Recent Industry Disruptions Challenge, Improve Retail Logistics and Supply Chain - WSI
American consumers are now living in an era of supply chain domination, in which we sometimes sacrifice privacy for convenience, or a few extra dollars for speed. Amazon drones drop small packages on our doorstep the same day. Meals arrive on urban doorsteps via tiny robots moments after placing the order. Naturally, the retail industry needs to adapt an agile and visible supply chain to fulfill these increasingly complex consumer requests.
In recent weeks, both Walmart and Amazon made waves in the retail industry, though for rather different reasons. Walmart recently narrowed its "must arrive by" date windows and will penalize suppliers, big or small, for early or late product arrival. The retail supply chain needs to up its game to meet these requirements; the penalties Walmart intends to inflict will sting. Similarly, Amazon's recent acquisition of Whole Foods may disrupt the retail industry in a profound way. The initial announcement caused a seismic shift in stock prices and provoked thousands of articles and blog posts about the implications of the deal for the supply chain, brick-and-mortar grocery stores, and small-to-medium-scale organic food producers.
Walmart's "Must Arrive By" Dates Set Tone for Retail Supply Chain
As consumers make their needs and desires more clearly heard, big-box retailers like Walmart seek to streamline supply chain operations—to have the right product on shelves when the consumer wants it. Walmart has turned to a more holistic approach to shopping, integrating its traditional big box retail locations with e-commerce. Walmart aims to stock shelves with product based on just-in-time, lean-minded operations.
And, the retail giant will now require its suppliers, from manufacturing giants like Unilever to smaller, local producers, to adhere to stringent delivery windows. When product arrives too early or too late at the designated Walmart location, suppliers will incur fines equal to 3 percent of the products' value. The effort to whip suppliers into shape, with the stated goal of 95% on-time, in-full deliveries, reveals Walmart's mission to compete directly with Amazon.
Walmart's rivalry with Amazon is also now reaching toward cleaning up its in-store workings, to provide consumers with a better shopping experience. Notably, after Amazon's acquisition of Whole Foods, Walmart announced its intention to provide customers with better-located and more aesthetically pleasing produce and fresh foods aisles. The compliance squeeze for Walmart's logistics providers and suppliers is getting ever-tighter. Suppliers and 3PLs that count on Walmart as a client would be wise to shape up and ship out—ideally within the allotted 24-hour window for on-time deliveries.
Amazon and Whole Foods: A Perfect Storm for Grocery Retail Disruption
News that Amazon intends to purchase Whole Foods in the second half of 2017 rocked the retail industry and stock market earlier this summer. The marriage of two retail powerhouses—one e-commerce and the other a traditional brick-and-mortar grocery store specializing in organic, locally produced and supplied grocery—inspired scads of think pieces and provoked lots of questions, from those for and against the merger.
Generally, economists see the deal as a positive one for both companies. Whole Foods has been reluctant to embrace digital supply chain technologies, and Amazon can help with that, given its position as a retailer that is really a data and supply chain company. Similarly, Whole Foods provides the cold-chain footprint close to end users that Amazon needs to become a major player in the grocery retail sector. Amazon's relationship with Sprouts Farmers Market and Whole Foods' relationship with Instacart could help expand fresh food delivery in an efficient manner. Or the two companies could leave those partnerships by the wayside and focus on enhancing their own complementary synergies in last-mile fresh food delivery.
The potential for cashier-free stores, as currently seen in Amazon's Seattle, Washington venture, could streamline the grocery-buying process for consumers nationwide. Plus, omni-channel presence would become even more convenient. Consider the possibility of Amazon lockers in every Whole Foods nationwide, to pick up online orders of pillowcases and books, along with your family's organic carrots and yogurt.
With these recent changes, the potential for retail supply chain disruption is great. 3PL providers must be cognizant of these changes in the supply chain and shifting compliance requirements to ensure continued profit and high performance for some of their biggest clients.