Supply chain issues for online retailers will definitely be front and center in 2021. The reasons for this should be clear, but some e-commerce retailers continue to be slow to react. This isn’t surprising. Many of us are still shell-shocked by the barrage of blows 2020 inflicted on e-commerce generally and on most of us personally. Moreover, and despite some evidence of renewed optimism, the end isn’t in sight just yet.
Supply Chain Issues in 2021
To understand the major supply chain issues we see in 2021, we have to start with a basic realization: the last year or so has driven the evolution of online retail to a point that’s about five years beyond what we’d otherwise have expected. It’s also about five years ahead of retail’s supply chain evolution and systems development, and that’s giant, elephant-in-the-living-room sort of problem. Moreover, while industry-wide evolution is never a planned thing, the rate of change in e-commerce has meant less coherence for consumers and retailers alike. There’s now a broader range of diverse recent solutions for similar problems, and greater fragmentation in systems that really need greater cohesion and interdependence. At the same time, consumer expectations have become more subjective and more focused on speed of access and fulfilment than on any sense of brand or retailer loyalty consumers may feel. E-commerce retailers have no choice but to respond, but proactivity is better... Here are some of the supply-chain issues that should concern e-commerce retailers in 2021.
Evolutionary Change Raises (and Reacts to) Consumer Expectations
When consumers quickly develop higher expectations in terms of speed and choices for shipping and delivery, retailers’ agility becomes a huge issue. Adaptability and flexibility in supply chain response to demand aren’t just nice features for shoppers who choose to take advantage of them. They’re now indispensable. E-commerce retailers will be looking for more and better ways to improve their agility in these areas, and we think they’ll be pushing for greater integration of data and supply chain components on a global scale. It won’t happen overnight or all at once, but we think that e-commerce will require improvements to reduce fragmentation and improve efficiency and sustainability in the retail supply chain. The last year has taught that lesson to just about everyone, and the underlying issues are simply not going away soon.
Smaller Retailers: A Shrinking Population?
One indicator of the sheer chaos in retail over the past year or so is the number of permanent retail closures – an indicator no retailer can ignore. And no retailer was immune, as witness the number of retail heavyweights that fell. There will be more of the same in 2021. In fact, there will be larger, more resilient retailers who will see major opportunities to acquire more brands and expand their reach into new channels as smaller brands and retailers are forced to shutter or declare insolvency. Good for the large retailers. Not so good for smaller retailers, many of whom are already living daily with the threat of imminent failure. For consumers, who have become more aggressive in asserting their preferences and desires, the results are likely to be mixed. Clearly, we’re still at the stage at which the ability to diversify supply chains effectively and quickly is beyond many smaller retailers, whether e-commerce-based, traditional, or hybrid. The costs and logistics are simply beyond them, and are likely to remain so until global supply chain systems become less chaotic, more resilient, and more harmonized. Those e-commerce retailers who are the most vulnerable should be taking action in 2021 to rethink their networks in terms of their payment partners, their customer service commitments, and their ability to develop relationships with multiple robust suppliers.
Where’s My Stuff: Safety, Accessibility, Reliability, Speed
We can expect to continued expansion and refinement of shipping and delivery options, especially with a growing number of consumers who are willing to pay for expedited delivery. However, it’s not just a matter of speed. It’s also about “complete” delivery, with much talk of supply chains that provide“last mile” service to retailers and their customers. And there’s more. There will be growth and innovation in contactless payment and delivery for those who are concerned about health and hygiene. At the same time, the popularity of BOPIS (buy online, pick-up in store) will continue to grow. Recent developments in BOPIS techare said to improve inventory management to boost supply chain functioning. The new tech involves the use of RFID technology at the item level to allow retailers to see all stock accurately, in real time. All of this is great for consumers, and for retailers who are resilient enough to accept the challenges involved. However... These trends will apply to brick-and-mortar retailers who are already investing heavily in a new online presence to boost sales, enrich customer experience, and bring their brands into the 21st century. Some of these retailers will dedicate portions of their physical space as mini-fulfilment centers from which to manage the last mile. They will also apply to a growing number of e-commerce retailers who are creating physical sites for “click-and-collect” consumers and those who prefer the flexibility BOPIS provides. And they’ll all need to address the need for speed in finding viable, cost-effective solutions they can implement quickly and reliably. Those e-commerce retailers who are already weakened by critical supply chain issues may simply not be able to hold on long enough to get it done. Not without help.
Supply Chain Education & Management
Given the problems e-commerce retailers have had to address over the last 18 months, it’s not a surprise that supply chain management is getting more attention than in the past. The global supply chain mess and its implications for retailers and manufacturers are driving something of a rush in 2021 to find and hire supply chain experts with a grasp of the current situation’s complexities. You know the old saying about the availability of hens’ teeth, right? This isn’t a new issue. As far back as 2013, the Wall Street Journal published an article describing a graduate credential or degree in supply chain management as “The Hot New M.B.A.”We’re guessing there will be a spike in demand for qualified global supply chain experts in 2021 – but that’s no guarantee that they’ll have long-term fixes for what is, after all, a rapidly evolving set of problems, even if there’s enough expertise to go around. This will be an issue 2021 for retailers large and small. When you need reliable outside expertise or want to hire it for your in-house team, where will you look and who will you trust? After all, we’re talking about the kind of advice on which one “bets the farm.”
Instant Gratification, Rapid Returns, and the Reverse Supply Chain
Reverse logistics have always been a big deal for e-commerce, even when there wasn’t a terrible sense of urgency about them on the part of some retailers. Things have changed. We can expect to see continuing growth in 2021 – perhaps even exponential growth. E-commerce consumers have always had a strong interest in instant gratification. The ease of shopping and the speed of transactions have intensified that: the front end of the transaction happens quickly, and consumers have been demanding that fulfilment be quick as well. A great many consumers are willing to pay extra to make that happen. And now, they’re beginning to demand that returns also meet the requirements of instant gratification to the extent possible. But of course, we’re not just talking about returns. Reverse logistics cover a good deal more, and will be worth more than half a trillion dollars US in five years’ time. Consumers return more e-commerce products than traditionally purchased products, and speedy, free returns are the order of the day (at the very least). E-commerce retailers must look for ways to strengthen and harmonize their reverse logistics in 2021, and to add value through added options and services.
Keeping It Green: Sustainable Supply Chains in 2021
If we’re seeing accurately what’s coming, there’s going to be a movement for significant sustainability-driven change in key retail supply chain areas for 2021 and beyond. The drivers of these changes aren’t just consumers, though they were largely the thin edge of the wedge in the movement for eco-friendly e-commerce solutions. Now the drivers include legislators, activists, socially and scientifically aware corporate citizens, public interest groups, and international agencies.These entities have concluded, with justification, that climate change is real, and that certain products, practices, and procedures amount to ongoing ecological threats with serious social and economic implications. In 2021, entrepreneurs, investors, and regulators will be watching more intensely to see that organizations meet requirements for sound environmental and sustainability-driven practices and procedures. The retail industry – along with other sectors – will find itself charged with responsibility for rethinking and rebuilding supply chains as sustainable ecosystems that address problems of supply renewability and climate awareness. In other words, there will be an accelerating drive for “purpose-led procurement” in 2021. The initiatives driving this trend would be difficult to maintain under normal circumstances, but our circumstances have not yet returned to normal. There may be unforeseen supply chain disruptions through the year, and e-commerce retailers who haven’t taken steps to build eco-friendly resilience into their supply chains may face dire consequences (again).
And a special note...
We must also recognize that sustainability is no longer just about eco-friendliness. We think that in order to be sustainable, our supply chains must also recognize supplier diversity and acceptable corporate behavior. At the most obvious level, retailers and the brands they sell will be accountable to consumers, not merely in terms of sound and sustainable ecological practices and processes, but also with respect to supplier diversity, avoidance of modern slave labor usage, human rights protection, use of locally sourced materials and services, fair employment practices, and more. Those of us who have not learned that lesson in 2020 have not been paying attention, and will likely be called to account in 2021. If, in light of this information, some of us have rethink some of our supply chain practices and relationships, we should probably get on that right away... Some of these trends are alarming, and it’s on us as e-commerce retailers or service providers to take steps to protect and strengthen our enterprise supply chains as part of building greater resilience into our retail operations.
Next Steps: Supply Chain Action Plans for 2021
These aren’t universal prescriptions for ensuring your supply chain’s health in 2021 and beyond. They’re strategies you can adopt – steps you can take to build added resilience into your e-commerce operation (or your hybrid store). Some of them speak directly to supply chain issues, while some have more to do with marketing and immersive customer experience that impacts supply chain process.
- Rethink Relationships with Suppliers
It’s now March of 2021, and none of us should need reminding about the importance of our relationships with suppliers and logistics at every step in our supply chains. We think it’s important to consider your suppliers as collaborators in a joint enterprise. Our business health and success as e-commerce retailers is linked to theirs, so we shouldn’t be treating them as mostly anonymous service providers. We have interests in common, and we might want to consider aligning ourselves with specific suppliers as if we were partners in fact, with a joint mission that will profit both of us if it’s successful. Think about it:
- Partnership-like alignment reduces the potential for tension, miscommunication, or effort expended at cross-purposes.
- We can put in place joint control structures to enable success built on coordinated efforts, policies and milestone frameworks.
- We can create transparency and accountability to ensure that our supply chain relationship functions smoothly and problems reveal themselves quickly.
- We can coordinate systems and technology for maximum effectiveness and strong supply chain infrastructure.
It may be possible to have multiple relationships of this nature with key elements of our supply chain so that we diversify sourcing and build greater resilience in our operations.
2. Review Existing Policies and Practices for Sustainability and Functionality
There’s not much point in rebuilding a structure if the foundation on which we build has some rot in places. Neither supply chain policies and practices, nor any other business policy, should be allowed to remain static. The rate of change in e-commerce retail is too great, as is the speed of what we might call “contextual evolution.” We should all be reviewing and rebuilding our policies and adjusting our supply chain practices based on both first principles AND evolving industry-specific issues. In practical terms, this may mean going back to our respective mission statements. We may have to take a hard, wide-eyed look at ourselves and our consumers in terms of their current needs and desires. We may have to change our thinking about existing practices for ordering, stocking and inventory, control, customer service offerings, and more. We’ll certainly have to change our marketing initiatives and related resource allocations. And while we’re doing that, we should remember that the actual infrastructure choices and changes we’ll need to make depend on all that other stuff for validity and utility...
3. Review Our Existing E-Commerce Infrastructure: Time to Optimize
If we’re clear about our principles, policies, and best practices, we can make more intelligent and timely decisions about potential changes in our e-commerce infrastructure. Areas of change might include anything from website design and opportunities for immersive customer experience to updated brand stories and storytelling, payment and delivery options, reverse supply chain services, and more. They may even include “hybridizing” (yes, we sometimes make up our own words). Just as brick-and-mortar retailers are increasingly adding an online presence and functions to their business, some e-commerce retailers will see the benefits of physical locations – not for sales, but for localized fulfilment, returns, and immersive customer experience opportunities. After all, a physical location can now enable the use of digital kiosk technologies that may offer on-the-spot online transactions and automation for returns. It allows for contactless pick-up if properly implemented. It allows for the creation of immersive 3D digital displays and interactive product experiences that aren’t possible through an e-commerce website. The times are changing, and meaningful review of existing infrastructure may give us new opportunities to enrich relationships with our customers.
There’s no doubt that 2021 will be interesting, or that it will bring us its own ups and downs in terms of retail supply chain issues. The days of relative certainty with which most of us were familiar are gone. So is the complacency they tended to breed in too many of us. We were caught up in our daily business, and in wrestling with retail issues at a micro level. If we want our e-commerce businesses to survive and thrive, we’re going to have to think a little bigger in 2021.