4 Ways Amazon Could Shake Up Supply Chain Trends In 2019 And Beyond
The new year always brings an exciting mix of reflection and anticipation — an opportunity to assess past accomplishments (or disappointments) and set new plans in motion. For retail CEOs, the busy holiday season doesn’t allow for much quiet contemplation, but it does provide some very clear signals about what’s worked well and what hasn’t.
If there’s one topic on top of every retailer’s strategic planning list this year, it’s probably Amazon: how to compete with them, how to differentiate from them, how to leverage them, how to learn from them and, for many, how to simply survive in a retail world dominated by them.
Amazon’s disruptive influence across the retail, supply chain and transportation industries has forced widespread reevaluation and reinvention across thousands of organizations — from what new skills to hire for to which new technologies to buy and which processes to implement. It can be a painful process in the short run but enormously rewarding in the long term.
As CEO of a retail delivery experience management company, I can confirm the challenges are very real — and very exciting. It’s a common refrain that nothing brings out the best in people like a little adversity along the way. With that in mind, here are a few predictions I believe will bring out the best in all of us in the years ahead:
By 2021, I predict that UPS and FedEx will acquire Uber-style delivery companies to compete in the final mile.
According to Statista data (paywall), e-commerce sales are slated to grow as much as 25% between 2019 and 2022, which means they would bring retail deliveries along with them. Meanwhile, USPS prices are going up, which could impact the cost and profitability of UPS and FedEx and potentially increase their need to make more last-mile deliveries themselves. Additionally, Amazon’s 3PL and logistics businesses (like a new air freight hub) appear to be growing rapidly and exerting pressure on other competitors. Despite this, major parcel carriers have not made much of a foray into the gig economy to my knowledge, which I attribute largely to the strength and opposition of union forces. It’s only a matter of time before a deal is brokered between unions and 1099 labor, following in the footsteps of Uber and the taxi and public transportation industries’ unionization efforts (paywall).
By 2022, I predict that all omnichannel retailers and more than half of e-commerce retailers over approximately $25 million in revenue will offer same-day delivery in major metro areas.
Consumer demand for same day delivery is growing. According to PwC, 40% of online shoppers surveyed said they would pay extra for same-day delivery, and retailers are investing in ways to get more localized inventory, including on-demand warehousing. SupplyChainDive said Target already fulfilled 70% of orders from its stores in 2017, and it acquired same-day delivery provider Shipt in 2018. With what I see as an inevitable rise of drone delivery — McKinsey estimated the value of drone activity would reach $1 billion in 2017, and ResearchandMarkets estimates that drone delivery and transportation will reach $11.2 billion in 2022 — and its potential cost savings, same-day delivery could become a competitive necessity in the near term.
By 2022, all retail logistics and supply chain professionals could have NPS/CSAT metrics as part of their scorecards.
One Fortune writer recently predicted that tomorrow’s CEOs will come from the ranks of today’s supply chain leaders. The “Amazon effect” is redefining customer expectations and business behaviors and requiring future leaders who can translate big-picture goals into many moving parts. According to a 2017 study by my company and Eft, this trend is already gaining steam: More than 83% of retailers studied said CX was a company-wide goal, and 56% said that CX measurements are key parts of their operational decisions. A 2018 PwC study found that 54% of consumers studied felt CX at most companies needed improvement. Beyond standard supply chain key performance indicators (KPIs) such as on-time delivery and perfect order fulfillment, I believe net promoter score (NPS) and customer satisfaction (CSAT), which are leading indicators of customer happiness and loyalty, will play a greater role in the supply chain scorecard. Most marketing, customer experience and support teams already gather these metrics, and now supply chain and marketing team goals will likely become more intertwined.
By 2023, I predict that artificial intelligence (AI) will impact most supply chain roles, particularly in the areas of technology, big data and customer service.
For many retailers, spreadsheets remain a primary vehicle for managing supply chain data and decisions, creating silos of disparate, disconnected data that can increase operational costs and inefficiencies. AI help supply chain leaders collate and make sense of this data, automating the ability to predict customer demand, forecast product availability, optimize routes for delivery, and better target and personalize communication with customers. Retailers such as Amazon and REI are making bold investments in AI-driven technologies such as order optimization, warehouse robotics, blockchain, and the Internet of Things (IoT) to bring this automation to bear on the customer experience and on their bottom line. A new generation of supply chain leaders will likely require skills in AI that empower them to translate this highly technical information into business decisions and profitability.
2019 needs to be a year of action. With so many investments in consumer-focused initiatives and support, customers should be and will be the ultimate winners of the year. For better or worse, I believe Amazon’s impressive success over the past few years is pushing brands to modernize and align their teams around the central goal of improving the customer experience. From supply chain to e-commerce to marketing to customer support, retailers must find ways to improve the customer experience. I’m looking forward to seeing how companies evolve their understanding of customers and improve satisfaction.
As a retailer, a supply chain leader, a logistics provider, a frequent shopper, or just an opinionated industry observer — what do you think? What technology will help retailers compete with Amazon this year?