Accenture offers up take on E-commerce supply chain challenges

Editor's Note: This article originally appeared in Supply Chain Management Review. 

The rapid growth of e-commerce is driving deep changes in our industry, from tightening up trucking capacity to elevating the importance of final-mile delivery processes. To respond, supply chain managers now need to leverage diverse systems, thereby making processes more efficient. Steve Osburn, Managing Director at Kurt Salmon – a part of Accenture Strategy specializing in Supply Chain. shares his insights and observations on e-commerce in this exclusive interview.

Supply Chain Management Review: How is e-commerce changing the way we approach logistics/distribution network strategy?

Steve Osburn: E-commerce customers in the U.S. are becoming increasingly demanding. A recent study from Accenture Strategy found that 62 percent of U.S. consumers expect orders, with free shipping, to arrive within three days. Many retailers are struggling to deliver on this expectation. Therefore, rethinking inventory placement is key to gaining a competitive advantage. Networks are shifting from one or two big central distribution centers, to multiple distribution centers closer to the customer allowing goods to get to them faster which is now a key differentiator.

SCMR: Any insights on how markets will change in the coming years?

Osburn: Networks will become much more sophisticated. Retailers do not have enough inventory to get all SKUs close to the customer, so companies will have to differentiate SKUs by velocity and take a more thoughtful approach to distribution instead of keeping inventory all in one location. Labor availability – from warehouse workers to truck drivers – will also continue to be an issue, driving companies to explore new technologies that enable automation. Furthermore, capacity constraints – particularly around the holidays – will continue to be a challenge.”

SCMR: What is the best approach for managers today?

Osburn: Managers need to build flexibility into everything they do. The market is changing quickly, and networks cannot be the reason that prevents companies from keeping up.

SCMR: How is e-commerce changing the way shippers approach carrier relationships?

Osburn: Companies used to negotiate with shippers once every three to five years where they would select a partner and manage the relationship. This “set it and forget it” model is dead. Today, shippers need to constantly re-evaluate to ensure that the current set of partners they work with can deliver on the needs of the business and monitor projections and volumes by lane to ensure that there are no unexpected surprises.

SCMR: How can e-commerce bring the information needed to allocate resources more efficiently?

Osburn: Data analytics, predictive technologies and increased communication up and down the chain is key. Not just within the shipper’s company, but with the shipper’s partners as well. Accurate projections are the key to success, especially during the busy holiday season.

SCMR: What are the major risks for managers embracing an e-commerce strategy?

Osburn: Inflexibility is a major risk in e-commerce. There are so many unknowns because the customer is now the true driver of the workload, and flexibility is the real key to success. Companies need flexible networks, that can rise to meet high demand, but still process low demand economically, and a flexible workforce which is becoming harder to achieve in a demand-driven environment.

SCMR: How is e-commerce changing the way shippers apply IT/technology/software?

Osburn: Technology is the glue that holds it all together. Having integrated systems is important for shippers and their partners, as is predictive technologies that can help pre-empt demand and returns and improve the preparedness of a company.

SCMR: Has technology reached a level of maturity that certain key players such as ocean shippers, industry clearinghouses such as ISO standards, and public-private partnerships will step up?

Osburn: There will be big rewards for those that step up. However, many of these companies are operating at full capacity and running at full speed just to keep up with current business demand. This leaves a gap for new players to develop solutions that can help solve problems that shippers are not focused on currently.

SCMR: How is e-commerce changing the way shippers are finding the labor they need?

Osburn: Labor challenges have been present for a few years now. This is driving the need for distribution center automation. Shippers are also having to get more creative with their hiring and retention strategies and policies.

SCMR: Will shippers start tracking productivity per worker in order to ensure ROI for new technology and worker investments?

Osburn: Tracking productivity per worker is not a new thing in the industry, but with the increased investment in automation, there is certainly renewed focus from shippers. Activities such as training time required, machine downtime and shift ramp-up/ramp-down are being managed much more closely.