Report finds that 70 percent of execs see supply chain costs continuing to rise in near future.
The pressure to provide the delivery options demanded by customers is putting pressure on retail supply chains, and nearly 60 percent of retail supply chain executives say that they believe it isn’t possible to fully recover fulfillment costs. Further, 70 percent say that the cost of fulfilling and delivering online orders erodes gross margins, according to the Seventh Annual State of the Retail Supply Chain report from the Retail Industry Leaders Association (RILA). The report was a joint project of Auburn University's Center for Supply Chain Innovation and RILA, in partnership with logistics research firm DC Velocity.
According to the report: “As retailers seek to find balance between omnichannel costs and revenue growth, they realize that the supply chain is the key to profitably serving customers. To achieve success, the supply chain team must continue to excel at its primary fulfillment role, figure out how to best utilize stores that were never designed for large scale fulfillment, and develop strong capabilities in areas previously managed by other groups. Supply chain success will enhance retailers' financial vitality and outlook.”
Consumer pressure has pushed the “fast or free” delivery options to new “fast and free” demands, which means that, for 70 percent of the retail supply chain executives surveyed by RILA, their costs will just keep going up for the foreseeable future.
"2017 is a banner year for the retail supply chain and this report provides a tremendous benchmarking opportunity for today's supply chain leaders," said Lisa LaBruno, senior vice president of retail operations for RILA. "As retailers focus on innovation and moving their supply chains into the future, this report provides the insight and tools to help prioritize investment and increase marketplace competition."
In order to create more efficient supply chain operations, RILA says that companies can employ supply chain analytics, leveraging blockchain data structures to provide visibility throughout the chain, and fulfillment centers in large urban areas (which have the customer and order density needed for cost-efficient omnichannel retailing).
"Adapting to the hyper-competitive landscape requires supply chain capabilities that attract customers and grow the business," noted Brian Gibson, executive director of Auburn University's Center for Supply Chain Innovation. "Supply chain executives must integrate operations across multiple channels, use analytics to drive supply chain decisions, and monetize supply chain capabilities. Our report provides extensive discussions of these initiatives."
To read a full copy of the report, click here.