Tomorrow’s Supply Chain: Five steps to the future of fulfillment

COVID-19 has changed retail for good. As consumers adapted their lifestyles and spending habits to accommodate lockdown restrictions, e-commerce sales skyrocketed worldwide.  

At the same time, consumers revised their expectations around delivery. Today, they expect enhanced speed and convenience, along with greater transparency around orders, pick-up, and delivery. After becoming acquainted with these services, people are less understanding when firms fail to meet their requirements.

In response, brands have upgraded their capabilities at pace. Up to nine in 10 retailers offer buy-online-pick-up-in-store (BOPIS), reserve-in-store, ship-to-store, ship-from-store, mobile app purchasing and home delivery. As a result, some have suffered a hit to their profits even while orders for home-delivery surge.

The challenge for retailers is that consumer expectations for omnichannel continue to evolve, and competitive differentiation is becoming harder to achieve. To truly meet customer needs and to do so profitably, brands are looking to provide omnichannel flexibility and scalability at the local level. But this, in effect, means rethinking fulfillment from start to finish.

Resetting an established supply chain strategy is no small undertaking. So, how should retailers proceed?  

Step One: Learn from the Future
Retailers have access to rafts of data they did not possess even five years ago. As organizations fundamentally rethink ways of doing business that deliver growth, focusing on historical data to inform the future has been challenged. 

To make decisions faster, organizations now need to use analytics and artificial intelligence to spot, help them understand future demand, and therefore where they should locate, design, and build fulfillment centers, store networks and inventories. 

Advanced and predictive analytics, using internal and third-party data sources, are key to forecasting demand, the impact of changing customer behaviors, and shifting market dynamics at a local level.

Step Two: Reconfigure the network 
The future of fulfillment lies in leveraging the growing number of distribution centers, micro-fulfillment centers, partial dark stores, dark stores and more.

Retailers are trying to understand how to configure these networks in such a way to meet customer demand while maintaining profitability. There will be no one-size-fits-all solution, with a variety of set-ups required to handle different volumes, order patterns and service requirements. 

But the right mix of nodes – and an innovative approach to how different facilities can be used – can underpin a much broader and more compelling range of customer promises than retailers in the past could even imagine.

Step Three: Update inventory management
Tomorrow’s inventory will be powered by analytics solutions that model consumers’ probable spending patterns, depending on their profile, to ensure retailers have the inventory they need for rapid fulfillment. 

Without such tools in place, retailers will struggle to understand where to place inventory across their network of facilities. By contrast, retailers that can anticipate the levels of stocking required in each node, will be well-placed to improve sell-through, reduce split shipments, increase turnover speed, and improve their sustainability performance.

Step four: Reimagine delivery and the last mile 
As e-commerce continues to grow, retailers will increasingly become more imaginative about delivery, particularly in the context of the rising carbon emissions created by an extensive fleet of delivery vehicles.

Intriguing concepts are emerging. Some retailers are focusing on gig economy delivery services, or even setting up their own “mini gig economy” operations in-house with staff who make deliveries in their local areas. 

Greener transport solutions are also an area of interest. Multi-tenant fulfillment hubs are popping up in underused urban spaces. And customers themselves can even be part of the solution if given the right incentives and if retailers can offer more convenient pick-up options.

Final Step: Partner up 
Retailers are embracing an ecosystem approach, working with a broader range of suppliers than ever before, and thinking more creatively about what they might offer. 

Partnerships span areas including on-demand warehousing and new options for transportation and last-mile delivery. Technology providers also have a key role to play, developing specialist solutions such as order management systems and carrier management tools.

The goal is to exploit the expertise of niche players to secure new capabilities without the time and investment it takes to build solutions from scratch. Choosing the right partners is crucial – particularly given the growing visibility of the supply chain to customers – but retailers are open to a range of options. Some are even teaming up with other retailers for mutual benefit.

These five steps do not offer a one-time solution to omnichannel fulfillment. Retailers need to constantly revisit their approach, to optimize their networks and processes as new opportunities and challengers emerge. 

But time is short. Consumers may have been prepared to forgive disappointments at the height of the pandemic, when they recognized the general strain on brands and their workforces, but they are quick to lose sympathy. As the post-pandemic world grows nearer, leading retailers are on the charge. Meeting customer demand with local fulfillment is key.

Jill Standish is the senior managing director for Accenture’s Global Retail Consulting Practice, responsible for the business strategy and ongoing development and execution of strategy for clients.

Sean Whitehouse leads Accenture’s Retail Supply Chain and Store Operations Capability, and has been an experienced strategic advisor to retail executives for the last 20-plus years.