2018 supply chain trends: were we right?

Date : 22 November 2018

At the beginning of the year, we picked out four supply chain trends we expected to gather significant momentum in 2018. As we approach the end of the year, the time has come to review how accurate our predictions were. There’s more information on each in this infographic. Here’s a quick reminder of the four we put forward:

  1. The online-offline space invasion
  2. Reprioritising skills for success
  3. Crunch time for cyber-security
  4. The snowballing sharing economy

Over the next few weeks, I’ll review each in turn, assessing whether they came to fruition, how they have developed this year, and how they may develop in the months and years to come.

Scan the horizon

Before I do, though, I want to again sell the virtues of trends analysis. The process is essential to helping both businesses and individuals prepare for change. But it’s only useful if it prompts action. Successful trends analysis involves bringing the outside in; to scan the horizon, understand the macro environment and how our competitors and customers are evolving.

While much of the energy is directed at the future, the accuracy of your future trends analysis and the actions you take to prepare will unquestionably be enhanced by first looking backwards to review past predictions and the responses they prompted.

The online-offline space invasion

We called out the continued push of traditional bricks and mortar retailers into the online domain and vice versa as a key trend for 2018. We termed it the “space invasion” and it has felt a little like that. From either standpoint, the driving forces and objectives are similar – cost and service. Specifically, establishing infrastructure as close as possible to shoppers, to reduce fulfilment and last mile costs, while providing an array of flexible shopping options.

Examples of how this has played out are evident around the world. In Canada, Loblaw is a great example of a traditional bricks and mortar retailer evolving its omnichannel proposition. It has invested heavily this year and has plans to do much more. Its tech team has grown to over 1,000 members and 70% of Canadians have access to its click and collect programme. This is being serviced out of over 520 stores and 28 spokes, including 19 Shoppers Drug Mart stores. Its home delivery partnership with Instacart extends to 60% of Canadians and the retailer is also testing a click and collect proposition within its No Frills and Maxi discount formats. Many retailers are partnering with third-parties, particularly in the vital “last mile” sector.

Source: IGD Research

On the other side of the coin, retailers with their roots in the online channel continue to push in the bricks and mortar domain. In China, Alibaba-owed Hema Fresh is demonstrating what an online-offline fusion for the food and grocery sector looks like. With ambitious plans to open hundreds of outlets across China in the next 3-5 years, Hema Fresh is a major force driving this trend forward.

Its stores act as mini-fulfilment centres for online shoppers, who can expect 24hr delivery and a 30-minute delivery service if they live within 3km of a store. Shoppers can also shop, eat and collect goods in store. Hema Fresh stores incorporate automation like that seen in large-scale online fulfilment centres. Online orders are picked from shelves and placed into bags with digital tags. These are then sent to the delivery department via overhead conveyors. Fulfilling orders from stores allows Hema Fresh to radically reduce order cycle times.

Source: IGD Research

These two examples highlight how the line between online and offline retail continues to blur, driven by the need to meet changing shopper expectations while creating viable fulfilment networks.

Just the start…

In our recent Supply Chains for Growth research, we highlighted fulfilment for the future as a characteristic of supply chain organisations that are set up to deliver strategic competitive advantage. Delivering exactly the products shoppers want, in precisely the right place and at the right time, often at the shortest possible notice is the challenge – easy to say but difficult to do.

But this will be a matter of survival for many businesses. Some will look to exploit existing expertise, others will look to third parties. Certainly, holding goods close to consumers will be vital to providing a rapid response profitably – this is a major factor driving investments like those I’ve highlighted but no one-size-fits-all solution has emerged. Success will require a range of solutions by locality. Large stores will continue to reduce selling space, creating room for automated online order picking. Convenience stores and other “hyper-local” delivery points allow for collection and top-up shopping, or onward delivery.

Source: Supply Chains for Growth, IGD, 2018

So, it seems the space invasion will continue as businesses innovate in a bid to build a fulfilment model fit for the future. Check out Supply Chains for Growth for more on how we see fulfilment evolving in the food and grocery industry.

Next up is Reprioritising skills for success, driven by the continued influence of technology on the supply chain. 2018 saw several key announcements on how businesses will attempt to deal with the opportunities but also the challenges it presents.

Chris Irish

Chris Irish

Supply Chain Insight Manager

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