Overwhelmed by orders? Struggling to get shipments from manufacturers?
You’re not alone. DTC brands everywhere are faced with similar challenges. The global pandemic has sent shockwaves through eCommerce supply chains, rupturing already-strained supply channels.
You can’t change the past few months, but you can learn from them. Clearly, it has never been more essential to build robust and resilient supply chains that protect brands from similar setbacks now and in the future. Here’s how DTC brands can do just that.
Stop Relying on Just in Time Supply Chains
Being lean used to be sexy. Not anymore. “COVID-19 has exposed the vulnerabilities of complex global supply chains built on lean manufacturing principles,” according to the World Economic Forum’s Jesse Lin and Christian Lanng, CEO at Tradeshift.
Lean manufacturing or Just In Time (JIT) manufacturing has become the dominant model for a huge cross-section of companies since Toyota CEO Eiji Toyoda first established it in the 1950s, explains Alex Hadwick at Reuters Events Supply Chain. While the principle is excellent at reducing waste, it relies on every part of the supply chain continually delivering parts and raw materials on time. The smallest hiccup can derail the entire system; the pandemic dismantled it.
Now businesses are thinking twice about being lean. “Just-in-time is not looking so good right now with this disruption,” says Dwight Merriman, Senior Managing Director, Chief Executive Officer of Industrial at real estate investment management firm, Black Creek Group. “That’s going to be re-thought. Companies don’t want to get stuck short again like they have during this crisis.”
Most will use a two-step approach to strengthen and diversify supply chains to make them more resilient going forward.
Diversify Manufacturers and Bring Them Closer to Home
The first way eCommerce brands can move away from JIT supply chains is to change how they work with existing suppliers while sourcing new ones closer to home.
Brands should start working with suppliers to establish continuity plans for the future and should also start to diversify their supply chain to become more resilient, writes Macala Wright at ASD Marketweek. “Balancing flexibility and sourcing resilience with cost should always be a priority for retailers, but especially in light of the pandemic,” she adds.
Such efforts may cost brands more, says Jeff Stiles, Vice President of Supply Chain Management Product Marketing at Oracle, but companies doing this are less concerned about saving money and more about becoming more diverse and flexible. In particular, many are choosing to work with local suppliers — a trend he expects to continue going forward.
In fact, the trend for bringing supply chains closer to home is so strong that Google searches for “reshoring” spiked in early April, writes Supply Chain Dive Senior Editor Shefali Kapadia.
Make Distribution More Versatile and Increase Carriers
The second step is to look downstream at what happens after customers make a purchase. In particular, how you get products to those customers. Glenn Gooding, President of iDrive Logistics, points to issues with brands that rely on a single distribution center. They look great from a cost perspective, but you lose all means of distribution if they have to close because of a COVID-19 outbreak.
The more distribution centers, the better, says Gooding. Your bottom line may suffer in the short-term, but there’s less risk that you’ll lose fulfillment capability.
It makes sense for brands to have multiple distribution centers, writes Ruthie Bowles at cloud-based order fulfillment, warehouse and inventory management software provider Logiwa, especially if you want to provide an omnichannel retail experience to consumers. More distribution centers mean faster deliveries and cheaper shipping fees.
They also help make your supply chain more resilient. Stock from one warehouse can be sent to another for fulfillment. Taking the idea further, multiple warehouses give brands multiple backup plans in case one or more distribution centers get closed because of COVID-19.
As online competition increases, many brands are turning to micro-fulfillment solutions to increase efficiency and offer quicker delivery times. These are small and highly automated warehouse facilities located near consumers, explains the team at CB Insights. Storing goods locally enables faster delivery, while the warehouses themselves can act as storage units for nearby stores. Micro-fulfillment centers are also cheaper to run and quicker to incorporate into existing supply chains. Their size means they can be placed in the center of cities or even at the back of existing stores.
Map Your Supply Chain For Greater Visibility
Improving your supply chain’s resiliency is difficult if you don’t have a clear picture of what it looks like, which is why brands must invest time and money to map it. The better you understand your supply chain and the more data you can collect and analyze, the easier it is to track suppliers and keep up with consumer demand, explains Golden Ashby at SDC Executive.
Your business will become more resilient, too. The pandemic has proven that supply chain mapping pays off, reports Arizona State University professors Thomas Y. Choi and Dale Rogers, and Bindiya Vakil, CEO and Founder of Resilinc. Those few companies that had invested time and money into mapping their supply chain were much better prepared when the pandemic started. They knew which areas were most at risk and could act immediately to strengthen those areas and limit potential disruption.
One example is the Texan grocery chain H-E-B. The company had been involved in almost daily communication with retailers and suppliers in China since January, explain Dan Solomon and Paula Forbes at Texas Monthly. Using this information, executives could model what the pandemic might look like in the U.S. and take steps to get ahead of it.
On March 4, H-E-B activated its Emergency Operations Center in San Antonio. The EOC is run from the company’s new 1.6 million-square-foot warehouse and brings together the most impacted areas of the company and their leaders to work together and make decisions daily. H-E-B went as far as providing two hot meals a day for these employees. They also set up a store inside the warehouse so employees, who were unable to go shopping themselves with the new 8 a.m. to 8 p.m. hours of operation, could get any essential supplies they needed.
Operational decisions came thick and fast. In addition to the new hours of operation (which were put in place so employees could stock shelves), the company started limiting sales of in-demand products like toilet paper and cleaning supplies in March. Partnerships were struck with other distributors to ensure the timely delivery of products.
Invest in New Technology
Amazon and other eCommerce giants may be pushing towards an automated workforce in the future, but they aren’t there quite yet. The truth is that humans still complete the vast majority of supply chain work, says Derik Pridmore, Co-Founder and CEO at global machine learning company Osaro. From factories to freight carriers to warehouse workers, dozens of different people are required to take products from the manufacturer to the consumer.
This isn’t sustainable. “The pandemic has proven the critical need for innovation due to increased demand, concerns about the health and safety of workers, and traceability and safety of products and services,” Pridmore writes.
Many businesses involved in the eCommerce supply chain are looking at how new technology can assist them during and after the pandemic, writes The Wall Street Journal logistics and supply chain reporter Jennifer Smith. In particular, companies want automated solutions and digital platforms that reduce their reliance on human workers.
The benefits of automated supply chains and fulfillment go beyond the current pandemic. In particular, automated solutions improve efficiency and lead to higher productivity, says Kristina Lopienski, Director of Content Marketing at ShipBob. Warehouse workers can be reassigned to areas that aren’t easily automated while brands can reduce employee count and save money. Automated shipping systems are quicker at packing orders and counting stock levels, allowing brands to process a greater number of orders and ship products to consumers much faster.
Consider the Consumer
Last but not least, it’s important to acknowledge and strengthen the final step in your supply chain: the consumers.
You can start by reassuring your current customers that you are doing everything you can to keep people safe, says Errol Denger, Director of Product Management at Adobe. “Explain that in most cases the time-in-transit means that packages are a very low risk for transmission of the virus and also provide customer best practices for keeping social distancing with the delivery driver and wiping down packages with disinfectant wipes before opening, etc.”
Don’t rely on your current customer base to continue ordering at the same rate as before, however. Now is the time to invest in marketing efforts to attract new customers. Not every channel is going to work well at the moment, says Visiture’s Brittany Currie. While billboards and radio might be out, digital marketing — like paid ads and content marketing — can help you generate immediate traffic and connect with your customers.
DTC brands may also be wise to look at expanding their market into the B2B sector. There are plenty of opportunities for all kinds of brands to start selling to businesses and help out during the pandemic, writes Jake Rheude, Vice President of Marketing at Red Stag Fulfillment.
“If you sell shoes or clothing, for example, reach out to your manufacturers to see if they produce uniforms and business equipment that you can add to your store,” he says. “These new products may help you approach cleaning and maintenance services that are still employed or carrying items such as non-slip shoes and cleaning products, and could help you become a partner to local hospitals and care facilities.”
Brands don’t have to go as far as pivoting their entire business model, but they do need to use the pandemic as a wake-up call to optimize their supply chain now and in the future. When an eCommerce brand’s business depends on getting products to customers, creating a robust and resilient supply chain should be one of the top priorities.