Retail supply chains need bold ideas, research analyst finds

Customers shopping inside a mall

LAKE BUENA VISTA, Fla. — What can retailers learn from some of the world’s leading risk-takers? That was the essence of Michael Dominy’s presentation on Wednesday at the Gartner Supply Chain Symposium/XPO 2022 conference at Walt Disney World’s Dolphin Resort.

Dominy, a research analyst with Gartner, said that now is the time for retailers to make moves to both improve and monetize their supply chains. He presented his case through a look at retailers around the world that have made what he called “bold moves” in transforming their operations and are reaping the benefit.

As to why now is the time, Dominy said support from the C-suite has never been greater. In a recent Gartner survey, 60% of respondents said their firms are increasing investment in the supply chain (up from less than 50% in 2019) and 82% are increasing investment in digital capabilities. Additionally, 74% expect their supply chains to drive social and environmental goals while 67% expect it to maintain margins. More than half — 58% — expect the supply chain to drive top-line profit.

So how are retailers doing this? Dominy identified several iconic brands that have invested in their supply chains and even rethought how supply chains work.

Cheaper is better

Levi’s, he said, took the bold step of offering $20 for same-day delivery of purchases during the pandemic by leveraging crowd-sourced delivery providers to fulfill ship-from-store orders. That fee, Dominy noted, was less than what the company charged for two-day delivery ($25) and much less than one-day delivery ($32).

Louis Vuitton is another company that took a risk. The company offered free delivery to anyone who chose its “green” delivery option. That slower delivery service reduced carbon emissions by 92%, Dominy noted, while satisfying demands of environmentally conscious consumers.

Clothing retailer H&M’s risk went outside the company’s own walls. The company made a play in the circular economy, launching its Rewear initiative to resell or recycle products. But, rather than just take in its own products, H&M accepts merchandise from any retailer into the program.

Dominy also highlighted Chinese fast-fashion brand Shein. Shein has quickly grown into a $15 billion global business thanks in large part to its rethinking of manufacturing and supply chain. The company utilizes a manufacturing process in China where it runs small manufacturing runs of items and then ships them via China Post or other local posts in various countries. While delivery can take a few weeks, the company has reduced its costs. At the same time, running smaller manufacturing runs on demand allows it to offer more products and consequently sell more items.

As a comparison, Dominy noted that as of July 6, 2021, Zara had 12,694 items for sale on its website, H&M had 14,350, and Shein had 547,316.

Supply chain as a service

Other companies are turning to monetizing their supply chains.

American Eagle Outfitters (AEO) is one of those. In 2021, the company acquired Quiet Logistics, which handled last-mile delivery logistics for retailers. In addition to bringing that capability in-house, AEO is able to offer other retailers logistics services at a profit to themselves — supply chain as a service.

Dominy said companies that leverage their in-house supply chain expertise by offering it to other companies tend to have happy employees, which will drive new revenue streams and reduce turnover.

Looking at the examples, Dominy said it’s important to recognize a few things. First, faster delivery isn’t always the best delivery option. Second, more investment needs to be made in digitizing the supply chain and increasing automation. Third, environmental and social goals are only achievable when ecosystem collaboration is part of the process, and finally, the supply chain can serve as a moneymaker if companies adopt that approach.

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