Welcome to the 6th edition of Q&A with Dr. Tompkins.
Q: How has DIGITAL disrupted supply chains and do these disruptions also impact the supply chains of traditional retail?
Answer: Great question that requires three different responses:
EACH for eCommerce: We really had it made in the “old days” when the customer performed the task of order picker and final delivery transportation, or with the catalogue business where we were paid to do the picking and final delivery. Maybe hard to recall, but in the old days (like in 2017) the customer actually came to the store, selected what they wanted to buy, stood in line waiting to pay us for the items, and then provided the transportation to get their purchases to their home. With the advent of eCommerce we pick the customer’s items and we deliver the product to their home, but unlike catalogue there are no shipping and handling fees. This EACH supply chain for eCommerce is obviously different from what retailers have traditionally done and has created a huge disruption in the retailers supply chains. Traditionally retailers moved containers, trailers, pallets, and/or cases to their stores or Eaches for catalogue fulfillment, but now with eCommerce they have been forced to have a supply chain that allows them to send EACHES to customers’ homes without being paid for shipping and handling.
- The Unit Load Principle of Material Handling describes the problem with accommodating the EACH supply chain. The Unit Load Principle says that less effort, work, and cost is required to move and store many individual items as a single load than to move many items one at a time. This Principle is saying:
- It is easier to handle ONE container of 22 pallets than to move the 22 pallets individually
- It is easier to handle ONE pallet of 28 cases than to move the 28 cases individually
- It is easier to handle ONE case of 12 bottles than to move the 12 bottles individually
- Handling 22 pallets individually is more difficult and expensive than handling the 22 pallets as one container
- Handling the 28 cases individually is more difficult and expensive than handling the 28 cases as one pallet
- Handling 12 bottles as EACHES is more difficult and expensive than handling the 12 bottles as one case
- The Container Supply Chain is more efficient than the Pallet Supply Chain, the Pallet Supply Chain is more efficient than the Case Supply Chain, and the Case Supply Cain is more efficient than the Each Supply Chain. Or conversely, the most inefficient and expensive supply chain is the EACH SUPLY CHAIN.
Thus, the Each Supply Chain has gone from a customer performed activity to a company performed activity with no additional compensation to the company (Shipping & Handling Fees in the Catalogue Supply Chain). The digital disruption of supply chains has forced us to accommodate the least efficient, most difficult, and the most expensive supply chain, the EACH SUPPLY CHAIN. So, you ask the impact: GIGANTIC!
EACH for TRADITIONAL RETAIL: The perfect storm of Traditional Retail (in-store or offline) occurred when the huge SKU explosion took place in the variety of SKU’s offered for sale. For example once upon a time there were just Milk Chocolate M&M’s in different size packages. But now we see Milk Chocolate, Peanut, Peanut Butter, Almond, Pretzel, Crispy, Dark Chocolate, etc. flavors in different sizes (mini, regular and max) in different colors, and packages. This SKU proliferation in every aisle of the store resulted in retailers dedicating more space to each product family and lower Return on Invested Capital (ROIC). However, once we are forced by eCommerce to have an Each Supply Chain the concept of EACH replenishment, instead of CASE replenishment of the store has followed or will follow. As the EACH Supply Chain for store replenishment and the resulting shrinking of the size of the store occurs, we find that just like the impact of the EACH Supply Chain on eCommerce, the EACH Supply Chain for Store Replenishment has forced us to accommodate the least efficient, the most difficult and the most expensive supply chain, the EACH SUPPLY CHAIN. So again the impact: GIGANTIC!
EACH for NEW RETAIL: New Retail is the combination of eCommerce and Traditional Retail, Bricks and Clicks, Offline & Online (for Amazon: Online to Offline (O2O) and for Walmart: Offline to Online (O2O)). New Retail is not about integrating O2O, but blurring the boundaries between O2O. New Retail is not about Omnichannel, but Unichannel (Unified Channel). New Retail is not just Unichannel but the combination of UniCommerce, UniMarketing, and UniLogistics. New Retail is not just about Retail, but about the combination of Retail and Entertainment (Retailtainment), about shopping as a competition, shopping & socialization, and shopping & recreation. So, the correct answer to the question about EACH for New Retail is it is the combination of the answers for EACH for eCommerce and EACH for Traditional Retail. So, in brief the answer is GIGANTIC!, GITANTIC! Or if you prefer DOUBLE GIANTIC!!
Q: Given the answer to the digital disruption on retail question have we just doomed the NextGen Retail Supply chain to be inefficient, difficult, and expensive?
Answer: I hope not. But, if what we continue to do is have distribution centers and fulfillment centers with mechanization to support manual EACH picking (typically pick modules, put walls, and shipping sorters or alternatively Kiva Systems), YES we will find ourselves with inefficient, difficult, and expensive EACH Supply Chains. This answer however is not acceptable. In fact, it was this answer which three years ago that drove the thought leadership of Tompkins International to the creation, evolution, patenting, and bringing to market of Tompkins Robotics. Learn more about Tompkins Robotics, and how the EACH Supply Chain can efficiently, easily, and inexpensively support Direct To Consumer, Buy Online Pick Up In-Store, Buy In-Store, Pick Up In-Store, and Replenish Store.
If you missed last week's Q&A you may read it here. Be sure to send me your questions!
James A. Tompkins, Ph.D.
Chairman and CEO, MonarchFx
Executive Assistant: Debbie Flynn, 919-855-5447