Return-to-School Period Will Test Retailers and 3PLs
Retailers and their logistics partners are having to find ways to navigate through uncertainty in a way that they can take advantage of whatever demand there is while keeping costs down, all at a time when the pandemic is already placing significant strain on their operations and sales.
In many ways, the return-to-school shopping period is an important dress rehearsal for the upcoming peak season. Consumer behavior during the peak season is difficult enough to predict in “ordinary” times.
I would characterize it as something that is 70% “science” and 30% “crystal ball.” With the coronavirus, this equation has been inverted.
The retail industry was already being disrupted by online shopping. We have seen a significant increase in e-commerce during the pandemic – and companies that have had an online or omnichannel offering have been much better positioned to maintain operations and weather the storm – but the extent to which it has accelerated the trend toward online shopping is still unclear.
It is also extremely difficult to discern what appetite consumers will have in the current economic environment to spend their money on discretionary items in the holiday season. As we see with school supplies, the impact of the pandemic is creating short-term swings and shifts in buying habits and channels, and also in the categories that consumers are favoring.
Acing the Back-to-School Test
In this environment, our advice to retailers is to build as much flexibility and responsiveness as you possibly can into your supply chain.
Work with logistics providers that can add in the necessary capacity and infrastructure at short notice to support fluctuations in your volumes. Partnerships with the right business partner that can enable the right solution and technology can help solidify the capability and flexibility you need.
For example, we have already seen the significant impact collaborative robots have in increasing labor productivity, allowing operations to scale capacity up or down at short notice. Regardless of short-term changes in consumer behavior, it is already clear that choice is important to customers, so retailers need to be ensuring that they are offering multiple channels to market and different service levels (from next-day to deferred delivery) at different price points.
This means that retailers also need to closely analyze their distribution and retail networks and identify both how widely their fulfilment centers are distributed and which modes of transport are optimal to meet their different service levels (also taking into account contingencies in case of disruption).
Data will be hugely important. Real-time visibility on your inventory at a piece level and on flows and disruptions throughout warehousing and transportation networks will be imperative.
With such a deficit of certainty, any understanding that retailers can build on buying trends and demand shifts will be a significant source of competitive advantage. To this effect, it is important that retailers be open to sharing as much data as they can with their supply chain partners.
In this context, we also believe that consumer habits over the return to school – a topic that is being felt intensely by the majority of households across the United States – will provide meaningful insights that retailers and third-party logistics providers can use to refine their preparations.
By leveraging the learnings from the next few weeks, we can jointly understand better how to manage the uncertainty that prevails today and be ready for arguably the most critical peak season we have seen to date.