U.S. retail e-commerce sales grew 16 percent year-over-year to top $114 billion in the first quarter of 2018, rising three times faster than total retail sales, according to the U.S. Census Bureau. From T-shirt manufacturers to tire distributors, planning requirements are growing as businesses work to fill demand across digital and brick-and-mortar channels – before a competitor beats them to it. For example, one large tire manufacturer built its own private-label retail business to sell its products online, hoping to entice consumers away from shopping sites like Amazon.
In this omnichannel environment, the traditional distribution model no longer works. Businesses once took a just-in-time inventory approach, planning their supply chain activity around seasonal shifts and campaigns, and ensuring warehouses were stocked with goods. With e-commerce, however, companies can no longer afford to take the time to move items from warehouse to their final destination. When customers can purchase elsewhere with a few clicks on the screen, after all, why should they wait for your company to get their fulfillment in order?
As a result, just-in-time inventory is giving way to just-in-time delivery. Many deliveries are now bypassing the warehouse entirely, with businesses focused on last-mile delivery as they move goods to their final destination. That number of final destinations has also ballooned, creating additional complexity and cost.
To get the right products to market at the right time, the use of air freight has risen sharply. Air freight volumes jumped 9 percent in 2017, the strongest growth in demand in seven years, and have continued to climb an additional 5 percent through April of this year. That demand is creating higher prices, with rates rising 2.9 percent from January to February – a post-holiday period when rates typically decrease.
An Agile Approach to Omnichannel
Keeping up with the pressures of this environment – while also keeping costs in check – demands an agile supply chain. To get to market quickly, businesses need a solid understanding of their lead times and business requirements, complete visibility into shipment status, and the ability to respond fast when conditions change.
While sophisticated information systems are essential for powering omnichannel supply chains, true agility also requires a deep understanding of the logistics environment. By blending the right technology, processes and expertise, businesses can:
- Optimize each step of the supply chain journey. Rather than relying on information from carriers or vendors, establishing a centralized platform gives businesses real-time insight into each step of a shipment, from production to customer doorstep. By reviewing accurate historical averages on customer demand, production and shipping times, businesses can spot bottlenecks in their processes and opportunities for improvement. An exception-based system will also alert businesses immediately to delays, so they can adjust shipments on the fly.
- Respond quickly to changing conditions. When a big customer needs an order right away, businesses need to be able to make decisions instantaneously, like changing the mode of transport. With a technology-enabled system, businesses can quickly see where they have goods available and the best way to route them. This is also where an experienced supply chain partner adds value. A seasoned provider can leverage its network to help find capacity, or recommend creative solutions to transport items quicker. While the solution may involve changing modes or carriers, being flexible can help businesses deliver on time and on budget.
Few businesses are immune from the pressures of an on-demand marketplace. By establishing agile systems and processes, businesses can stay informed and ahead of the curve in a fast-moving environment.