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Impact on Supply chain due to E-Commerce growth

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By Balakrishnan Chettythody, Senior Engineering Director, Supply Chain Technology Group, Lowe’s India

“Customer is King” (or more appropriately a Queen) is a common axiom that we hear from businesses. Digital Commerce has fructified this dream by providing services and products that customers need round-the-clock.. This is how any royalty would expect to be treated, and customers deserve no less. These heightened expectations to meet customer needs through few clicks and fulfillment in a matter of hours has thrown a set of interesting imperatives to operations like Supply Chain.

The traditional supply chain that has primarily operated behind the scenes serving physical stores that at best can service a few thousand people, are now directly dealing with millions of customers and delivering products at their doorsteps. Driver partners and delivery agents have had to transform themselves to become ambassadors and and the face of an organization and portals to source precious customer feedback.

As more and more retailers have geared themselves to meet same and next day deliveries,real-time inventory positions across the network extending from manufacturers to distributors to retailers have become indispensable for running the operations. Customer order modifications are routine matters on most eCommerce sites. These trigger complex logistical operations to source and transport the products very often from different locations in a matter of hours. This tracking of inventory is not limited within the supply chain network. Customers now anticipate frequent notifications that tracks real time order fulfillment. These updates can be as recurrent as every few minutes as the delivery van gets closer to their homes.

Many of the supply chain’s fundamental change due to the online shopping revolution have occurred in warehousing management. It is no longer fathomable that thousands of products to be either received or dispatched every minute in the distribution centers to be managed without automated picking and put away operations. With increased product movement and significant variance in demand across product SKUs, different product flow patterns have to be employed within the warehouses to manage the picking and packing operations efficiently.

Many retailers have had to relook at the space management on both, a macro and micro level within and outside DCs. On one end of the spectrum, with endless aisles of products online, warehouse operators have had to squeeze every inch of real estate within their existing facilities.  Starting up new DCs is very capital intensive and are therefore not the most appropriate first choice. Many large box retailers have also experimented with how the store backrooms can serve as mini DCs, giving them the advantage of extra storage and providing options of efficient last-mile delivery.

One increasing trend that is being recognized due to short lead times available for retailers to meet customer promise is the inability of large centralized DCs to fulfill these expectations. This development has led to the emergence of a federated network of large and small warehouses that optimize competing needs of speedy delivery, adequate storage capacity, and sustainable transportation costs.

Predicting demand where products can become viral in an instant or merchandise can go out of fashion overnight is something the industry is still grappling with. The sophistication of algorithms that previously were largely limited to weather patterns, seasonal events, and planned promotions, now include social media trends, happenings in adjacent markets, and tracking what market influencers are focused on. These volatile market conditions have led to the field of demand forecasting ripe with possibilities, and we are likely to hear more in the coming years of significant advancements.

As the complexity of running modern supply chains increases, both small and large retailers rely on their partner ecosystems to improve reach, augment capacity, or manage spikes and troughs. Systems and processes need to be geared for seamless integration across several organizations. The elasticity of managing capacity has to be akin to how resources in cloud computing work. Warehousing as a Service or Transportation as a service will start becoming common and mainstream. A powerful combination of technology platforms and robust operational processes will continue to support the exponential shift towards a multi-channel shopping experience.

As e-commerce growth continues, a well-lubricated Supply Chain will have to play a decisive role in ensuring that customers are provided a high quality of service and ensuring that these operations are both financially and environmentally sustainable.

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