Morphing retail supply chains

From the February 2023 print edition

Consumer behaviour, technology, globalization, environmental and social concerns, economic fluctuations, and more are among the challenges that companies face trying to serve consumers that are more demanding than ever.

Among organizations, 67 per cent consider meeting customer expectations for speed of delivery
a critical factor impacting the structure and flow of their supply chains over the next 12 to 18 months.

Lisa Fenton, CSCMP, is supply chain professional based in the Greater Toronto Area.

That’s according to a report from KPMG International, called The Supply Chain Trends Shaking Up 2023.
In the report, KPMG notes these key trends will need to be managed. Countries will be skeptical about cross-border trade cooperation. Cybersecurity will be a concern, while key material access will be in turmoil. Manufacturing footprints; retail and distribution supply chains are morphing and supply chain investments are accelerating. What outcomes could we expect if retail and distribution supply chains morph? Here are some of the possibilities:

  • Automation and data analytics could help to increase efficiencies;
  • Omnichannel retail and contactless delivery could help to improve customer experience;
  • Visibility could be improved through digital platforms and data analytics enabling decisions about stock levels, production, and logistics;
  • Focus on sustainability and environmental impact and improved working conditions;
  • More agility for retailers who reduce dependency on single location and diversify their supply chain while reducing supply chain disruption; and
  • Increased flexibility to demand and disruption while adapting to the latest trends and market conditions quicker and more effectively.

Why should companies be concerned about retail and distribution supply chains morphing? The following impacts are among the potential outcomes:
Consumer impact – Production, distribution and sales have a direct impact on prices and availability.

Business impact – Companies will need to adapt their supply chains to stay competitive and how they evolve will impact their ability to meet customer demands, reduce costs, and increase efficiency.

Environmental impact – Evolving supply chains affect carbon footprint, water usage, and waste.

Social impact – The direct impact of how goods are produced, distributed, and sold will have significant impact on the well being of workers and their communities.

Economic impact – As a significant part of the economy changes in the retail and distribution industry will have ripple effects throughout the economy.

Innovation impact – Embracing modern technologies and trends to identify new growth opportunities.

We are used to having so many choices in terms of availability and price. However, the COVID-19 pandemic changed our supply chains and our options. These options include:

  1. Buy online, pick up at store;
  2. Buy online, delivered to home or other location;
  3. In store purchase, delivery to home or other location;
  4. Drop ship from warehouse or manufacturing to store, home, or other location;
  5. Buy online, return at store or online; and
  6. Buy online, return online.

I recently experienced a new option: store-to-warehouse pick up. It was a hot summer day when we pulled off one of Canada’s busiest highways. I was dropping off our youngest son at the duplex where he would be living while attending university. My vehicle was full of clothes, toiletries, and his belongings, along with sleeping bags I had packed just in case we needed them.

Once unloaded, the priority was to get him a new mattress. This might seem like a simple-enough task in a large city with lots of retail stores within a half hour’s drive. Our criterion was to find a queen-size mattress in a box that didn’t cost a fortune and would fit in my trunk, as I have a small SUV. Our search started out fine but grew more frustrating as we went from store to store. No one had stock or, if they had stock, it was far more than what I was willing to pay.

We were running out of time and patience, but finally found a mattress in a box for a reasonable price at a major retailer. Unfortunately, they did not have the stock on site. We had to pay and then pick up the mattress at their warehouse which was closing within the next half hour. The warehouse was about 20 minutes away. We paid and made it to the warehouse, just in time.

While this aside illustrates at least one challenge that can arise in retail distribution, KPMG suggests some steps to better manage it going into 2023. For example, consider the future of your distribution and micro-fulfillment centre locations. As well, enhance and advance your e-commerce and omni-channels into true unified commerce process and technology. Review sourcing and supplier strategies to reduce risks, and consider implementing control tower visibility in a predictive environment, leveraging AI and ML.

It will be interesting to see what strategies companies adopt to get ahead of these trends and how it will affect customer experience.