Since our inception as both a supply chain management industry analyst research firm and a Supply Chain Matters global-wide blog presence, we have produced and made available our annual predictions for industry and global supply chains.
The purpose of these predictions is to advise our clients and global-wide supply chain management teams as to what to anticipate in the coming year as well as areas to focus on in strategy and tactical direction, business process improvements and technology investments. These predictions and their implications become the basis of our continued research and consulting agenda in the coming year. Feedback we have received indicates that this report often serves as a reference for many of our clients and readers.
Over the coming three weeks, we will be highlighting select portions of our ten specific 2021 predictions for blog readers.
Prior published bogs detailing our individual 2021 predictions have included:
In this blog commentary we will highlight 2021 Prediction Four.
2021 Prediction Four: Omni-Channel Focused Processes and Customer Fulfillment Capabilities Now Essential to Business Growth
One of the most prominent customer fulfillment changes that occurred in 2020 was the profound shift among both consumers and businesses to online buying and goods delivery. As global populations were restricted to residences or working from home, and with concerns for personal safety, online and Omnichannel fulfillment became an essential need. Loren Padelford, Vice President at Shopify, Inc. told The Wall Street Journal in late December: “Covid has acted like a time machine: it brought 2030 to 2020. All those trends, where organizations thought they had more time, got rapidly accelerated.” Indeed, our interview in October 2020 with Thomas Epting, Director, Shopify Fulfillment Network indicated that the Ottawa based provider suddenly experienced five years of growth in five months as a result of the COVID-19 restrictions on businesses, requiring an all-out effort to support new customer needs.
Businesses large and small experienced significant pressures to offer products and services directly in online channels. Many businesses had little choice but to accelerate plans for added online customer fulfillment and real-time logistics capabilities and those that were able to pivot were able to both grow or sustain needed revenues. For some, it was a matter of survival, for others, it was a call to action.
Online platform providers such as Amazon, Walmart, Target, and Shopify experienced 3-5 years of expected scale in literally six months, and also had to quickly pivot to support such added volumes. Online marketplace Etsy reported that merchants on its platform sold upwards of 24 million face masks during the September quarter alone, garnering nearly $289 million in revenues.
Learnings were garnered in areas of parcel carrier relationships, overall network volume throughput and metering of capacity by working directly with sellers and marketing teams in attempts to smooth out online order volumes in planned promotions. Other areas of concern related to making more informed decisions relative to logistics and last-mile delivery processes.
As noted in Prediction Two, there is a growing consensus that online commerce capability was not only the savior of 2020, but a likely permanent shift toward online fulfillment not only in B2C but in B2B fulfillment dimensions. Market estimates at the end of 2020 indicate that Ecommerce will range from 17 percent to upwards of 20 percent of global retail sales. A published estimate from Group M calls for online spending to grow by low-double-digit percentages through the next six years, even after populations return to the notions of a “new normal.”
Businesses and supply chain teams that previously invested in abilities to support both digital transformation and online capabilities were indeed more prepared to pivot, but, in the coming year added focused efforts are essential to support business needs.
This requires a line-of-business and cross-functional focus that is closely aligned with parallel digital transformation initiatives addressed in our Prediction Two. A further realization in planning for the year 2021 is a watchful monitoring of business relationships with online retail provider Amazon, and a very keen eye on what is sure to be continued escalation in overall logistics and last-mile transportation costs related to online business.
For 2021 and beyond, assessing which products and their associated supply and fulfillment networks are positioned for either traditional or online selling and fulfillment channels requires added thinking.
It will include transitioning for the notions of product design for supply chain, to product design for online channels, including physical design and packaging needs, or channel postponement driven product fulfillment. For food and consumer goods manufacturers, the lessons learned in 2020 were that products sold in high-volume wholesale distribution sales channels could not be readily altered for individual customer online buying needs. While both channels will remain, the balancing of capabilities in a flexible and seamless Omni-channel set of capabilities requires a re-thinking.
An ongoing determinant in this area will be one of continuous assessment whether to develop internally or outsource forms of inventory management, customer fulfillment and last mile fulfillment capabilities to an online retail platform provider. There are building concerns related to Amazon’s current and future relationship with hosted sellers as both a partner and a potential competitor.
There is further increased visibility and awareness relative to Amazon’s aggressive tactics in directly competing with its most popular hosted online sellers by offering Amazon private labeled products that are remarkably similar in design and functionality but at a lower cost. The online provider has complete control for monitoring or adjusting search results for certain products or categories. There is increased evidence that on the online platform provider has been directly targeting key competitors such as online home furnishings provider Wayfair and small and medium business focused online platform provider Shopify. Regarding the latter, The Wall Street Journal reported that small retailers hosted by this online platform recorded upwards of $5.1 billion in online Black Friday sales while small third-party sellers on Amazon garnered $4.8 billion in revenues.
The provider has increasingly been offering its own logistics and last-mile fulfillment capabilities to hosted sellers in Fulfilled by Amazon, but that comes with concerns related to seller positioning, volume quotas and other Amazon determinants that have implications for product revenue and margin impacts.
For more in-depth perspectives and commentary related to Amazon’s current and future strategies related to hosted sellers and online fulfillment, we suggest readers listen to our Supply Chain Matters recorded podcast with noted Amazon expert, Jason Boyce, where topics are discussed in more detail.
This specific area requires a reassessment or rethinking of the overall near and long-term supply chain technology strategy, one of Cloud based technology that best brings together an interconnected network of synchronized planning, multi-tier supply network visibility, and more real-time, synchronized customer fulfillment execution.
Customer fulfillment will have to be defined in a broader Omni-channel perspective with context to traditional selling, wholesaling or E-commerce process and decision-making capabilities. Such definitions are not as separate and distinct processes, but
setting a goal of shared inventory management, supply visibility and customer fulfillment.
Control and access to end-customer data remains an overriding concern and will increasingly lead to the offering of online merchandise in an “Amazon plus” strategy, providing the option of alternative online outlets for products including directly owned and controlled platforms.
In assessing enabling technology to supplement Omni-channel customer fulfillment, focus on market offerings that pre-integrate various technologies such as artificial intelligence and machine learning, advanced analytics, Internet of Things enablement, among other technologies.
We join others in predicting that both Amazon and China based Alibaba will come under increased scrutiny from various global and domestic regulators regarding overly aggressive or monopolistic competitive practices focused on hosted sellers or online competitors.
In November 2020, the European Commission declared that Amazon broke European antitrust rules by using independent sellers’ data for its own benefit. Further announced was a second formal investigation into the company’s e-commerce processes. In October 2020, a U.S. Congressional Subcommittee concluded a 16-month investigation and accused the online provider of exerting “monopoly power” over sellers on its web site. Regulators in India have clamped down on Amazon for the past two years. Such scrutiny and formal investigations will continue in this coming year, perhaps with consequences. We agree with some Amazon watchers that the online provider will either cutback or suspend its private labeling initiatives in the coming year to appease increased regulatory scrutiny.
Similarly, in late 2020, China’s regulatory agencies launched an anti-monopoly investigation against Alibaba, that country’s largest online retail platform provider. Also under investigation is online financial services provider Ant Group, a financial affiliate of Alibaba, founded by tech entrepreneur Jack Ma. According to various reports, Alibaba is suspected of punishing sellers who offer their products on competitive rival platform provider JD.com.
Obtaining a Copy
Our Ferrari Consulting and Research Group Advisory Report– 2021 Predictions for Industry and Global Supply Chains is now available for complimentary downloading with our Research Center. Readers can obtain a complete copy by providing some basic registration information.
In our next posting in our 2021 Predictions series, we will highlight Prediction Three- The Need for Augmented Resiliency in Global Supply Network Strategies.
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