One of the under-reported side effects of the push to omni-channel distribution is that it is making an already hectic peak season even, well, peakier. "The 14 weeks of peak season are like hair-on-fire," says Rick Jackson, executive vice president with Mast Global Logistics, the logistics arm of such major fashion retailers as Victoria's Secret, Bath & Body Works, The Limited and Pink, among others. With capacity constrained ever tighter and consumers holding off longer into the holiday season before making their purchases, "the peaks are spiking even higher than before," Jackson points out.
Omni-channel strategies were one of the main topics under discussion at the recent Council of Supply Chain Management Professionals conference (CSCMP 2014), held in San Antonio, Tex. While moderating a panel on the state of logistics outsourcing, I quickly found out why the topic is so popular: very few companies have actually figured out what an omni-channel supply chain looks like, let alone how one works.
According to the 2015 Third-Party Logistics Study, fully one-third of all respondents (nearly 800 manufacturers, retailers and 3PLs) say they're not currently prepared to handle omni-channel fulfillment. What's more, 50% say they're not testing new fulfillment strategies at this time, which if nothing else indicates that there's very little pressure on companies to become early adopters of omni-channel distribution, given the predominant "wait-and-see" attitude in the marketplace.
Of course, the downside is that consumers are hardly a patient bunch; if anything, the whole point of omni-channel is to respond more quickly to consumers' insatiable appetite for products delivered as quickly and as inexpensively as possible. What will likely happen is that the growing demand from consumers will push retailers to ask more from their 3PLs, who will eventually (if they haven't already) invest in omni-channel fulfillment solutions, says Shanton Wilcox, vice president of supply chain management with Capgemini Consulting. "These new solutions have the potential to alter the way existing 3PLs do business."
Robert Lieb, professor of supply chain management at Northeastern University, acknowledges that 3PLs will have to make "substantial investments" on behalf of their customers if they want full participation in the growth opportunities that will come in the future. "The e-commerce marketplace is very competitive, and companies such as Amazon have moved aggressively in providing logistics services for companies selling their products online." Indeed, for many major 3PLs, Amazon is not only a customer but also a competitor in the market for logistics services—a situation that will likely advance due to the scale of Amazon's logistics infrastructure investments.
In any event, accelerating customer interaction will be one of the major changes supply chain leaders will have to deal with in the coming years, particularly as digitization and mobility increase, observes Tim Foster, managing director, Asia-Pacific, with supply chain consulting firm Chainalytics. Supply chains will need to be rebuilt, Foster says, "to better reach and serve customers and create efficiencies. Offering the consumer choices will be critical to success," and omni-channel is certainly one of those choices.
Foster believes manufacturers and retailers will address this market transformation by eliminating non-value-adding activities within the supply chain. He cites the example of pharmaceutical distribution, where the traditional supply chain flow from manufacturer to wholesaler to retail pharmacy is being replaced by either a direct flow from manufacturer to retailer, or a loop with the 3PL in the center.
Omni-channel, however, is not the biggest challenge facing shippers or 3PLs; that dubious honor goes to a shortage of talent. In the afore-mentioned 2015 3PL Study, nearly two-thirds (62.6%) of respondents say it's difficult to find and attract talent. Some estimates suggest that 60 million people will leave or retire from the supply chain industry in 2014, but there are only 40 million people available to fill those positions.
Fortunately, companies are starting to take the omni-channel business model more seriously, and are looking at ways to optimize their 3PL supplier, notes Zack Deming, principal with Korn/Ferry International, a provider of talent consulting services. "Optimizing workforce management through the use of analytical planning tools can help prepare businesses for potential talent shortages."
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