The Forecast for an Agile Supply Chain and the Future of Retail
October 21, 2020
President of CaseStack Retail Supplier Solutions, Dan Sanker and Hub Group’s EVP of Account Management, Brian Meents sat down with Inbound Logistics to discuss the future of the supply chain industry and the keys to position your supply chain for continued success.
*Responses to each question are not in exact sequential order
Given everything that’s going on, what do you feel is the current state of the supply chain?
Brian Meents: Right now, the current state of the supply chain is evolving faster than ever. From a long-term perspective, I think we’re in the midst of this transition and evolution in the supply chain with consumer demand increasing. That drive towards efficiency and visibility is becoming more prominent than ever.
While this pandemic is near term, I think consumer spending habits are going to change for the long term. For us, it’s important that we’re staying up with those trends and providing our customers with the right solutions. From a technology investment perspective and from an M&A perspective, we’re very much looking at that and focusing on making the right investments to increase what we can bring to the market in terms of solutions.
Dan Sanker: You also have omnichannel supply chains becoming completely normal, where I don’t think that was the case five years ago. We’ve gotten to the point where companies and our clients have to take a look at data and determine what’s going to happen tomorrow as best as they can. Big data doesn’t replace human thought, but it augments what our abilities are. You’re also starting to see more AI and machine learning accelerating similarly, and we need all that now to be more predictive.
What has been your assessment on retailers adjusting to the current climate?
Dan Sanker: To some extent, I think retailers are moving forward more quickly with things they’ve been looking to build. Now, (the market) has really driven the point home that we have to build resilient supply chains that can handle the shocks…In the backend, there are all of these things that have to happen from replenishment to ordering to managing categories…and we (Hub Group) make sure the product is where the consumers want it at the lowest possible cost.
Brian Meents: Retailers are doing anything and everything to get product on the shelves and available for their customers – whether it be through brick and mortar or in distribution centers for E-Commerce availability. I’ve talked to several different retailers and right now they’re all saying their sales-to-inventory ratio has never been as low as it is now. The overall increase in demand from consumers and their disposable income going more towards household goods, I think this is a long-term trend. Retailers now have to solve this puzzle of where to put inventory to get it close to the consumer while also controlling cost. I think that is something that is, now more than ever, at the top of mind.
In terms of being an agile and resilient supply chain in the future, what do you think are some other keys customers should focus on?
Dan Sanker: You can’t really rely on this multi-faceted, multi-county, multi-region, supply chain. That doesn’t mean you can’t buy things from different countries to maximize profitability, it just means that when you look at a resilient supply chain, every component of everything should have a back-up plan. If you’re missing one small piece you can’t run the business.
If you’re a retailer, we saw the fact that it took about six months to get to the point where now you walk in and see an area of masks and sanitizer. It was mystifying that you couldn’t get those products for 6-7 months. Clearly, that’s an indication that, as a world, we didn’t have resilient, agile supply chains. We had low cost supply chains, which are critical. But there’s really not a reason why you can’t have a low-cost supply chain that’s not resilient. You just have to be very thoughtful in how you develop your supply chain so that if something fails, you have an alternative.
Brian Meents: I think that we go through cycles where demand is strong, and supply is tight and other times when demand isn’t as strong, and supply is plentiful. That creates a lot of ebbs and flows within purchasing behaviors. I think supply chain professionals are looking at how to balance those two going forward, so they don’t swing one way or another. I think that comes down to how they set up their transportation and distribution network. I think they have to become more creative. I think they have to work with (providers) who can supply more than just a single mode of transportation.
That’s where we’ve made a lot of our investments. How do we go to market as not just as an intermodal company or not just as a logistics company or not just as a brokerage provider? Rather, how do we go to market with all of those services and couple those with what our customers are doing. One of our biggest focuses has been how can we work with our retailers and customers to help map out what that supply chain should look like.
Some retailers like Walmart have invested in service like ‘click and collect’, how have those initiatives impacted Hub Group’s retail operations?
Dan Sanker: You have some consumers that may never go back to grocery shopping the way they used to do it. So, when you go up the supply chain, you go, “what do we have to do differently to make this all possible (to deliver)”. One of the things that recently came up is tightening windows to make sure products are on time and in full. Walmart had a recent announcement with a change to 98%, from 87%, On-Time In-Full (OTIF). So, we have to make sure inventory is always on time and have back up plans for things that might go wrong and use predictive analytics for what we’re seeing…It’s not something that’s unheard of but this one was accelerated and moved all of those trends forward.
Brian Meents: I think this is just the tip of the iceberg in terms of the trends we’re going to see and those expectations (to deliver) are higher than ever. By being able to develop a solution that gets product to market faster, you can’t do that unless you have that product staged and ready. And you can’t have it staged and ready without that enhanced visibility and technology that goes behind that. That’s where the money is being spent. Retailers are looking for that next best thing in how to best serve their customers and stand out from the competition, and technology, right now, is really the driver of that.
To listen to the full podcast, click here: http://bit.ly/HubGroup_IL_Podcast_101520