Logistically Speaking: It's the Most Omni-Channeling Time of the Year

Dec. 11, 2013
Your supply chain better be more lively and quick than St. Nick himself or you'll be facing a blue Christmas.

The early returns on holiday shopping are in, and the reviews are decidedly mixed. On the one hand, online sales on Cyber Monday set a new record, to the tune of an estimated $2.3 billion. In fact, online sales over the five-day wraparound Thanksgiving weekend (which now, regrettably, includes Thanksgiving Day itself as one of the big shopping days) were up a brisk 16.5% over the same period last year, according to IBM's retail-tracker statistics (although I don't recall the execrable practice of rebranding Thanksgiving into Brown Thursday in 2012, so it's somewhat misleading to make a direct year-over-year comparison).

On the other hand, despite the surge in online sales, overall sales over the Thanksgiving weekend were actually down nearly 3% from 2012, based on analysis by the National Retail Federation. As The Wall Street Journal explains, holiday spending has become pretty much a zero-sum game. By opening their doors to shoppers on Thanksgiving Day this year, retailers basically curtailed interest in luring customers to brick-and-mortar stores on Black Friday. In fact, close to half (44%) of all Black Friday sales were online.

The biggest winner, no surprise, was online retail giant Amazon, whose sales were up 35% over the long weekend. Not only is Amazon winning the retail war, but the company also is clearly in the lead for generating the most logistics buzz. A couple weeks before Thanksgiving, for instance, Amazon accomplished what most observers thought was an impossibility—it made the United States Post Office relevant again, thanks to a deal that has the USPS making Sunday package deliveries in several major U.S. cities. The whole idea of Sunday deliveries, of course, plays right into Amazon's strategy of removing any obstacles that might cause a last-minute shopper to resist buying something over a weekend.

Then, in a master stroke of timing, Amazon CEO Jeff Bezos appeared on "60 Minutes" on Cyber Monday Eve to let the world know about his latest logistics innovation: delivery drones. And he's not talking about some off-in-the-distant-future scenario, either—Bezos is targeting 2015 as the date when Amazon hopes to roll out its drone delivery fleet. While that timeframe appears to be incredibly optimistic—the Federal Aviation Administration, for instance, will no doubt have a lot to say about whether or not commercial drones should be populating the nation's airspace—it's a clear sign that Amazon is pushing past same-day delivery capabilities and is aiming for, perhaps, same-hour deliveries.

We've been hearing a lot lately about omni-channel fulfillment, and it was one of the most frequently cited buzzwords at the recent Council of Supply Chain Management Professionals (CSCMP) annual conference in Denver. The idea that consumers are beginning to demand more selection, faster delivery and lower shipping costs is changing the very nature of retail-centric supply chain management, notes Vijay Ramachandran, senior retail programs manager with solutions provider Manhattan Associates. For better or worse, Amazon is now the gold standard by which other companies are being weighed, and as Ramachandran explains, every customer touchpoint—web, mobile, store, call center—must be seamlessly linked throughout a company's extended supply network. "And that means, your extended supply network must adapt quickly to your customer preferences," he emphasizes.

Admittedly, not every company has Amazon's technology and clout, but any company aspiring to be best-in-class at omni-channel distribution "needs to be able to share with and integrate data from their extended enterprises, with a fully integrated view of all customer information," says Bob Heaney, lead supply chain analyst with Aberdeen Group. "Balancing cost and customer experience will be the key to successfully exploiting the omni-channel challenge."

So to sum up, we're facing a perfect storm for supply chains: heightened customer expectations, tighter margins, cross-channel integration challenges, and a huge gap between front-end merchandising and back-end order fulfillment capabilities. And this storm is arriving just in time for the most frantic shopping month of the year. Is it any wonder, then, that "top logistics talent" and "proven supply chain technology" are at the top of many companies' Christmas lists this year?

Happy holidays!

Follow me on Twitter @supplychaindave.

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