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 customer.
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-and- mortar 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 omnichannel and multiple touch points with
customers. In turn, there is mCommerce
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.
Current, standard supply chains were designed for a
specific purpose. Omnichannel means a
multipurpose supply chain—or more accurately, multipurpose 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—
— InventoryVelocity2 . 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 omnichannel 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 InventoryVelocity2.
— 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. And the longer the time,
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.
— Upstream
Extension of Supply Chain. Extending upstream is more than collaboration
with suppliers. Supply chain
effectiveness begins with the inbound supply chain. The outbound portion cannot
function well if products are not available.
The inbound supply chain is also a big factor when it comes to
compressing time and gaining inventory velocity. Improving supply chains must recognize that
there is no single supply chain. There
are supply chains within supply chains.
Look at the Mississippi River; it is made up of hundreds of streams and
rivers. That is how supply chains
are. There should be elevated
integration with key suppliers and logistics service providers. It should work like de facto vertical
integration.
ü 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.
ü Technology. LTD 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
omnichannel 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 organization 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.
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