May 28, 2019

Retailers Meet Supply Chain Challenges with Technology

Written by Garret Weigel | Connected Facility, Supply Chain

The retail industry has seen radical swings in recent years, with the most significant being the invention of the internet, but more specifically, the birth of Amazon and other successful online retailers. To combat this change, retailers across the world have mobilized their operations to offer previously unreasonable shipping times for their products. McKinsey & Company summarizes this idea well:

 

"In our view, the answer is clear: the U.S. retail industry, far from being moribund, is experiencing disruption – and reinvention – at unprecedented speed. It’s not a story about the malaise of an entire sector but rather a tale of two worlds. A confluence of trends has changed the playing field, forcing retailers either to adapt and innovate or to suffer painful losses or imminent demise.”

 

Fleet Investment

To address these challenges, many retailers are bolstering their fleet, while others have had their own trucking fleets for some time. Some retailers, like Walmart, has had theirs since the 1970s. Their drivers make about 4,700 deliveries each year to Walmart and Sam's Club stores around the United States. Last year, Walmart hired 1,400 drivers; this year they're looking to hire even more.

 

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Others are also investing in their own truck fleets, such as Hormel Foods, Smithfield Foods, and Dollar General. They are now getting more control over their transportation costs with increased focus and implementation of better solutions to remain competitive in this changing landscape. Elsewhere, The Kellogg Company noted its supply chain as causing what they call “acute” cost pressures. Their strategy to reduce cost pressures, which they said were related to increasing costs associated with a driver shortage, was to leverage their supply chain partners and collaborate to find better solutions.

 

Improving Last-Mile Logistics

In addition to truck fleets, retailers still struggle with the last-mile logistics. At least that's what the firm Convey Inc. found when they surveyed some 230 retail supply chain professionals. According to their survey results, about 96% of the respondents considered customer experience as being important when measuring the last-mile supply chain performance. The survey found that current technology is still not solving the problems and pains of the customer experience. It noted that only 5% of respondents credited their current systems as supporting the efforts that would improve customer experiences.

 

Another 61% reported that existing systems do nothing at all to improve the customer experience. Tellingly, 89% of survey respondents said they aren't confident that they can balance customer experience demands against rising transportation costs and the dynamics of the transportation marketplace. Survey respondents expressed their concerns that part of this may be due the disparate nature of available transportation and logistics data. Much of data is siloed; connecting this data rapidly is their top challenge in the years ahead and an area that they plan to invest in.

 

Technology Improves Performance

McKinsey & Company posit that the retail grocery industry could greatly improve its warehouse operations with added technology, including robotics, the Internet of Things (IoT), and artificial intelligence (AI): "Up to half of in-store tasks could potentially be automated.” The complexity of such remarkable automation means that robots may answer shoppers’ questions while tacitly suggesting new and suitable products for a customer based on their purchasing history and taste. These robots can perform inventory tasks, track expiration dates, pick, pack, stock shelves – even clean up spills. Technology is advancing steadily to enable the most ordinary tasks – including the not so ordinary, like making sandwiches and salads.

 

In a release in Total Retail, Jon Slangerup, CEO of American Global Logistics, a supply chain logistics solutions provider, said, "supply chain technology is entering a renaissance as retailers look to digital tools to transform nearly every aspect of operations.” Slangerup says that three-quarters of retailers plan to go digital with their supply chains, hell bent on affording real-time visibility and responsiveness. This is a necessity, given the challenging and ever so competitive environment in which they operate.

 

He added that with pressure mounting on all sides, "a well-run supply chain is becoming indispensable for retail businesses. Continued tariffs are creating inventory volatility for retailers, prompting many to weigh the pros and cons of forward-buying goods to avoid impending price hikes. U.S. imports hit a record 21.6 million TEUs in 2018, with shippers rushing to get goods in hand before additional tariffs take effect."

 

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