Saturday, December 20, 2014

Are We Responding To The New Demands Of The Supply Chain?

A Supply Chain is only as strong as its weakest link.

The delays in internet deliveries has highlighted how the existing supply chain is not capable of responding to spikes in volume and demand. So what will be the future? Will we be any better at forecasting next year than we were this year? Will the lack of responsiveness actually choke back consumer demand to shop online? Will the cost of carriage rise sharply to mitigate the risks to carriage companies?

The growth of internet transactions across all goods is heavily dependent on an effective and responsive transport infrastructure and this is often at best reliant on forecastable traffic. If a parcel arrives late, or a consumer has to chase a delivery, they don’t blame the carrier, the blame the seller.
Over the last decade we have seen the huge growth in shorter delivery time slots. Once it was standard that we expected anything up to 28 days for our orders to reach us, now the standard is increasingly next day and at little cost. One of the companies that drove that hike is service expectations, Amazon, announced that it plans to give l hour delivery response to its customers in Manhattan. We can guarantee that this is just the start and there soon will be a big city offer across many cities. Will others respond – Yes. Have others built a complimentary offer such as Amazon’s Prime club – No.

If we look at the wider market we already have a growing shift in the UK from out of town large supermarket sheds to more community local convenience stores. This is being also driven by budget supermarkets such as Lidl and Aldi who have started to redefine bargain and low cost. We now see an increase in supermarket internet ordering and home delivery of bulk volume and dry goods, the stuff you don’t want to carry. This is being complimented by an increase shift of fresh, lighter everyday goods being bought locally and often from the supermarket’s own local convenience store. This is the start of a real shift in consumer buying and consuming habits which itself will help some High Streets more than cutting business rates and other government initiatives. This is further coupled with the offer to click and collect your goods from a local store or point.

The consumer is no longer thinking black and white, online or offline but starting to choose based on convenience and what suits their lifestyle. This in turn is increasing the risk of the supply chain having the wrong goods at the wrong place at the wrong time.

Amazon is exposing the holes in yesterday’s supply chain not just upstream but as always downstream. When they talk about drone delivery and technology the one thing you can be sure of is that they are serious.

What has this got to do with books, media and publishing? Well, just as some predicted a black and white answer saying that everything would go digital they have got it wrong and a hybrid market place is developing. Even music has seen the reemergence of vinyl. However, supply chains are finely balanced and must be cost effective from end to end and if not adjusted could seriously expose not just the validity of the channel but the goods themselves.

Today we have a physical book downstream supply chain which was built not for tomorrow but the last century and there is too much duplication, waste and inefficiency. In the late 90s we had the UK Supply Chain review and perhaps we now need to revisit this again.

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