innovative retailers. Certainly the idea is feasible, as companies such as Uber have already proven in the arena of public transportation. If we can crowdsource the transportation of people from door to door, retail products should present little problem.

Crowdsourcing will inevitably be cheaper than delivery by parcel service and could also present the ultimate in flexibility. From the college student on his bicycle to the owner-driver of a large goods vehicle, retailers could choose online from a myriad of service providers, ready and waiting to get packages away from DCs or retail store stockrooms.


Upstream Technology

Last mile distribution presents just one facet of retail supply chain technology which will be targeted for innovation. Automation within warehouses will surely reach new heights as robotic technology improves. Retail companies and suppliers will become much more comfortable with big data and analytics, which, as mentioned already, will be a vital component for effective visibility and collaboration, not to mention accurate demand forecasting. The most successful organisations will be those prepared to involve themselves in technology and software development, rather than satisfy themselves as users.

Ultimate Supply Chain IT SystemTechnology will most likely dominate the consumer purchasing process too. Purchases online and in-store will be processed through fulfilment systems without the need for human intervention at any stage—aside from the need to manage exceptions.

Personalisation and customisation will be an important element in playing to consumers’ growing thirst for the shopping experience. This will begin at the manufacturing end of the supply chain, with brand-owners leveraging big data and the Internet of Things to produce highly customised products tailored to narrow ranges of consumer preference.


Conclusion: Retail Supply Chain or Matrix?

It’s to be expected that retail supply chains in the next 10 to 15 years will be hotbeds of disruption. The Internet and ecommerce have started a revolutionary process that’s gone way beyond adding an extra sales and supply channel for consumers. In fact, the business of meeting retail demand might be more easily mapped to a matrix than a clearly defined, end-to-end chain.

Retailers and their suppliers must innovate to adapt, which means rethinking relationships, collaborating in a meaningful way, learning to harness the Omni-channel concept, and driving technology development as well as leveraging what’s available.

These factors will be prerequisites to compete in an environment where the role of brick and mortar stores is no longer certain, and consumers shop as much for the experience as for the product.


Contact Rob O'Byrne
Best Regards,
Rob O’Byrne
Email: [email protected]
Phone: +61 417 417 307
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