How supply chains can support the shopper experience
This new department challenges the authors of selected Journal of Business Logistics (JBL) articles to explain the real-world implications of their academic research.
The Journal of Business Logistics (JBL), published by the Council of Supply Chain Management Professionals (CSCMP), is recognized as one of the leading academic supply chain journals in the world. But sometimes it may be hard for practitioners to see how the research published in its pages applies to what they do on a day-to-day basis. To help bridge that gap, CSCMP's Supply Chain Quarterly will challenge the authors of selected JBL articles to explain the real-world implications of their academic research. Here, then, is the first installment of our new series, "Research for the Real World."
THE ARTICLE
"What is the Right Supply Chain for Your Shopper? Exploring the Shopper Service Ecosystem," by Hannah J. Stolze, Wheaton College; Diane A. Mollenkopf, University of Tennessee; and Daniel J. Flint, University of Tennessee, published in the June 2016 issue of the Journal of Business Logistics.
THE UPSHOT
Supply chain managers are accustomed to thinking about and designing their companies' supply chains to match either the products they are delivering or the needs of the end consumer of the final product. But those models may not reflect how goods and services are actually bought in an omnichannel retailing environment. Many times the person who buys a product is not the end consumer; accordingly, supply chain managers miss opportunities if they focus only on the end consumer and not on the shopping experience where the purchase decision is actually made. In the marketing realm, this is leading to a new concept called "shopper marketing."
The authors argue that because the shopper's experience is the point at which marketing and the supply chain meet, retail supply chains should be capable of supporting marketing efforts that are aimed at shoppers. Toward that end, the article identifies three types of shoppers (goal shopper, bargain shopper, and social shopper) and matches them with three types of supply chain (efficient, coordinated, and responsive).
Stolze, the lead author, spoke with Supply Chain Quarterly about what this concept could mean for practitioners.
What issues were you seeking to explore through this research?
In 1997 there was a pivotal article in the Harvard Business Review that asked, "What is the right supply chain for your products?" It was very product-focused and followed a very inventory-intensive mindset [in regard to] supply chain management. The article focused on making sure that you had the right product at the right place in the right amount at the right time—what's known as "the four Rs." So, if your product was a can of soup, it was a very functional product, and that automatically placed you in the "efficient supply chain" category. And if your product was a high-end fashion item that was purchased less frequently, then you were automatically placed in the "responsive supply chain" category.
The challenge is that as marketing shifts, the understanding of the shopper shifts, and that shift also needs to occur in the supply chain. To execute [retail] supply chain strategy, it's not so much about having the right supply chain for the product. It's about what occurs at the point of purchase—the mindset of what will the product look like in the retail environment—because the job of the supply chain is really delivering the product to the shopper, not the end consumer.
Consumers are still part of the supply chain, of course; you can't leave them out, but the most important part of the supply chain is when the person makes the purchase. There are different reasons people buy soup, and you need to be able to meet the needs of these different types of shoppers.
Briefly, what are the implications of this research for supply chain practitioners?
It requires a shift in their thinking from the traditional focus on product, inventory, and consumers to the person who will be shopping in the retail store or online in the retail environment. There needs to be a shift to thinking instead about the dynamics of place.
In marketing, the focus is on product, price, promotion, and place. Logistics is all about the "place" piece. Is the product in the right place so it is available when the shopper wants to buy it? Do you have enough product in the right quantity and assortment? Now it's not just about having the right quantity of product, it's also about how the shopper wants to experience the product. So if it's around the time of the Super Bowl that might mean specialized packaging—maybe a shift to larger bags with pictures of football. Or it might mean putting the product in a different place in the store so that it is easier for shoppers to find.
How will (or should) your findings change the way retail supply chain executives think about their supply chains?
Historically, companies have had one supply chain strategy. Either it's been "we are focused on breakbulk closer to the customer" or "we are very fast and responsive." Now they need multiple supply chains, not just for different products but also for the same product.
Let's go back to the soup example. Some people just want to buy a can or package of soup off the store shelf, some customers want to buy soup from a soup bar, some want to buy it bundled with a coupon for bread and American cheese so they can make a grilled-cheese sandwich to go with the soup. How you package and deliver soup to market is different depending on whether it is being delivered to the shelf, being ladled into a container at a bar, or bundled with a grilled-cheese promotion.
Could this also reshape how supply chain organizations interact with marketing organizations?
It is definitely going to increase the need for cross-functional interaction. For example, currently the insights into "who the shopper is" reside in marketing, and the responsibility for executing on those insights resides with logistics and operations. So now, even more than in the past, the two are going to have to talk to one another.
Marketing needs to understand what is possible in the market. And operations and logistics need to understand why they are [designing different supply chains for different shoppers], because it does increase costs, and if they don't know why they are doing it, they are not going to execute it properly.
What is the most important takeaway from your article for practitioners?
I think the big idea is really this concept of an ecosystem focused on the shopper. Traditionally, companies have focused their attention on their own products and their own goals. Now there is more of a need for marketing and supply chain to have a common goal-setting environment for the planning of promotions and the execution of them.
TO READ THE FULL ARTICLE ...
As a member benefit, CSCMP members can access articles in the Journal of Business Logistics at no charge. To read this and other JBL articles, go to CSCMP's website and choose Journal of Business Logistics under the "Develop" tab. Log in to your account and click on the secure link to the Wiley Online Library.
Ron Marotta of Yusen Logistics listens to Rick DiMaio of Ace Hardware talk about the steps Ace is taking to keep its store stocked after Hurricane Helene and during the East and Gulf Coast Port Strike.
The East and Gulf Coast port strike was the top discussion point during a panel discussion of shippers and logistics providers at the Council of Supply Chain Management Professionals (CSCMP) annual EDGE Conference this morning. The session, which was supposed to be focused on providing an update to CSCMP’s “2024 State of Logistics Report,” quickly shifted to addressing the effect that the strike by nearly 50,000 dockworker at 36 ports in the Eastern half of the U.S. could have on supply chains.
“The seriousness of this action cannot to be taken lightly,” said Ron Marotta, vice president of the freight forwarder and supply chain service provider Yusen Logistics (America). “It has not happened since 1977. Our lives depend on sustaining a smooth global supply chain.”
Marotta warned that for every day that the ports were not open, it would take four to five days to recover from the impact. One added concern is how the port closures would affect recovery efforts for Hurricane Helene. “There’s a huge amount of item that would normally be replenished by importers and retailers,” Marotta said.
Rick DiMaio, executive vice president and chief supply chain officer, for Ace Hardware Corp., commented that the hardware retail cooperative was doing okay for now keeping stores in stock, although he did expect the company would be “chasing generators for awhile.” “But in this recovery phase [from the hurricane], we certainly don’t need a strike right now,” he said.
The port closure will also have a knock-on effect on other transportation modes. For example, Andy Moses, senior vice president of sales and solutions for logistics services provider Penske Logistics, expects to see some companies turn to air freight as a result of the strike. This will, in turn, cause air freight capacity to tighten up and rates to rise. Furthermore, the longer the ports are closed, the more likely inflation is to rise again, according to Moses.
Nor will the effects of the strike stop at the U.S. border, according to Marotta. Many Caribbean Island nations depend on food import from the U.S. that move through East Coast ports. Additionally, some medical supplies typically are exported through the ports to Europe.
On a positive note, however, many companies took actions earlier in the year to prepare themselves for a potential strike. Ammie McAsey, senior vice president of customer distribution experience for the pharmaceutical distributor McKesson, said the pharmaceutical industry has brought in enough extra inventory that there will not be a short-term impact on the U.S. health care system due to the strike.
Government intervention?
Marotta hopes that the U.S. government takes the step of invoking the Taft-Hartley Act to stop the strike and send the International Longshoremen’s Association (ILA) and the port management group, United States Maritime Alliance (USMX) back to the negotiation table. In 2002, for example, President George W. Bush used the Taft-Hartley Act to end an 11-day lockout of union workers at West Coast ports. President Joe Biden, however, told reporters on Sunday that he would not do this.
“I hope that cooler heads prevail and that the executive branch realizes that it’s not just a labor issue, it’s also a humanitarian issue,” Marotta said.
Confronted with the closed ports, most companies can either route their imports to standard East Coast destinations and wait for the strike to clear, or else re-route those containers to West Coast sites, incurring a three week delay for extra sailing time plus another week required to truck those goods back east, Ron said in an interview at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
However, Uber Freight says its latest platform updates offer a series of mitigation options, including alternative routings, pre-booked allocation and volume during peak season, and providing daily visibility reports on shipments impacted by routings via U.S. east and gulf coast ports. And Ron said the company can also leverage its pool of some 2.3 million truck drivers who have downloaded its smartphone app, targeting them with freight hauling opportunities in the affected regions by pricing those loads “appropriately” through its surge-pricing model.
“If this [strike] continues a month, we will see severe disruptions,” Ron said. “So we can offer them alternatives. We say, if one door is closed, we can open another door? But even with that, there are no magic solutions.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.
CSCMP EDGE attendees gathered Tuesday afternoon for an update and outlook on the truckload (TL) market, which is on the upswing following the longest down cycle in recorded history. Kevin Adamik of RXO (formerly Coyote Logistics), offered an overview of truckload market cycles, highlighting major trends from the recent freight recession and providing an update on where the TL cycle is now.
EDGE 2024, sponsored by the Council of Supply Chain Management Professionals (CSCMP), is taking place this week in Nashville.
Citing data from the Coyote Curve index (which measures year-over-year changes in spot market rates) and other sources, Adamik outlined the dynamics of the TL market. He explained that the last cycle—which lasted from about 2019 to 2024—was longer than the typical three to four-year market cycle, marked by volatile conditions spurred by the Covid-19 pandemic. That cycle is behind us now, he said, adding that the market has reached equilibrium and is headed toward an inflationary environment.
Adamik also told attendees that he expects the new TL cycle to be marked by far less volatility, with a return to more typical conditions. And he offered a slate of supply and demand trends to note as the industry moves into the new cycle.
Supply trends include:
Carrier operating authorities are declining;
Employment in the trucking industry is declining;
Private fleets have expanded, but the expansion has stopped;
Truckload orders are falling.
Demand trends include:
Consumer spending is stable, but is still more service-centric and less goods-intensive;
After a steep decline, imports are on the rise;
Freight volumes have been sluggish but are showing signs of life.
CSCMP EDGE runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Resort.
The relationship between shippers and third-party logistics services providers (3PLs) is at the core of successful supply chain management—so getting that relationship right is vital. A panel of industry experts from both sides of the aisle weighed in on what it takes to create strong 3PL/shipper partnerships on day two of the CSCMP EDGE conference, being held this week in Nashville.
Trust, empathy, and transparency ranked high on the list of key elements required for success in all aspects of the partnership, but there are some specifics for each step of the journey. The panel recommended a handful of actions that should take place early on, including:
Establish relationships.
For 3PLs, understand and get to the heart of the shipper’s data.
Also for 3PLs: Understand the shipper’s reason for outsourcing to a 3PL, along with the shipper’s ultimate goals.
Understand company cultures and be sure they align.
Nurture long-term relationships with good communication.
For shippers, be transparent so that the 3PL fully understands your business.
And there are also some “non-negotiables” when it comes to managing the relationship:
3PLs must demonstrate their commitment to engaging with the shipper’s personnel.
3PLs must also demonstrate their commitment to process discipline, continuous improvement, and innovation.
Shippers should ensure that they understand the 3PL’s demonstrated implementation capabilities—ask to visit established clients.
Trust—which takes longer to establish than both sides may expect.
EDGE 2024 is sponsored by the Council of Supply Chain Management Professionals (CSCMP) and runs through Wednesday, October 2, at the Gaylord Opryland Resort & Convention Center in Nashville.