3 SUPPLY CHAIN TRENDS

1. Changing Consumer Experience

Shopping isn't just about walking into a store and buying things anymore. Today, shopping can be done
from home, from work or even from a phone. Many stores today offer shoppers the option to buy online and
pick up in store. For example, Macy's, a large American department store, guarantees that online orders
are ready for pick up in store in four hours, however, on average, most orders are ready in just two hours.

Another retailer, Follett, which operates university stores at more than 1,200 campuses in the US, says that
56% of its online orders are picked up in store.

This quick service level requires strict inventory management in order to avoid shortfalls. Companies need
real time inventory management capabilities and need to set safety stock levels that will ensure items are
available when customers order, but also won't take up too much room at retailer locations.

2. Growing Ecommerce

The links between the physical world and the virtual world are shortening, which also renders some links in
the supply chain to be less relevant than they once were.

Online sales accounted for more than half of total retail sales growth in 2015, according to data from the US
Commerce Department. Ecommerce sales in 2015 totaled $341.7 billion, representing a 14.6% increase
from the previous year. Total retail sales in the US grew just 1.4% in 2015, and most of the growth came
from the online arena. In 2015, roughly 1.5 billion people bought something online and that number is
expected to continue increasing.

Selling straight to the customer online cuts out several links in a company's supply chain. The supply chain
can go straight from a warehouse to a customers without following the traditional chain through different
distribution centers and retailers.

Being less reliant on retail stores also means companies need to change their sales focus to consumers
instead of focusing on buyers or merchandisers from stores.

This also means changing distribution and logistics processes. Distribution channels now need to reach the
end customer instead of retailers; and logistics processes must allow for smaller orders instead of industrial
size orders to stores. The tradition of trucks delivering goods to stores each morning may little by little be
replaced with small deliveries to people's homes.
3. Crowding in Urban Centers

Today, 54% of the world population lives in cities and that is expected to grow to 66% by 2050, according
to the UN DESA’s Population Division's World Urbanization Prospects. In 1950, only 756 million people
lived in urban centers, and today that number is close to 4 billion.

There are also more "mega cities" today than ever. The UN defines a "mega city" as an urban center with a
population of at least 10 million. In 1950, there were 10 mega cities in the world. Today there are 28; 16 of
which are located in Asia, four in Latin America, three in Africa, three in Europe, and two in North America.
By 2030, there will be 41 mega cities, according to UN predictions.

Urban centers mean expensive real estate. Stores in big cities are small and most have no storage space
other than the shelves where customers pick out their goods. This means products need to be delivered to
stores ready for shelves and delivery drivers must restock shelves often.

People in urban centers also have higher expectations for convenience. Fewer people in urban centers
drive cars, so shopping decisions are usually made by store location and proximity to people's apartments.

Smaller stores and a focus on convenience require retailers to have more flexible supply chains and shorter
response times to inventory stocking. Low inventory levels means retailers may need deliveries of small
doses more frequently, maybe even more than once a day. Delivery fleets may also need adjustments to
navigate cities and carry inventory in shelf ready packaging.

Stores also need more advanced inventory management capabilities to determine when and which
products are needed to ensure they have the exact amount to fill their shelves, or risk losing money on
empty shelves or overcrowding space.

Link:
https://www.tefen.com/insights/industries/General_Manufacturing/trends_in_supply_chain_management