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Ed Lawson

Ecommerce & D2C strategy 
A SupplyChainINTENT virtual boardroom discussion held on Tuesday 18th August 2020

With thanks to Louisa Hosegood, Digital & Strategy Director at Bis Henderson Consulting for her advice and expert input. 

Key points:
-    Covid has accelerated a trend to online that was already happening.
-    It’s not just for B2C but increasing convergence with B2B demanding the same service levels and delivery times.
-    Direct-to-consumer models offer potential benefits, not just in terms of additional revenues or higher margins but also for customer engagement, insight and loyalty. However, these benefits need to be weighed against the risks of destabilising existing channels. A more fundamental question: is there a need for D2C?
-    Ecommerce / D2C operations are often grafted on to existing supply chains which inevitably puts them at a disadvantage to those that have been designed from the ground up. It takes a ‘blank canvas’ mindset to be competitive in this context.
-    A global view of inventory is a necessary first step that opens the door to AI-assisted order management which can decide from which stock locations to fulfil from. 
-    Omnichannel forecasting is needed. For example, it might be better to fulfil an order for a raincoat from a store in an area with less rainfall to maintain availability in higher demand store locations and avoid trapped stock.
-    Also worth rethinking how to use carriers: rather than just delivering from DC’s perhaps there’s value in a carrier network that can manage inventory between stores, ie stock rebalancing, moving online parcels picked in one shop to another local one for customer collection, local home deliveries. Carrier capacity is a constraint at present.

Key challenges / questions
-    How to manage capacity flexibly as ecommerce demand is volatile and hard to manage? Ecommerce customers expect accuracy and speed which can be difficult to deliver at time of high volume.
-    How can ecommerce be sustainable across the year, not just for peak periods? Assets need to be utilised flexibly to avoid redundant capacity in low seasons. Omni retailers have a great opportunity to be able to use all assets to create that flex that pure plays can’t always ie use shops for picking at peak.
-    How can / should supply chain shape the ecommerce strategy? There’s often a desire to make everything available on the same terms online but the economics of ecommerce mean that some lines are not profitable. Supply chain should be able to input around cost-to-serve and assortment.
-    How can you determine ‘critical mass’ around a product set and geographical market for ecommerce strategy? Any model of ecommerce operations involves a set of fixed and variable costs and operational partnerships. The best model depends on the pattern and volume of demand it’s designed to serve. Especially for organisations new to ecommerce, it’s wise to conduct pilot projects to test and demonstrate proof of concept.
-    Does it make sense to use a specialist ecommerce 3PL? 
-    How to strike the right balance between sustainable packaging / practice, and customers’ desire for convenience when planning ecommerce and omnichannel. 
 

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