There has been a lot of headlines and analysis recently generated by the media concerning the impacts of the COVID-19 global pandemic and what it all means for the retail industry. Much of the writing and reporting thus far has, for good or ill, focused on some of the more significant ramifications that have come about as a result of these uncertain times, including the rashes of insolvencies and store closures that have occurred over the course of the past year, as well as the marked decrease in retail sales in 2020. Well documented is the substantial reduction in physical store traffic and the growing hesitancy of today’s consumer to visit brick-and-mortar locations – trends that are believed by many to have been abetted and exacerbated by government-imposed lockdowns and restrictions across the country. The subsequent and drastic change in consumer behaviour has also been discussed at length, a shift most noticeably represented by the sharp uptick in online spending last year. And as the notion that these trends could be sustained through to a post-pandemic world becomes more widely accepted, the idea of the ‘pivot’ is being proffered as the solution to the challenges and a means by which to capitalize on new opportunities. However, according to retail supply chain and last mile expert, Gary Newbury, although this may be the case, without a sufficient reevaluation and reimagination of the retail supply chain, any pivots attempted could go unsupported, rendering them as disingenuous substitutes for meaningful change to capabilities and performance and a significant reorientation of direction.
“One of the most interesting aspects of the supply chain is that it resides within and impacts the public domain,” he says. “As a result, the average consumer has a relatively broad understanding of what the supply chain is in that they know a failure in its execution means that they may not have access to their day-to-day items at their grocery store. The pandemic and subsequent lockdowns have brought the retail supply chain into sharper focus, making it of greater concern to consumers. And one might argue that if it’s of concern to consumers that it’s surely a concern of retailers. Though this is obviously true to an extent, in order to properly address these concerns and the challenges inherent in today’s retail supply chain, a rethink and reinvention of their operational model is required. The problem is, retailers aren’t accustomed to thinking of their supply chains as strategic instruments within their toolkits. That’s going to need to change if they want to evolve with shopping trends and achieve their desired goals.”
Aligning the Chain
One company that knows a thing or two about the strategic use of the supply chain, acknowledges Newbury, is Amazon. He describes the online behemoth as “one massive supply network”, and quite rightly so. Operating 175 distribution centres in 15 marketplaces around the world – 106 in the United States and 16 in Canada – the e-commerce giant has managed to develop an expansive yet flat model of distribution to facilitate the delivery of the more than 5 billion packages that left its centres in 2020. It’s a mind-numbing statistic, and one that, according to Statista, amounts to an astounding 13.7 percent share of the total global e-commerce market. What’s equally impressive, however, is the fact that the Amazon last mile delivery network, which it launched in the U.S. in 2014, accounted for the delivery of an estimated 3.5 billion (70 percent) of those packages. In a class of its own, Newbury doesn’t expect any single retailer to be able to compete with the strength of Amazon’s e-commerce and distribution capabilities. But he suggests that the horizontal nature of its operations is something that retailers should take note of as they continue engineering ways by which to address the mounting pressures felt by their supply chains.
“There’s a systemic issue within most retail operations with respect to the way the supply chain is aligned across the organization,” he says. “And until retailers adopt a different approach, their supply chains will remain tucked away in inconvenient pockets. Logistics – transportation and warehousing – is often in one bucket. Sometimes it’s split. Receiving product on the dock or in the back room lies with the stores. Purchase ordering is the responsibility of merchandising. There’s some ambiguity around demand planning with respect to where it lives within the current structure. Allocation is a subset of merchandising. As a result, the entire retail supply chain is incredibly fragmented and doesn’t ever join up to any great effect. While we were in a steady-state world, the way things worked was effective enough to generate 2 percent year-over-year comparable store growth. But when there’s disruption that results in significant demand shifts, because there is no horizontalization to their approach, retailers are left without a proper understanding of the situation and the ways to meet the quickly evolving demand.”
