In a previously published blog post on Customer-Centric Supply Chains, we discussed how retailers are shifting their networks to be centered more around their customers instead of focusing singularly on traditional efficiencies. Generally, this is achieved with a decentralized network comprised of a greater number of smaller, more agile fulfillment centers strategically placed near demand hotspots. The obvious benefit of this design is the ability to offer a superior eCommerce experience through fast and free delivery. By proactively placing inventory close to high density demand areas, retailers can get their products to their customer’s doors in a matter of hours at a very low cost, allowing them to remain relevant in today’s highly competitive eCommerce environment.
Interestingly, with the effects of the global pandemic, retailers are quickly realizing another compelling case for implementing this type of network – the mitigation of supply chain risks. By reducing their reliance on a few centralized DC’s and instead intelligently distributing their products across a wider range of localized fulfillment centers, retailers would have the ability to adapt to the two major types of disruptions we’ve seen from COVID-19 so far:
- Mandated Business Shutdowns
- Consumer Demand Fluctuations
First, retailers with multiple fulfillment facilities and strong network flexibility will be able to better react to the regional outbreaks and continue to meet their customers’ needs. As we have seen with the first wave of COVID-19, outbreak severity and local business operations policies can vary significantly between different regions. Retailers with the ability to continue filling orders from a variety of locations will have a much better chance of continuing to meet their customers’ needs even when some areas are on strict lockdown. With an increasingly inter-connected globe and the potential for future waves of COVID-19 outbreaks, it is hard to justify having the ability to fulfill orders from one or two DC’s as a sound business plan.
Along with the flexibility necessary to adapt around localized shutdowns, retailers must have the ability to leverage agile networks to react to the demand fluctuations accompanying disruptive events. The consumer demand changes (both down and up) from stay-at-home orders and individual health concerns are acute examples of why retailers need to be able to quickly adjust their networks to meet their customers’ needs. This ability is driven by having the physical infrastructure as well as the technology to analyze the demand changes and execute the moves.
While some retailers have been hesitant to commit to configuring their networks in a more customer-centric way, the added benefit of supply chain resiliency through disruption may be the final straw compelling them to adapt. At Bricz, we love to work with retailers in evaluating and executing this shift to help them meet the needs of as many customers as possible.
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Contributor: David Wiens, Supply Chain Consultant at Bricz