Black Friday isn't What it Used to Be…E-Commerce has Changed the Landscape

As retailers prepare for “Black Friday”, what used to be the “biggest shopping day of the year” (the day after Thanksgiving), expectations are actually rather low.  A reporter on CNN noted that it was a “non-event”, and that even “Cyber Monday” (the Monday after Thanksgiving weekend) is no longer a big deal.  The fact is, that e-commerce and omni-channel retailing, has forever changed the Christmas shopping experience for consumers.

E-commerce has also made life much more difficult for retailers.  E-commerce orders are typified by higher volume but smaller picked orders delivered to homes . To complicate this, reverse logistics capabilities must be established to handle the high volume of exchanges, returns, and damaged goods as more websites cater to a guaranteed zero cost of return policy.

To cope with this environment, companies are seeking to outsource more technology design, inventory management, working capital investments, and planning execution to other partners in the supply chain. Experts have warned that driving too much responsibility up the supply chain can result in significant risk and loss of control. Companies risk losing control of the channel if suppliers decide to integrate downstream towards customers.  In such cases, the total cost of ownership (including such things as transportation and inventory management) become opaque to the OEM, and the enterprise can lose leverage to reduce costs if they hand over an entire product subsystem to a single supplier. This trend is offset by the other view in industry that logistics is all about cost savings, and is often not recognized by many as a source of value-added capability.

An offshoot of this trend is the bundling of product and logistics solutions. Customers are requiring solutions to problems that they face, which means being able to not just have the physical movement of the product, but a combination of packaging, distribution, tracking, and responsiveness to requirements. This has been the case in the automotive industry for years, where JIT deliveries on an hourly basis based on real-time EDI transmissions is the norm. Increasingly, organizations don’t wish to manage inventory, and are requiring suppliers to provide vendor-managed inventory, real-time responsiveness to inventory tracking software, and technical support. Many companies are unable to provide these capabilities on their own, and are partnering with solution providers to develop combined product-service supply chain solutions.

Of note is the fact that customer expectations and networked economies are particularly important in many developed countries. US managers also ranked global complexity as an increasing trend. Another interesting point was the difference in Brazilian executive responses. Here, the main logistics trend is similarly customer expectations, but a myriad of other trends are also perceived as critical, including cost pressure, talent, networked economies, and unreliable infrastructure. We also found that emerging technology was higher ranked by high-tech industries in a study we conducted in 2013.

As these shopping and logistics networks become more complicated, many of the companies we interviewed recognize that they cannot “do it alone”, but need to become experts at managing global relationships.   This is particularly true in regions where sales are only starting out, and in many cases, companies need to figure out the “pieces of the puzzle” and what it means to operate regionally and meet customer expectations in an e-commerce world. To do so, partnerships are key, particularly for importing into regions. Many countries have specific requirements for packaging, shipping, and other importation issues that require customization of logistics processes. Organizations need to develop specific packaging requirements inside these countries to meet government laws, and then set up processes to import products and customize to the local market. Shipping across borders has an impact on the effectiveness of the channel, and so organizations need to carefully choose distributors and selling locations. A supply chain strategy involves making decisions: How do you distribute? Into your own warehouse structure or another? And how many distributors do you select for the territory? Organizations are recognizing that they need to identify partners who can optimize and understand local legislation and conditions to effectively navigate this increasingly complex set of decisions.