Supply Chain Commentary:
The Battle of Retail Titans

Tags: Logistics I.T., Retail, E-commerce, Retail Logistics, Supply Chain

Scott Deutsch is President, North America, Ehrhardt + Partners

Technology is ever-changing and recently, has been advancing at an extraordinary rate and providing accessible capital with highly valued stock prices. These prices are enabling acquisitions that have the ability to change the competitive landscape overnight. Exhibit A: Amazon’s deal with Whole Foods Market.

Many recent acquisitions can be attributed to companies with aggressive growth initiatives. Their business models and executive management attitudes foster an environment of willing and constant change, which has become the industry standard, not the exception.

Since Amazon introduced its Prime membership in 2005, consumer expectations have evolved. Buyers now expect fast, accurate, and convenient delivery, and businesses are rushing to meet their demands. In order to stay competitive in today’s market, companies must have not only have the speed and accuracy, but also the scale and number of distribution centers to compete.

While Amazon is the largest online retailer in the world, Walmart remains the largest retailer of any kind, and the two are battling it out to conquer the last mile of the supply chain. After looking at the numbers, it becomes apparent that this is not a battle of the grocery industry, but rather a battle of the distribution center.

Moving at Amazon Speed

So, why can’t established companies move as quickly as their Internet-born competitors? In part, because they are limited by their IT architecture. The architecture in traditional companies typically reflects a bygone era, when it was not necessary for companies to shift their business strategies, release new products and services, and incorporate new business processes at hyper speed.

Until this decade, mobile devices, the Internet of Things, and big data and analytics platforms weren’t crucial for competing in the marketplace. Companies did not have an acute need to continually infuse new IT-enabled business capabilities into their operations. Well, now they do.

In order to compete against digital-born companies, traditional companies need to adopt a much different approach to designing and managing enterprise architecture.

For a business to successfully navigate through these challenging times, three main ingredients must be in place:

  1. The business must have the financial model with performance metrics to support the rapidly changing and growing business.
  2. The business must develop an internal operating system and a dedicated team with authority to properly enable the growth initiative to thrive.
  3. The business must have technology platforms that provide the freedom to rapidly support the assimilation of the business change and to easily enable future market conditions and challenges.

Although Amazon is widely regarded as the future of retail, it is important not to disregard the other titan in the industry: Walmart.

Walmart is developing a program to leverage its existing stores and most importantly, its employees. In this game of scale, the company is set up nicely with 2.1 million employees worldwide and 1.4 million employees in the United States alone. Walmart is leveraging their scale, logistics advantage, and technology to win even greater market share.

In the battle of the retail titans, the importance of the distribution center continues to grow.