August 2014 | Commentary | Checking In

The New Retail: Three Legs to Stand On

Tags: Inventory Management, Logistics I.T., Retail, E-commerce

Keith Biondo is the publisher of Inbound Logistics magazine.

Did you ever read a magazine or newspaper article and get the feeling that something was missing? It happened to me when I read several business press articles touting e-commerce as the savior of retailers.

That "something's missing" feeling bothered me as I read various vague descriptions of how e-commerce is the driving force behind the "New Retail." Those supply chain observers went a little buzzworthy on us about what is truly fueling the retail revolution.

E-commerce? Sure, it gets all the glory, but it's just the first leg of what I call the three-legged stool of the New Retail.

The second leg is logistics technology—including visibility, ERP, and inventory control—that enables linking back to suppliers and forward to consumer demand signals (e-commerce or not), effectively matching demand to supply. E-commerce alone won't drive the ability to serve customers, or provide same-day delivery.

E-commerce alone also won't seamlessly link inventory with sales. That requires the crucial third leg: great logistics execution, a capability without which this tripartite approach fails. Yes, e-commerce's impact on retail operations is significant. But we can't ignore the yeoman's work carriers and logistics partners who execute your supply chain strategy.

One recent example of how important the logistics IT and execution legs are to retail operations comes courtesy of Target Corporation. The retailer's new Canada operations lost nearly $1 billion in 2013. Reason given? Supply chain failure in inventory control technology, which created a nightmare for 147 Canadian stores served by three Canadian distribution centers. Target is calling its solution a supply chain "reset" of both its broken logistics IT and execution legs.

Find another example of retailers successfully blending all three legs of the stool in Merrill Douglas' article, It's a Store! It's a Site! It's a Warehouse!, and see how e-commerce helped transform Dale Pro Audio and Wrigleyville Sports. But when serving real products to customers when they want them, these retailers needed strong IT connections to vendors, as well as the ability to execute. The New Retail cannot stand without all three legs fueling its flexibility, responsiveness, and dynamism.

Those who overemphasize the importance of the e-commerce leg of the stool in driving the New Retail seem to ignore—or at least minimize—your contribution, the impact of your skillset, and the human element of transportation and logistics management performed by skilled professionals.

You know what? I'm getting that "something's missing" feeling from this article, too. It's missing a fourth leg: You.