A supply chain revolution is coming as we’re entering a time in which retailers who can react quickly and adapt their supply chain strategy accordingly will realize greater opportunities for growing sales and remaining relevant in the face of Amazon for years to come.
Retail supply and demand finally meet
Today, the retail supply chain (whether it be brick and mortar, online only, or hybrid) is represented by warehoused inventory—which is reliant on predicting demand and a product-push supply chain. However, basic laws of economics dictate that supply and demand, freed of external forces, will find balance.
And true to form, increased demand from e-commerce has fostered advances in supply-side technology that now enable inventory visibility and optimization.
In other words, the elimination of the geographic constraints on demand is leading to the removal of the geographic barriers of supply with distributed inventory and advanced supply chain strategies.
Think about that for a moment. We are on the cusp of experiencing a world in which distributed inventory is the norm and not the exception. It is setting the stage for “The Opportunity,” because retailers that aggressively embrace this new model early will be in a strong position to compete with Amazon using the exact same strategies Amazon uses to propel their unrivaled growth, a strategy which had until now been mostly unavailable to retailers.
The opportunity in adapting the retail supply chain
Lets look at this more closely, what changes by adapting distributed inventory? The answer is two fold.
First, a retailer’s product assortment can be greatly expanded so they can offer a complete selection of SKUs and variances in their category. And, importantly, those SKUs can be offered through all of the retailer’s channels not just confined to one or two channels. Second, they do this with out warehouse and transportation cost, freeing up capital to invest elsewhere.
Now, the opportunity on hand is that the largest retailers make up less than 30% of total retail sales, leaving lots of chances to win market share.
Furthermore, most large retailers are still anticipating that it will be two to four years before they are capable of executing on this cross-channel or third-party distributed inventory strategy. This lag in response opens up an opportunity for those retail organizations that are capable of embracing change to gain an early-mover advantage.
However the same systems and processes that support the traditional retail supply chain are actually holding most retailers back from being able to respond to the new distributed inventory opportunities.
Why? Because these traditional retail systems are fundamentally built with the idea that they will all be part of the same organization.
Becoming a leader in the new paradigm
So how does a retailer break through these barriers and adapt their supply chain to the changing retail landscape? How do you turn all of the risks of drop shipping and expanded product assortment into weapons your organization can use to win new customers?
Retailers need to take a realistic look at their current infrastructure and business processes concerning their ability to integrate across both applications and organizations throughout their supply chain.
