Since the beginning of the COVID-19 outbreak, online sales have continued to surge, as many stores remain shuttered and consumers turn to online retail options to get their essential and non-essential items. According to Convey data, in April alone, shipping volume swelled by 54.4% year-over-year. Meanwhile, many retailers have had to quickly scale up their eCommerce channels, ensuring they have the means to quickly fulfill customer orders. To top things off, these retailers also face the obstacles of maintaining healthy workers, carrier capacity issues, which all result in slower fulfillment times for customers.
We interviewed Karl Siebrecht, Co-founder & CEO of the industry-leading, on-demand warehousing provider, Flexe. We wanted to understand how coronavirus (COVID-19) is causing supply chain disruption across retail, and how retailers can maintain resilient supply chains throughout and beyond the crisis.
In this interview, Karl provides valuable insight into how retailers can ‘run to the fire’ and develop creative solutions in response to COVID-19. Read the interview below.
Karl, tell us a little bit about you and your role at FLEXE.
As the Co-Founder and CEO of FLEXE, my primary focus is to ensure our teams are supported and well-positioned to take care of our retail customers and warehouse providers—no matter the circumstance. So that is true now, in response to COVID-19, and it was just as true in February before the world changed overnight. Our teams are super connected to our customers, providers, and each other, so on a daily basis I can pretty easily tap into where I can be the most helpful and jump in.
Professionally, my career has been diverse, but the common thread has been that each endeavor has been pretty niche: One of my majors in college was Russian, I became a diving officer in the U.S. Navy, which is a super small and competitive program, my first startup in Seattle was in adtech 20 years ago when it was an emerging category, and then I co-founded FLEXE, which is the first logistics technology company of its kind.
How do you see retail and supplier roles shifting as consumer expectations continue to increase?
For a really long time, commerce was retail-centric: Goods go to a place and then people have to go to that place to buy them. Everything centered around the store, or its equivalent. Then two things happened: The internet and Amazon.
From very early on, Amazon understood that to shift buying online, commerce had to focus on the customer: “Earth’s most customer-centric company.” The industry has spent years catching up and making the move to eCommerce. Well, COVID-19 just accelerated that move by years.
Consumer expectations were already high, and now they’re even higher. Retailer and supplier roles will shift to be more customer-centric, and we’re going to see that play out across functions, from marketing and promotions to fulfillment and delivery. The customer experience is front and center and the supply chain is ultimately what makes it all come together.
How do your customers think about creating a consistent last mile experience?
The last-mile experience is the eCommerce equivalent of providing a consistent and compelling in-store experience, both of which are incredibly important to the brand. In eCommerce, most businesses want to provide fast, free delivery to consumers. In retail, most businesses want to avoid out-of-stocks and empty shelves.
So, most of the conversations we have with our customers when it comes to the last mile are around warehouse network extension and optimization, and how to increase speed and drive down last-mile costs by getting inventory closer to customers. Oftentimes, that means creating a hybrid logistics network that has a combination of traditional fixed (leased) FCs and flexible, variable-cost only FCs so they can do this in an economically viable way.
With all of the supply chain disruption related to COVID-19, what’s the number one thing that retailers should be aware of? Do you have any advice to combat this?
In this industry, we are used to disruptions. The one constant is change, whether driven by evolving customer demands for faster delivery, seasonal swings, tariffs, weather, or any number of other unforeseeable events. COVID-19 is an extreme example of this. Most disruptions are constrained by time and space, but COVID-19 is worldwide, it’s simultaneously impacting both supply and demand, and it’s unclear when it or the subsequent recession will end.
I don’t give advice that I wouldn’t take, so here are a few things I’ve been keeping in mind:
- If you are able, take a step back and see where you can create optionality because that is one of the greatest assets in times of uncertainty.
- Only work with partners that will run to the fire with you.
- Clearly communicate. Always. Admit what you don’t know, and explain the “why” behind key decisions that impact employees, customers, and other constituencies.
What should retailers do now to prepare for upcoming supply shortages?
- This is a tough one, and I definitely don’t have a crystal ball for it. The reality is that we will see some supply shortages for some goods and services in some markets (PPE is a painful example), and over-supply with weak demand for some other goods and services (labor is a painful example given the extraordinarily high unemployment rate currently).
- Similar to the above, I’d try to create optionality wherever possible. Convert fixed investments to variable costs, find ways to become more agile in order to respond more quickly to changing market signals, etc.
- And, do all you can to communicate delays and shortages with consumers to help manage expectations.
What things have changed that you think will stick around once this is all behind us?
Most companies now realize that supply chain resiliency is a necessity instead of a luxury. This has been an emerging topic among some thought leaders and early adopters for a few years, but the magnitude of disruption caused by businesses’ inability to react quickly to this event has laid bare the costs of over-optimizing supply chains for efficiency while sacrificing agility.
I also believe a lot of those first-time online shoppers are now effectively the “late majority” of adopters, which broadens the demographic for eCommerce. eCommerce adoption has jumped ahead by something like 5 years in the past 12 weeks, and I don’t see it going backward much once things return to normal.
Some businesses will be forced to get creative and try new solutions they wouldn’t normally consider. I’m sure we’ll also see a lot of new innovative ideas born during this pandemic and economic downturn emerging on the other side of it. Times of crisis are always painful, and sometimes elucidating as well. The old saying “Necessity is the mother of invention” rings very true to me at this point.
About Karl Siebrecht, Co-founder & CEO of FLEXE
This ‘Ask Me Anything’ piece is the second blog in our partner series on supply chain resilience during and after the COVID-19 outbreak. Check out our first interview with Happy Returns, or check out the following pieces to learn more about supply chain disruption during this time:
- Our Parcel Network Pulse Dashboard pulls together our data of over 3 billion shipping events to help retailers identify where eCommerce fulfillment disruptions are happening.
- As COVID-19 impacts ripple across the supply chain, how should retailers communicate with consumers to keep them happy? Stay up to date with trends and best practices in our blog, A Guide To Post-Purchase Communication During COVID-19.
- With so much uncertainty in the next few months, what should retailers focus on in 2020? Forecasting Supply Chain Resilience in 2020 goes over trends and insights we’re hearing from experts and top retailers.