Executive Briefings

Developing the Supply Chain in E-Commerce Era

Retail has an $800bn problem, according to research firm IHL Group. That is the collective cost of inventory distortion in out-of-stocks and overstocks among retailers today, and it could increase same-store sales by 9.2 percent if completely fixed.

While the internet has eased merchandising constraints by enabling retailers to sell to consumers anywhere in the world, there are still significant geographic constraints on the logistics and fulfillment of supply. Even with distribution centers across the country and the planet, supply can still be restricted because of the costs that come with buying and holding inventory, not to mention building and maintaining these facilities.

Despite these widespread inefficiencies, the priority for many has revolved instead around consumer-facing omni-channel retailing. It is important to provide flexibility to purchase your items at a store, on the Web or on mobile devices, but a plethora of platforms fail to do much good if you have supply chain woes that prevent quick and efficient order fulfillment.

For the brave new ecommerce-enabled and -disrupted world, supply-side innovation is the key to winning. What makes Amazon and Walmart ecommerce and brick-and-mortar giants, respectively, is that they have supreme control over their supply chains. Although we tend to primarily view them as marketplaces, the reality is that they are massive supply pools first, with the unparalleled ability and coordination to oversee virtually billions of dollars of inventory.

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While the internet has eased merchandising constraints by enabling retailers to sell to consumers anywhere in the world, there are still significant geographic constraints on the logistics and fulfillment of supply. Even with distribution centers across the country and the planet, supply can still be restricted because of the costs that come with buying and holding inventory, not to mention building and maintaining these facilities.

Despite these widespread inefficiencies, the priority for many has revolved instead around consumer-facing omni-channel retailing. It is important to provide flexibility to purchase your items at a store, on the Web or on mobile devices, but a plethora of platforms fail to do much good if you have supply chain woes that prevent quick and efficient order fulfillment.

For the brave new ecommerce-enabled and -disrupted world, supply-side innovation is the key to winning. What makes Amazon and Walmart ecommerce and brick-and-mortar giants, respectively, is that they have supreme control over their supply chains. Although we tend to primarily view them as marketplaces, the reality is that they are massive supply pools first, with the unparalleled ability and coordination to oversee virtually billions of dollars of inventory.

Read Full Article