February 21, 2017
Column | fastlane

Disrupting dystopia

With its formidable delivery capabilities, Amazon is creating something of a dystopia in the retail supply chain. But rival retailers don't have to invest in drones or underground tunnels to stay in the game.

By Clifford F. Lynch

So far, 2017 has produced plenty of excitement. Atlanta snatched defeat from the jaws of victory in the first Super Bowl overtime ever, and Amazon was awarded yet another patent, this time for a communication system that will help autonomous cars and trucks navigate reversible lanes (lanes that can go in either direction). Donald Trump was inaugurated as our 45th president, and some of us (including me) learned a new word - "dystopian." This was the adjective political pundits used to describe the America he portrayed in his inaugural address. While I wasn't exactly sure what "dystopian" meant, it didn't sound good. So I looked it up and found that a dystopia is "a community or society that is undesirable or frightening."

I need not comment further on that, but it did occur to me that Amazon may be creating something of a dystopia in the retail supply chain (especially with respect to the frightening part). There's little doubt that Amazon has established a climate in which customers now expect next-day or even same-day deliveries, and that many of its competitors are having a tough time matching that level of service. That's unlikely to change anytime soon. Amazon has established more than 200 distribution centers and hubs to shorten the "last mile," a step that not many retailers can duplicate. Some retailers have opted to use stores for distribution centers, but that isn't always practical for reasons of space. Back when "just in time" inventory management first took hold, many retail stores eliminated the "back rooms" that, if they still existed, could have been used for assembling and organizing outgoing orders.

What, then, must a small or medium-sized retailer do to stay in the game? I believe the answer lies with the hundreds of logistics service providers (LSPs) that can be found in any city of reasonable size across the U.S. This network, in most instances, is ready, willing, and able to provide that last-mile rapid delivery that the marketplace has come to expect.

Among other advantages, the majority of LSPs are able to provide service to multiple clients, offering opportunities to consolidate shipments, an option that does not exist in a single-tenant facility. This will increase operating efficiency, reduce freight costs, and afford a significant convenience to the final customer.

Just as importantly, LSPs offer flexibility. As their needs change, clients can adjust the amount of space, labor, and even service they want their LSP to provide, paying only for what they use. This will be particularly important during peak retail seasons.

On top of that, the labor forces of LSPs tend to be very customer focused. They are professional warehouse specialists who spend their work days shipping error-free, on-time orders, not retail clerks who might be pressed into service in a retail back room.

Finally, as most supply chain managers know, the glue that holds all this together is technology, and successful, sophisticated LSPs employ the latest in efficient warehouse management and order processing systems. In a recent conference call conducted by Stifel Capital Markets, Steve Sashihara, CEO of Princeton Consulting, discussed disruptive technologies that are affecting the supply chain. He noted that when it comes to disruptive technologies, the innovators tend to be small companies that are willing to take a risk. I believe this can afford a wonderful opportunity to those logistics service providers that can bring some imagination and creativity to the table.

While dystopia is a word that some of us can now add to our vocabulary, it need not apply to the supply chain community.

About the Author

Clifford F. Lynch
Columnist
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider of logistics management advisory services, and author of Logistics Outsourcing – A Management Guide and co-author of The Role of Transportation in the Supply Chain. He can be reached at cliff@cflynch.com.

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