Great quote in the June 28 WSJ.  Under increasing financial pressure to optimize inventory, Tom Shortt, Home Depot's Senior Vice President for Supply Chain said: "Get comfortable with days of inventory, not weeks."  Online buying habits and speedy fulfillment capabilty also allows big retailers to consolidate -- and shrink  -- stock for many products at the distribution level rather than across their retail network.

UPC and related technologies were originally conceived to support inventory tracking.  They have unveiled consumer behavior... for those willing to gently lift the veil.

Sundip Naik, vice president of supply chain, innovation and digital services at Capgemini, recently made this case to WWD:

It is ironic that technologies, to listen to digital customer sentiment, have never been so capable and full of opportunity, yet only a small percentage of companies are investing in these systems. 

Today, creating and maintaining a customer-centric supply chain is possible, but it requires the investment in listening technologies and building cross-functional teams to use the data. Data can also be leveraged in multiple facets to inform the planning process. Below are some key areas retailers should consider where data can be leveraged to help planning and process:

• Merchandising Planning: Analytics around customer behavior, market basket analysis, shopping cart analysis, cohort analysis and local purchase behavior analysis

• Assortment Planning: Consumes additional analytics around social listening, CRM and location in conjunction with merchandising and forecasting data

• Forecasting: Utilizes analytics around social, e-commerce, POS and market segmentation; Forecasting analytics can also provide early warning on products that are selling too fast and can provide obsolescence visibility

• Replenishment: Employs data to inform loss sales, percentage of orders fulfilled on time and real-time visibility of in-transit inventory using technologies such as GPS/RFID

Fundamental to making this shift is a matter of worldview. Does the "supply chain professional" focus on the chain... or does the "supply and demand executive" look at balancing relationships between push and pull... or does the "curator of demand" concentrate on serving constantly shifting flows?  Is it a canal you own and operate or a white water stream you are rafting? Control or creation? 

On June 26 forty-two years ago the first retail product with a Universal Product Code was sold.  The immediate consequences were modest and actually increased marginal costs across the supply chain.

By the 1990s UPC and related processes had informed a stream-lining of logistics that substantially reduced distribution costs among leading competitors.

In the last decade these tracking technologies have transformed commerce by facilitating the capture and communication of increasingly granular expressions of demand... and the revolution is really just beginning.

The intersection of tracking buying behavior with online -- and especially mobile -- retail creates the potential for mass customization of production, distribution, and delivery that will drive competition for the next generation.

Sears and Roebuck claimed the potential of telegraph and railway. Sam Walton recognized the potential of Interstate Highways and UPC-driven supply chains. Jeff Bezos is battling with Sam's successors and others to own digital demand.

Data streams from consumer behavior -- facilitated by UPC-related technologies -- now allow designers, manufacturers, and retailers to "hear" and target demand as never before.  Most are not listening.  These will die.  Those who listen are more likely to continue competing, even as the digital domain dramatically increases its decibel level.

Earlier today I provided a colleague with information on the 2016 Allianz Risk Barometer and realized that somehow I failed to link 6/26 to this year's version when it was released early this year.  Worth correcting now. Once again at the top of the risk continuum:

The impact of business interruption (incl. supply chain disruption), market developments (volatility, intensified competition and market stagnation)and cyber incidents are the major risks occupying the attention of companies at the start of 2016, according to the fifth annual Allianz Risk Barometer, which surveys over 800 risk managers and corporate insurance experts from more than 40 countries.

Many of the other risks queried against -- fire, cyberattack, natural disasters -- are experienced as supply chain disruption.

Writing in Modern Materials Handling, Bridget McCrea suggests that the demands of ecommerce are pushing major changes in processes, technology, and expectations related to the "last mile."

In the last thirty years line haul costs have fallen fast and far as a proportion of total costs.  In the next ten years last mile delivery will almost certainly follow.

The Council of Supply Chain Management Professionals (CSCMP) has released its 2016 State of Logistics Report.  According to Jeff Berman, writing at Logistics Management:

Among the report’s key conclusions is the logistics industry is entering a new era. The report predicts over the next decade, the logistics industry will face “disruptive forces,” including technology and operational constraints that threaten to fundamentally change the rules of the game. 

It may already be starting. Motor carriers are experiencing rate weaknesses, especially in the $278 billion truckload market, as temporary overcapacity has given shippers some pricing power. The report concluded that TL rates and demand for transportation are “soft, and continue to fall.” 

While this is occurring, the TL sector copes with nearly 100 percent driver turnover as the truck driver shortage continues. “Despite softening demand and slower rates, competition for drivers remains intense,” the report concludes. 

There are bright spots for asset providers, however. The $82.2 billion parcel and express sector, fueled by double-digit growth in B2C online commerce, continues to grow. Its main drivers are the “explosion” of B2C e-commerce and omni-channel retail, the report says.

The revolution in ecommerce depends on agile, adaptable, affordable surface transportation. Even as ecommerce explodes, many traditional delivery mechanisms are taking-water.  Because the traditional Truck Load providers are being replaced by non-traditional alternatives?  Because parcel delivery is the ecommerce center of gravity? Because LTL is rising? Because inventory costs are creeping up. Because speed-to-market is becoming more important than cost-saving?  Because [insert your best guess]?

Journal of Commerce reports on how the shipping industry is not adapting to the new demands of ecommerce.

The main challenge is in communications, he said. “Vendors are trying to get product from the port faster, but the communications layer is broken. They’re using a lot of work-arounds,” he said. For example, building inventory stockpiles inland and shuttling freight to stores. 

“They’re doing that because they can’t guarantee they’ll meet a must-arrive-by deadline,” McCandless said. The blind spot on inbound freight can be quite big. “We’re working with one large U.S. retailer that has a 30 percent black hole on inbound tracking,” McCandless said. 

Where are the communications connections broken? Pick your location. The transfer of a container from ship to shore is one data problem point: When will a container be unloaded, where will it be stacked and when can it be pulled by a drayage operator?
As a shipment heads inland, how are dray deliveries scheduled? Are shippers notified when a container has been deconsolidated and when a truckload or intermodal shipment has been dispatched? How are landside shipments tracked in-transit? How are delivery appointments scheduled at inland distribution centers? Are shippers alerted when a less-than-truckload shipment is dispatched to a store or factory? How is data transferred for last-mile deliveries? 

...“The industry needs to fundamentally rethink how it does business and not just try to out-Amazon Amazon,” said Richard Metzler, chief marketing officer at uShip, an online transportation marketplace. “All the retailers are struggling to figure out what to do against Amazon. There’s too much inventory from a cost and service point of view. It has to change.”

The article gives especially helpful attention to the tendency to assume that effective information-sharing requires something akin to Electronic Data Interchange (EDI).  More often all that's needed to facilitate hand-offs across demand and supply networks are a set of thin Application Program Interfaces (APIs).  EDI requires the intimacy -- and complications -- of sex.  API is more like a friendly kiss.

US ecommerce sales growth year-over-year provided by Internet Retailer

A recent DCVelocity story offers a very helpful overview of how ecommerce is reshaping Distribution Centers.  According to the authors:

Customer expectations and competition from e-commerce are driving widespread changes to warehousing and distribution operations. Direct-to-consumer growth is not only affecting retailers, but also manufacturers, wholesalers, and 3PLs. Warehouses and warehouse fulfillment operations are increasingly playing a greater role in commerce due to disintermediation and a reduction in retail sales through stores. On top of that, the relationship between retailers and upstream partners is changing, as wholesalers have increased their presence in retail and retailers have pushed direct-to-consumer responsibilities back onto their suppliers. As a result, warehouse footprints are expanding, responsiveness and adaptability have become more important, parcel shipping has grown, and labor efficiency remains as important as ever.

The authors make the case that many of the efficiencies supporting the last generation's supply-and-demand networks are counter-productive to the speed and specificity of ecommerce.  We may be making a turn from pallets to pieces.

When Jeff Bezos suggested Amazon would begin delivery-by-drone, some perceived a Machivellian effort to distract competitors with an ecommerce "space race".

But according to the Xinhua news agency;

Chinese online retailer JD.com has begun using drones for deliveries in the countryside of east China's Jiangsu Province. 

The service around Suqian City, hometown of JD.com's founder Liu Qiangdong, can more than halve the cost of delivery to less than 0.5 yuan (7.6 U.S. cents) per parcel, said Xiao Jun, vice president of JD.com. 

At a delivery depot in Suqian's Caoji township, two drones are capable of handling 200 parcels a day. The drones can each carry 10 to 15 kg of weight and fly 15 to 20 km at a speed of up to 54 km per hour, said Xiao. 

They can automatically load and unload goods and operate in moderate rain and wind with a speed of up to 38.5 km per hour.

Meanwhile Walmart is getting lots of positive attention for its plans to use drones to speed-up Distribution Center operations.  According to The Street:

Walmart appears to be taking the sensible route when it comes to integrating drone technology into its business operations. For one thing, the company plans to use only remote-controlled flyers, rather than self-autonomous. The first application for drone technology will be in taking inventory. It takes Walmart warehouse workers about one month to check what goods need to be restocked, according to Reuters.Using a frame rate of 30 per second, drone-mounted cameras will be able to accomplish this in a fraction of the time.

Amazon is reportedly looking to test use of drones for home delivery in Ireland.  Several tests are also underway to use drone delivery in disaster situations.

June 21 Update: New US regulations continue to restrict the use of drones for ecommerce deliveries.

The June 3 Walmart annual meeting spawned numerous news stories, features, and analyses on the giant retailer's competition with Amazon. This competition can be abstracted to encompass issues beyond the two players: virtual inventory versus customer-facing stock, digital space vs physical space, even between saving money or saving time.

As this blog has noted previously, it is certainly a competition related to how and by whom and from where demand is expressed.

But what all of these diverse angles on the competition share is a dependence on supply chain velocity, as in speed and direction and, I add, depth.  "Owning" demand is only meaningful to the extent demand can be effectively supplied.  Speed without precision targeting -- in terms of time and space -- is a waste of energy.  Careful curators can claim narrow niches, but mass customization requires more choice, not less.

On June 4 The Economist offered this overview:

Rather than driving to a big box, many Americans are shopping online instead. American e-commerce accounted for 10.4% of retail sales last year, up from 9.3% in 2014, according to Morgan Stanley, a bank. Amazon is the force behind this, with sales in North America rising by nearly 30% in 2015. The choice for bricks-and-mortar retailers is clear: evolve or decline. 

Amid this tumult Walmart remains a titan. It is not just the world’s biggest retailer but also its largest private employer and company, measured by revenue. Last year it raked in $482 billion. Walmart’s empire is global, but America is its particular dominion, accounting for three-quarters of its sales. And on home turf Walmart still towers above Amazon, accounting for 10.6% of America’s retail sales, more than twice Amazon’s share, according to Cowen, a financial-services firm.

Yet Amazon is still growing fast, and Walmart may be past its peak. In 2009 Walmart commanded 11.6% of American retail sales. By 2018 Cowen reckons its share will be stuck at 10.6%, whereas Amazon’s will have jumped.

Strategically -- perhaps culturally -- the long-time focus at Walmart has been supply chain efficiency to achieve price advantage. Walmart also began and continues as a mostly non-urban enterprise.

The origin of Amazon was a bit (but only a bit) less focused on price while very intent on convenience.  It was born mostly agnostic in terms of urban vs. non-urban, but in practice is especially favored by younger, more affluent, and more urban demographics.

Each enterprise started life by disrupting non-perishables:  Amazon with books, Walmart with clothing.  But in 1987-1988 Walmart entered the grocery sector.  Its success in grocery -- surprising many and confounding most grocery leaders -- revolutionized the US sector and set the foundation for the behemoth Walmart has since become.

I perceive that the real battle between Amazon and Walmart is just beginning and will likely be decided in terms of how each claims and protects grocery market share over the next ten years.

At its annual meeting Walmart announced it is, "partnering with Uber, Lyft and Deliv to begin testing last-mile grocery delivery services. Walmart expects to start the pilot program within the next two weeks in Denver and one additional, unspecified market. This is on top of a smaller pilot program in Miami between Sam's Club and Deliv, which started in March. That said, it's clear Walmart has figured out how it can leverage its massive brick-and-mortar footprint -- where 75 percent of the U.S. population lives within five miles of a Walmart store -- to bring down costs and expand online grocery services more rapidly than the rest."

By reconceiving Walmart Supercenters as ecommerce cross-docks, the retailer could offer much higher velocity grocery services without anything close to the same capital costs that will be necessary for Amazon or other new grocery sector entrants. By partnering with innovative transportation partners,Walmart can forward deploy its preexisting supply chain investments for a whole new customer base.  That's a big head start.

It does not solve some serious marketing problems.  It does not solve potential SKU proliferation problems.  It will not happen overnight or without headaches.  But if the existing Walmart supply chain can be adapted to effective on-demand delivery, this will complicate market entry for others and support Walmart's ability to extend ecommerce advantages beyond grocery.

Last fall Neil Ashe, Walmart's head of global ecommerce, told financial analysts, “Online retail is hard, grocery retail is really hard, so online grocery is of course really, really hard. We are uniquely positioned in this space, we've 15 years of experience from the U.K. and experience now over the last couple in the U.S.,” he said. “We know how to execute this and we have got the physical footprint to make it work.”