MHI Solutions

Global Trends

Industry Focus: Retail

Today’s retail industry has, and is, undergoing a fundamental shift. Five retail trends are particularly impacting the supply chains as well.

By Sandy Smith

There is no doubt that today’s retail industry has, and is, undergoing a fundamental shift. Trying to get one’s arms around these changes may feel a little like traveling through a mall, laden down with packages. Then again, that idea is so 1990s.

These changes, though, create new opportunities for forward-thinking retailers and others throughout the supply chain.

5 RETAIL TRENDS IMPACTING SUPPLY CHAINS:

1 | Growth of e-commerce and closure of bricks-and-mortar stores.

Anyone who reads the business news certainly has seen the headlines. Sears and Kmart closed more than 350 stores. JCPenney closed more than 150. Macy’s, Gap, Teavana, Gymboree, RadioShack and HHGregg all saw similar headlines.

At the same time, e-commerce is growing. The National Retail Federation estimated that online retail would increase by 8-12 percent in 2017—nearly triple the growth rate of the overall retail industry. It is now a $430 billion economy on its own. Forrester’s Online Retail Forecast predicts that e-commerce will account for 17 percent of retail sales by 2022—up from 13 percent in 2017.

So, what does all this mean? Retailers who focus on omnichannel—delivering products to customers seamlessly, both online and in bricks-and-mortar stores—are trying to navigate a new reality, according to Patrick Sedlak, principal with MHI member Sedlak Management Consultants.

Online remains a heavily seasonal market—and retailers are still trying to figure out how to deliver on next-day purchases. “Especially during peak season, we’re seeing some of our clients and others in the industry leveraging third party logistics or 3PL providers’ capabilities to take those peak volumes and level them,” Sedlak said. “That’s prompting some 3PLs to offer short-term contracts by month or weeks to go after that peak surge.”

One peak enablement concept that is gaining ground is the pop-up fulfillment center—a temporary distribution hub set up in a vacant property near a customer base. “You can set it up in an empty Kmart or similar space in a metropolitan area. The idea is to stock it, run it, empty it, and close it down in a short span of time. Closer proximity to the customer can shorten order cycle times and reduce delivery costs.”

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According to the recently released 2018 MHI Annual Industry Report, “Overcoming Barriers to NextGen Supply Chain Adoption,” eight out of ten survey respondents believe these supply chains will be the predominant model within just five years. However, the report found that the adoption of some of these technologies was slower than originally reported when MHI started the annual report in 2014. The report cites three top barriers to adoption of these technologies: 1. Making the business case for NextGen supply chain investments. 2. Tackling the supply chain skills gap and workforce shortage. 3. Building trust and security in digital, always-on supply chains. This issue of MHI Solutions focuses on the adoption of these digital solutions, from best practices in robotics and artificial intelligence to blockchain and innovations in last mile delivery.

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