Speed joined by flexibility, efficiency as supply chain keys, retailers told

Speed is becoming an increasingly important attribute of successful retail supply chains in these days of growing e-commerce, but agility, flexibility, efficiency, cost-effectiveness and even social responsibility can be just as vital. That recurring message reverberated throughout the Retail Industry Leaders Association’s Retail Supply Chain Conference, held Feb. 12-15 in Orlando. Setting a need-for-speed tone in introductory remarks, Jim Gehr, president of North America retail at DHL Supply Chain, title sponsor for the 1,800-plus-attendee RILA gathering, was among the many speakers who noted that the consumer cry for swift delivery has accelerated. “Market pressures continue to challenge retail supply chains,” Gehr said, adding that, while one still occasionally hears about two-day shipping, “Now, it’s all about same-day shipping, same-day delivery and even two-hour delivery.” Wal-Mart Stores Inc.’s executive vice president for logistics, Chris Sultemeier, said social responsibility and sustainability initiatives can be profitable in addition to conscientious. “Doing things right has a great ROI,” Sultemeier said, referring to return on investment. He cited the 11,700-store No. 1 global retailer’s effort to deploy a more environmentally friendly truck fleet as an example, noting that, upon achieving a 10-year goal of doubling truck fleet efficiency in 2015, Wal-Mart was bringing related savings of $5 billion to its bottom line. “Doing what’s right for the environment and doing what’s right for business go hand-in-hand,” the Wal-Mart executive said.

Abhinav Shukla, chief operating officer of True Value Co., said his 4,500-retailer, $5.5 billion-a-year hardware cooperative has added efficiencies to its delivery fleet by teaming with truck rental giant Ryder System Inc. While numerous executives said they have difficulty making money on e-sales, Shukla said e-commerce can be profitable if done right, commenting, “Supply chain is a vital but often-overlooked element of e-commerce.”

In a panel discussion, three Wall Street retail industry analysts concurred that speed is imperative but by no means the only crucial trait of thriving supply chains. “The more you can diversify your supply chain, the better,” said Jing Wang, research associate with Fung Global Retail & Technology, adding that, while quality and customer service remain important, the secret to retail industry success is developing a supply chain that is efficient, agile and cost-effective. Paul Trussell, director of apparel, retail and broadlines equity research at Deutsche Bank AG, interjected, “We want to see companies getting faster, but we know speed isn’t everything.

“The supply chain is the longer-term opportunity for margin enhancement, faster inventory turn and markdown optimization,” Trussell said, opining that agility and flexibility have perhaps eclipsed speed as most desirous characteristics. “The supply chain is really what we view as the source of connecting the customer in a better manner.” Matt McClintock, senior retail analyst at Barclays Investment Bank, said that the term “supply chain” was seldom if ever uttered in quarterly corporate earnings calls of a decade ago, but now, maybe because of the rise in e-commerce, it is always a significant part of financial discussions. “If you’re not in stock, you’ve lost a customer,” McClintock said, referring to physical stores. “The Internet is almost always in stock.” The Port of Long Beach’s chief commercial officer, Noel Hacegaba, one of many speakers in a proliferation of off-the-record sessions, went on the record to share his view along such lines, telling the American Journal of Transportation, “It’s all about speed, fluidity and efficiency.” To make that happen at the Port of Long Beach, which combines with the neighboring Port of Los Angeles to form the No. 1 U.S. import gateway, more on-dock rail capabilities are being added, marine terminals are increasingly capable of handling mega-containerships and appointment systems are being implemented to ease truck congestion, with appointment systems already in place at nine of the 13 Long Beach marine terminals.

In a session featuring a trio of supply chain executives of big retailers, agreement was reached that data can be a key to unlocking supply chain efficiencies. Mike Graham, senior vice president for supply chain and manufacturing at 225-store grocery and discount retailer Meijer Inc., said it is imperative that data be utilized in analyzing business and supply chains, saying that some retailers are getting between 20 percent and 30 percent more capacity out of the same buildings by using analytics. Graham added that Meijer, which keeps its stores, each as large as 200,000 square feet, open on a 24/7 basis, aims to “service our customer any way they want,” including through making stores function more as distribution centers in efforts to bring inventory as close as possible to the consumer. Petco Holdings Inc.’s vice president for logistics, Paul Minor, said the 1,500-store pet supply chain is increasing looking to analytics as it seeks to fulfill customer demands across all channels, including via ship-from-store and pickup-at-store means. He added that about the only thing Petco sells that does not run through its distribution centers is its live animal inventory. CVS Health’s senior vice president of logistics, Ron Link, said ship-from-store has been aggressively rolled out at his 9,700-store pharmacy chain, although, after data analysis, it has been determined that such service can be efficiently accomplished nationwide via shipments from only a fraction of those stores.

The three panelists also expressed woes about possible negative impacts of regulations. Link said CVS has had to enhance flexibility following the 2013 signing of the Drug Supply Chain Security Act, while Petco’s Minor said potential measures such as the Trump administration’s proposed border adjustment tax, which would slap a levy of as much as 20 percent on imported goods, create a “chaos of the unknown.” Meijer’s Graham said of proposed import taxes and other Trump plans, “We’ve put a pencil to it, and it would be a significant, significant hit to the bottom line… where it almost would wipe out profit.” Graham nonetheless added that countermeasures such as moving manufacturing from one country to another may be deployed, commenting, “I think we’ll all adjust, no matter what it is.”

Melissa Greenwell, executive vice president and chief operating officer of The Finish Line Inc., whose role at the 660-store athletic footwear and apparel retailer includes overseeing the supply chain, used the RILA forum to advocate for more gender-balanced leadership of companies and their supply chains. Greenwell said that, while women make up 51 percent of the U.S. population, only 20 percent of people in supply chain director and vice president positions are female, and she made a case for women offering nonmale skill sets – featuring attributes from creativity to problem-solving – that have been proven to enhance bottom-line performance.