The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
I can’t imagine anyone would argue with me if I said the world looks pretty different today than it did three years ago. Globally, within that timeframe, we’ve had – among other events – a global pandemic, political instability, supply chain disruptions, rising inflation and war. In some instances, one (or more) of these led to the others, but in many cases, we couldn’t have predicted what has transpired over the past 36 months.
So, as we look to the future of the global supply chain, all businesses and areas of business – from inventory to distribution, suppliers to retailers – need to plan for one thing: uncertainty.
A solid foundation can make or break a business
Consider this analogy: when a strong storm is heading toward your house, you don’t want to pick that moment to worry about whether your foundation is solid. The time to ensure you have a solid foundation is when the weather outside is calm.
When the COVID-19 pandemic hit and changed consumer behaviors pretty much overnight, many organizations – especially in the retail industry – had to adapt to those changes or risk losing business. Those who had solid digital and omnichannel foundations in place had a much easier time than those with fragmented and siloed processes.
Over the past few years, many businesses had started to digitize, begun to automate and were able to cobble together back-end solutions that would meet customer needs in this new pandemic environment. At the same time, the volume of pandemic purchasing that caused so many supply chain issues also revealed company-specific foundational issues like poor inventory management, siloed online and brick-and-mortar-business, and antiquated processes. Had systems and processes – a solid foundation – been in place before an unpredictable global virus, I don’t believe we would have many of the ongoing issues and disruptions the industry is experiencing now.
Be “front door” ready
According to the U.S. Census Bureau, total year-over-year e-commerce sales surged by 32% in 2020. E-commerce sales now represent 14% of total retail sales. In the near future, e-commerce is expected to comprise 25% to 40% of total sales in certain categories, such as sporting goods and leisure, home improvement, apparel and mass merchandise. With this shift towards online shopping, retailers need to ensure their “front door,” or online platform(s), is poised to handle the growing demand. Not only does that mean a seamless and pleasant browsing and purchasing experience for the consumer, but the same behind the scenes. The website-to-front-door (i.e., delivery) and front-door-to-store (i.e., returns) should be just as seamless and effortless.
Address inventory challenges
The increasing complexity in order fulfillment leads to more difficult inventory decisions, and, in many cases, suboptimal consumer experiences. The challenge for retailers is accessing a complete view of their inventory at all times. This requires getting rid of the boundaries across channels to give the consumer the item they want regardless of where the inventory happens to reside. A retailer is much more likely to secure the purchase if the consumer can receive their item quickly rather than within seven to 10 days.
To do so, retailers must continue to manage the same aspects of inventory as they always have, including inventory by location, banner, product, category, season, region and supplier. However, instead of approaching inventory one channel at a time as they have in the past, they must understand and optimize their inventory position, delivery, shipping, logistics, allocation and replenishment across all of their inventory locations and channels at once.
Create a single system to manage orders
Many suppliers manage a separate process for wholesale orders, online orders and marketplace orders. And there may be yet another system for phone or email orders. Often, they track orders using manual methods like spreadsheets. This not only takes up valuable resources, but also causes delays and errors in processing orders. Rather than these disparate processes, suppliers need a single system to manage all of their orders from all of their sales channels. Not only do they need to view all orders, they also need to be able to find cost-effective shipping rates, print labels and book shipments through a single, automated system. Suppliers also need to be able to share inventory data with their retail and logistics partners.
Enable integration between retailer, business processes and partners’ systems
The new retail environment requires heightened order and inventory precision as retailers deliver more shipments with smaller units across more channels. Retailers need to get hundreds—or even thousands—of vendors, carriers, sourcing companies and other trading partners to execute against today’s heightened fulfillment expectations.
This is a critical step that is often forgotten or treated as an afterthought.
Omnichannel execution requires not only an overhaul of the retailer’s internal processes and systems, but also integration between the retailer and the business processes and systems of all of their trading partners. A seamless exchange of data is the key to enabling the close collaboration required in the post-pandemic era. Retailers need data from their suppliers about the items they buy, the orders they place, the inventory they move, and how suppliers perform. Likewise, suppliers need insight into sales and inventory trends that only the retailer can provide.
For most retailers, suppliers and partners, the elements that form a solid foundation will need to be laid one by one and will likely take some time. In reality, every organization will start from a different place, with some further along than others. What is critical for each individual organization to remember is that the next unpredictable event could be more disruptive than COVID-19, and the only way to be positioned for continuity is to be prepared. While we may not know just what to be prepared for, we do know that thinking and planning ahead is never a bad business idea.
About the author
Archie Black is CEO of SPS Commerce, where he has led the company to become a recognized leader in retail cloud services with the industry’s largest retail network.