Part 2: Consumer Behavior’s Impact on Supply Chains

Details #

In part two of a two-part series on retail and eCommerce, Michael Bender (former COO of eCommerce, Walmart) joins Karl to discuss how consumer behavior drives eCommerce decision-making, the importance of robust forecasting, and how supply chain flexibility creates eCommerce success. Listen in and discover lessons retailers learned from pandemic-era disruptions—and how AI can transform supply chain insights. Then hear from Chris Halkyard (Founder and COO of La Bella Stella, former Chief Supply Chain Officer of Blue Apron), Jordan Lawrence (Flexe Director of Logistics Strategy), and Ben Dean (Flexe Sr. Director of Network Strategy & Optimization).

Some of the topics explored:

• The four customer questions every eCommerce brand should ask themselves

• Lessons retailers learned from pandemic-era disruptions

• Why supply chain leaders focus on customers, costs, and carbon

• How AI transforms supply chain insights

• The value of combining robust forecasts and flexible supply chains

Logistics Leadership Podcast legal disclaimer

Episode Transcript #

Chris Halkyard 0:00

Any solid supply chain is going to have multiple options, because if your supply chain is setup where you're restricting or constricting growth, you're not doing your job.

Karl Siebrecht 0:11

I'm Karl Siebrecht.

Ben Dean 0:12

I'm Ben Dean.

Jordan Lawrence 0:13

And I'm Jordan Lawrence. And this is the Logistics Leadership Podcast.

Karl Siebrecht 0:27

Welcome back, everybody. Great to have you again on the Logistics Leadership Podcast. Ben and Jordan, as always, great to have you here, as well. I was super excited and I'm still kind of charged up about the conversation we had in the last episode, which was episode four, where we talked with Jason Trusley. And Jason's center of gravity, as he thinks about logistics and logistics strategy and logistics leadership, is the consumer. And his point, which he made in a very compelling way, is that consumer behavior is probably the biggest driver of the evolution of change in logistics.

Jordan Lawrence 1:07

Yeah, that was a great conversation you had there, Karl. Jason, just really front and center with a consumer appropriately. And what's so interesting is that in today's world, which is now almost fully digital, the ability of the consumer to immediately shape the decisions of supply chain leaders is near instantaneous. And of course, that presents challenges for supply chain leaders and I think Jason really deeply understands that. So a very fascinating conversation.

Ben Dean 1:38

And Jordan, there is the shift to digital, but you can't deny that there's still an analog component of the customer experience.

Karl Siebrecht 1:46

Yeah, that's exactly right. The supply chain is digitizing, but at the end of the day, this is the real physical world that we're operating in. So obviously, a lot there. So what I want to do is dig deeper into this topic. And I thought there would be no better place to go than to reach out to a friend and colleague, Michael Bender, who has spent the last several decades working in big jobs at some of the leading retailers and manufacturers out there, from Walmart to Victoria's Secret, Cardinal Health, PepsiCo. He's also serving on multiple boards. And he has been a Chief Operating Officer, a President and General Manager. And throughout that incredible career, he has always kept the consumers at the center of his decisions and his investments as he's tried to navigate their changing and evolving needs. So I'm incredibly excited to dig in with Michael a little bit to keep digging deeper into this topic.

Jordan Lawrence 2:47

Yeah, this is going to be a great conversation, Karl, I'm looking forward to hearing it. And this week, I've got some upcoming conversations with some tier one retailers. And I know beyond a shadow of a doubt, the consumer's always front of mind for them. So hopefully when we circle back, we can bring some insights from that conversation, as well.

Ben Dean 3:04

And diving deep into the pool of complexity for customer experience, we're going to be talking on my end with the Chief Supply Chain Officer at Blue Apron, Chris Halkyard. And that's just the tip of the iceberg of his experience in the eCommerce world. I can't wait to speak with him.

Karl Siebrecht 3:20

This is great. I'm really looking forward to this. And we will circle back up and compare notes. Hi Michael, thank you for joining me today, it is great to see you again. We are here to talk about how to think about adapting to the continuous changes in eCommerce. So actually had to look this up this morning, both Amazon and eBay started in 1995. As a marker for kind of the scaling up of eCommerce, if you will, we're getting close to 30 years on this, which is pretty amazing. So maybe a good starting place would be, kind of starting in the current times and then putting that maybe in some context with history. What do you see as the biggest trends in eCommerce currently?

Michael Bender 4:11

I think for me, Karl, a lot of eCommerce players now are past the point of trying to figure out how to integrate eCommerce into a business, particularly in a retail setting where you're trying to balance out both a brick and mortar capability as well as eCommerce. Now it's really about the progression toward focusing on what is it that the customer is really asking for, getting that product to them as quickly as possible, as efficiently as possible, and in a cost effective manner so that they can engage with the brand any way they want to. And that can be from obviously an order or a situation, sitting on the couch at home and having it come to you, or buy online and pick up in store. And so the leverage of technology certainly is evolving quickly. As I think about the progression of what's happened in the industry over the course of time, there was this period of time when the manufacturers had all of the power, right, because they were making the product and had all the information. And both the retailers or the intermediaries didn't have any of that power, nor did the consumer. That shifted to when retailers started to have more power, because they had the data and they had the shelf space, if you will. Now all the power is really in the hands of the consumer. And so all of the focus right now from an eCommerce standpoint that I see is really focused on understanding the customer, making sure that you are assorting whatever it is you do, in whatever space you operate in, in a way where you're able to bring those products and services to a customer better than the next competitor. And that's a big piece of it. Data's a big leverage point and the personalization of it, like I said, is a big part of it as well, which presents challenges, right? Because you'd love to be able to have a system where you're doing nothing but sending one thing to everybody. But that's not the way the world is working.

Karl Siebrecht 6:24

Right, right. I love the way you frame that. So it almost sort of maps to the evolution of eCommerce. Or maybe it just literally does, that one of the key dimensions is the power or control in the value chain has shifted from manufacturer, ultimately to consumers, with retailers sort of acquiring a bit more power and control as a result of that too, because they've got more data.

Michael Bender 6:52

I mean, if you think about even, the vivid analogy for me is buying a car. There used to be a moment when you would go to the car dealer, you had no information other than, I like that car. The dealer would say, right, I'm going to sell it to you for what I want. You can look online, you can find all the information needed about the car, and when you go in to buy it, there's really nothing to talk about, because you've got it all figured out in terms of literally down to the penny, what you should pay for that.

Karl Siebrecht 7:21

So in terms of trends in eCommerce, then a big one is, how to understand your consumers deeply so that you can help them interact with your business and buy in a way they want to buy. So one of the big trends is sort of understanding consumer needs at a more intimate, detailed level.

Michael Bender 7:43

The big piece, obviously, is how do you leverage the data to be able to get underneath and inside the head of a consumer and understanding very clearly what is it that's driving their behavior, their interest? And then, importantly, from an eCommerce standpoint, what other items are important in their data set, if you will, and their behavior so that when you're placing product, whether it's at a distribution center, or wherever your housing it, can you put it in a place where you're thinking smartly about what else might be in that basket and send it one time with everything that the customer probably would want to have, versus a package coming from Boston and one coming from LA one coming from Chicago, all going to the same address. And that's one of the things I think that a lot of eCommerce players are really trying to figure out as they try to hit toward profitability in the cases where they're not yet.

Karl Siebrecht 8:42

Michael, can you talk a little bit about what you have observed in how consumers' needs and behaviors have changed over the last, you know, two, five, ten years?

Michael Bender 8:53

I think from a consumer perspective, because they have the power, if you will, if we want to continue on with that theme, through the information that's available to them, they have more choice. And the switching costs are much less than they ever were for a consumer. It's very easy, regardless of what you're buying, but certainly commodity items for sure, to go to the place where whatever they're trying to solve for, whether it's price or speed or availability assortment, they can find just about anything they want. And so in some respects, it's made it easier. In others, it's actually made it more difficult because you think you have a customer locked in and loyalty and the definition of loyalty is a lot different than it used to be because a customer can move from site to site or store to store and find what they're looking for relatively easily.

Karl Siebrecht 9:50

Got it. So what are the implications of those dynamics on supply chains in logistics?

Michael Bender 9:56

I think one of the biggest ones certainly is having a robust ability to forecast accurately. Because once you have a sense of, this is what our demand actually looks like, you need to be able to then tune your entire operation to be able to support that level of demand flexibly enough that when conditions change, whether that's a consumer sentiment or inflation hits or a supply chain issue, whatever, that you have the ability to pivot when necessary. So the big implications for me is that the smartest companies are the ones that are figuring out how to build a flexible system, as opposed to one with deep roots in a physical location in particular.

Karl Siebrecht 10:38

Got it. As you think back over, you know, the last ten plus years, have companies gotten better at forecasting because there's new tools and technologies than there were ten plus years ago? Or are they about the same? Or is it worse? How has it changed?

Michael Bender 10:54

I would say that it's on the margin better, but more difficult, because of these dynamics that we were talking about earlier. And at the end of the day, that's why it's so important to build a flexible network to be able to put you in a position to be able to move left or right or up or down whenever you need to.

Karl Siebrecht 11:14

Yeah, interesting. So it's like an arms race between an increase in maybe the number and types of changes in dynamics and sources of uncertainty. But on the other hand, we've got better tools for forecasting, we've gotten to a slightly more effective state than 10 years ago.

Michael Bender 11:30

To the extent that you can manage in real time, and have visibility to your inventory, certainly that gives you the ability to make the changes that are necessary when conditions change. Now the tools that exist certainly allow you to be able to say, this is what's happening right now and to the extent that I want to change in 10 minutes, if I press this button. So certainly better technology and tools that exist, but the conditions and the timing and the pace of business is so much faster than it once was.

Karl Siebrecht 12:00

What are the elements of the supply chain that have historically been barriers to flexibility?

Michael Bender 12:07

Yeah, I think it starts more than likely with where you choose to plant the flag, if you will, at least in a physical setting. The usual suspects around the, if you just take the US, if you want the fulfillment or distribution network, you want to be in Indiana, you want to be in Southern California and places like that. And now, today, I think that's changed a bit in terms of looking at what I would consider to be sort of a network process. At the end of the day, Karl, I always start and end with the customer. You know, the four questions that a customer asks when they decide that they want to buy something, go out to dinner, run their daily lives, and they ask, what do you have? How much does it cost? Where can I get it? And when? I think the best companies are the ones that look at those four questions and do the better job than anybody else of answering that request. Those are the kinds of things that I think when you're setting up your supply chain that have to be answered. And you have to be in that mindset, because ultimately that’s who you're serving.

Karl Siebrecht 13:16

Yes, that's an elegant way to sort of boil it down. And I love that you're sort of like, let's come back to the customer and how the customer views the world and what he or she wants. You've mentioned a couple different examples of solutions, supply chain or logistics related solutions, that companies are deploying increasingly these days. You've mentioned visibility, you've talked about inventory modeling or optimization. You've talked about network design and thinking about scenario analysis, thinking maybe more dynamically about your network. Are those the types of solutions that rise to the top in terms of what you're seeing with the companies you work with deploying and evolving? Are there others you'd add to that list?

Michael Bender 14:04

Yeah, I think they are getting much more focused now also on looking at long tail, and working back up through the business to the merchants and a lot more coordination across the business that they're a part of. It's a much more integrated effort now, and included in that is the understanding of, are we really selling ten things all equally? Are we selling two that make up 80% of the sales? I'm seeing companies get much more focused and somewhat maniacal, honestly, on making sure that the assortments that are represented in their businesses are providing the right kind of payback in terms of the investment that's required to do that. I think maybe one of the other things I mentioned also is just the partnerships that you see where spreading out of costs, I see more of that happening in the space now where you may have a dedicated fulfillment network in eCommerce but now you're using part of that space to bring in, say, a third party to make sure that you're essentially sweating the asset as much as you can, when you make that investment.

Karl Siebrecht 15:13

It's an asset intensive business, to the degree you can share some of that fixed costs around the infrastructure, there's real value there.

Michael Bender 15:21

I do think it's important to underscore, at least for retailers that are true omnichannel players, you know, sometimes there's financial discussions, I'll say around, you know, should a business that has both an eCommerce and a brick and mortar presence in their business, think about separating those two pieces and if you go back to what the customer is asking for, they don't really care how you get the product to them, or where it's coming from, they just know that, you know, particularly in an eCommerce setting, when I press that button, and I give you my money, and you say you're gonna give it to me in 24 hours, or two days or two hours, I expect that that happens. It's much more difficult to do that, if you, you know, when you try to present a brand but it's separated.

Karl Siebrecht 16:07

So two different silos, yeah. What, if any, lessons have retailers, brands, merchants, learned from the pandemic? If any?

Michael Bender 16:21

Yeah, I think this question of forecasting, I think certainly is probably close to the top of the list, if not at the top of the list, about what it takes to, you know, to really run a business through a tumultuous time like we experienced. Everybody's tuned up their forecasting capability and gotten a lot smarter. Some brands and some customers have also figured out, and it's been an awakening moment almost, to say that, wow, there's a whole other business out there that allows us to be able to still engage with customers, you know, particularly in an omnichannel setting. I know in one of the businesses that I was a part of during that period of time, we had to close our stores for ten weeks. But our customers were still saying, I need the product, how are you gonna get it to me? We accelerated a lot of the work that we were doing to leverage technology to be able to engage with customers outside of the store setting. And so I think everybody, at least the best businesses, used that period of time, to almost kind of reinvent themselves, whatever that meant for their particular businesses. And a lot of that reinvention had to do with supply chain. And whether that was, hey I sourced from China and now I'm trying to bring it near shore or onshore here in the US to cut down on the time that it takes to get raw materials, all those kinds of things started to become regular conversations during that period of time. Whereas maybe in the past, just because you had a certain way of doing things, you're almost on autopilot, and it all worked and everything was fine. But then, in 2020, when everything started shutting down, everybody had to say, well, what are we going to do to run our business because I want to be around when this thing is over?

Karl Siebrecht 18:05

That's right. And so many companies, and there have been great interviews that I've read and listened to from CEOs and other senior people who reflect back and say something to the effect of, we learned that when necessary, we can move really quickly, separate and apart from what the pivot was, just the ability to move quickly, when needed...

Michael Bender 18:27

...Is a reflection on just the human side of life, right? When your back is against the wall and your foot is in a trap, you either bite your leg off, or you figure out how to get out of the trap. Again, I think the best companies had leadership and people around them that embraced that craziness and the uncertainty and looked at it as an opportunity and said, well, what can we do with what we have to work with? And rebuilt themselves and came out on the other side even better. The companies that were stuck and had their heads buried in the sand, different things happened to them.

Karl Siebrecht 19:05

Right, right. Exactly. You know, the pandemic put a big spotlight on the need for flexibility. You know, work as hard as you can to develop the right plan A, but be very ready to react quickly if plan A doesn't play out.

Michael Bender 19:22

The pandemic really prompted businesses to think much more creatively than they ever had to. In the business that I was running at the time in the optical space, we weren't selling something that was a want. We were selling something that was a need. You know, for those customers that typically would come to the store to get their eye exam and buy their glasses, they still would call and say, I see that you're closed. I had an order, right before you closed your stores. How am I gonna get my glasses because I have to go to work right? I remember those days sitting down with the team and saying, well, what do we want to do here? We'd already had a roadmap and a whiteboard in our office saying we want to build this kind of capability and leverage technology to be able to allow us to reach customers and outside of just coming to the store. We had been working on it, but we proved to ourselves early, I think it was ten days, it took us to actually go from, you know, sort of noodling around with the idea, which we've been doing for months, to actually saying, this is now a necessity, how quickly can we actually stand this up and prove to ourselves, we can actually do this? And then we leverage that kind of spirit and thinking to a whole host of other things after that, that allowed us to move much more quickly. And the way of working and the way that we got decisions made really changed quite a bit.

Karl Siebrecht 20:50

Right. So shifting gears here, we haven't yet talked about artificial intelligence. I'd really love to hear any of your views or thoughts on it, you know, not only is it sort of a headline thing in the consumer part of our world, but it seems to have legitimately gotten significantly more powerful. Are you seeing anything yet about the most valuable or highest potential applications of AI in terms of retail or supply chain related capabilities?

Michael Bender 21:22

Yeah, I mean, there are many, there are opportunities for businesses, again, to leverage these core capabilities that are already focused on, whether that's efficiency, visibility, being able to clone, if you will, like markets to be able to create, you know, if I know this is what makes this business successful in this region of the country, how do I build that into a model that helps us get out if you will? What other markets might be ones that can behave like this so that you improve the odds of being successful when you're planting the flag and building more locations, stores or whatever it may be. So there are lots of positive implications for that, certainly from a customer standpoint, those are the kinds of things that I think are just going to continue to evolve and be made better.

Karl Siebrecht 22:12

So Michael, this has been really fun, really enlightening. I always really enjoy our opportunities to chat. So thank you again, very much, for joining us here today.

Michael Bender 22:22

It's been great. Thank you so much, Karl, it's good to see you.

Karl Siebrecht 22:28

Okay, as expected, Michael really centered on the consumer. I like, in particular what jumped out to me, was how he talked about how the consumer has the power in the relationship.

Jordan Lawrence 22:42

Yeah, I thought that was fascinating. A little bit of a history lesson for me, too, it really just started at the manufacturer, and then moved to the retailers and then ended with the consumers. I think it's very interesting, both the, you know, the car dealer example that Michael brought up about information parity, and how much better informed consumers are. And what that really translates to is a fickle consumer. And it makes changing very easy in the mind of the consumer. And of course, that raises evermore challenges to be competitive, and to be front of mind for the consumer. Every delivery promise matters. Every supply chain promise matters. Just a very interesting perspective about the empowered consumer.

Ben Dean 23:28

I'm glad you brought a promise there, too, because that is the key to the customer experience is meeting your promises to them. And I think that reshifts for 3PLs and warehouse operators and transportation providers what their KPIs are. It was in the past, looking within the four walls at your efficiencies and productivity. But now things like cart abandonment and on-time delivery and fill rate jumped to the front. So it's a completely different mindset from how you managed your operations in the past.

Karl Siebrecht 23:59

That's right. And so the consumer has the power. That's the premise. That's the assertion. And consumers' needs and wants continued to evolve, right? You know, do I want things even faster? But maybe I don't want to pay for that. And what about my return options? So the consumers have the power, but I don't think they've settled on what they want. And let's be honest, there's not one consumer out there. There's lots of different types of consumers with different needs. So what are the implications for logistics and logistics models?

Jordan Lawrence 24:30

Well, Karl, I think maybe you're hinting at it a little bit there. But I do think there has been, call it over the last six months to a year, when I've talked to big retailers, a little bit of shift in the mindset of everyone chasing faster and faster delivery, because we want to do everything we can to please the consumer, while the other side of the coin is cost. And sometimes these things are at odds with each other. And I heard very explicitly, customers say, you know what, we're gonna get it to a customer in two days. Beyond that, we may offer some third party options. But it is no longer our priority to push everything up to same day, or even next day necessarily. And so there is a balance that's being struck there in real time. About balancing, what does the consumer find acceptable versus what will force them into switching or making a different decision.

Karl Siebrecht 25:21

So as you're talking to these big retailers, Jordan, are you starting to see alignment on kind of the winning model, and some consistency, that people are starting to kind of gravitate towards, you know, the best solution here?

Jordan Lawrence 25:36

You know, I think the outcome alignment is there around, we need fast delivery, we need to guarantee product to a customer's door and give them a reliable promise. But the execution of that is being taken in really three different routes if you look at direct to consumer eCommerce. One is leaning on a store network to deliver because customers say, hey, I already have these assets deployed, and so I can leverage them. Another is, instead of the mega million square foot distribution centers, a proliferation of smaller direct to consumer eCommerce warehouses and expanding that network and having segregated inventory, but being very agile in how you get to the consumer. And then finally, there is maybe the highest complexity. But what I think Michael Bender referenced was his preference, ever so subtly, he didn't say it overtly. But that is omnichannel, and really tackling everything in the context of one DC. And of course, this gets the complexity of inventory management. And there's no clear winner here. I think that the type of business, there's many things that dictate which route a particular shipper takes.

Ben Dean 26:52

I couldn't agree more. There's a clear alignment about some of the big terms like speed and omnichannel, but the how to get there is where there's 100 different answers to it. And as you mentioned, shift from store's a big answer. And this is where I think supply chain leaders can have a bigger impact into the revenue operations, the organization. Because suddenly your retail front is now a distribution and fulfillment center, with all the challenges that come with that from inventory accuracy to replenishment. And from the consumer perspective, you have to make all that complexity disappear below the line and make that as simple omnichannel experience for them.

Karl Siebrecht 27:32

Yeah, that's right. I mean, you know, one of the themes that came up again on an earlier episode was this simple framework of you know, it's really about customers, we've been talking about costs, and to some degree, to an increasing degree, carbon, so customers, cost and carbon. And, you know, it was kind of a leading question, Jordan, you know, it seems very clear that there is not one right model, in part because the world hasn't stopped changing and evolving. Again, consumers haven't sort of landed on, okay, here are my needs and I'll be good with these same set of demands for the next 10 years. So that's still changing. And different retailers and consumer products companies that are shipping direct to consumers, they have different assets in place, right, you know, you've got to start with the infrastructure you have, and then figure out how to optimize that. And that has to be, and frankly, is the starting point for, your plan and your strategy going forward, right?

Jordan Lawrence 28:29

Yep. And this, you know, to Michael Bender's point about digitizing the supply chain and the visibility, the more complex this gets, and really, any of these routes that you take demands the highest degree of inventory accuracy, the highest degree of visibility, and really, all of that is born out in digitization. So, you know, that's a theme that's covered many episodes, and many of the conversations you've had, Karl.

Karl Siebrecht 28:55

Right. So Ben, let's talk about the conversation you had, as well. So kind of taking an example of, I don't know what the right word is, I wouldn't call it extreme, but it's a very unique consumer value proposition, a very unique solution that comes with a unique set of supply chain logistics challenges. Tell me what you take away from that conversation.

Ben Dean 29:16

Well, one of the interesting counterpoints to that conversation was that faster isn't always better when we go back to promise. So I spoke with Chris Halkyard, who's been in senior supply chain roles from Blue Apron, BarkBox and Rent the Runway. When it comes to things like meal kits and expecting that you're going to get a meal at a particular time of day, and things like white glove delivery services, more people are getting appliances and furniture delivered, early is almost as bad as late. So accuracy and surgical precision are the approach to the differentiated 3PLs, as opposed to those that used to be just throughput and speed factories. And I think what Jordan is talking about is, there's no solution for that without digitization. How do you control early deliveries? How do you make sure that the customer can line up their delivery appointments? You need to be connected to that consumer, not just through that cart and the button, click there, but up through their experience when that arrives and ensuring that that outcome is positive.

Karl Siebrecht 30:16

Yeah, that's right. Okay, so let's take a step back here and just see where we are. So we have talked to some leaders in logistics and retail broadly. And what have we been hearing? Number one, that the consumer should be at the center of our operation and the decisions we make. That's kind of motherhood and apple pie a little bit, right? But you know, when you hear Jason, when you hear Michael talk about it, they can inject some real meaning into like, what does that mean, practically? Two, okay, costs matter, again, motherhood and apple pie. So what do I go do with that? What like, practically speaking, what are my design principles of the solutions I want to put into place?

Ben Dean 30:55

You know, I'd like to look at this strictly through the lens of the 3PL supply chain leaders. Because one, there's been a huge amount of funding moving in the direction of fulfillment operators, VC and otherwise. And now there's a bunch of them for the shippers and CPGs and retailers to choose among. So what differentiates you in that space? I think what we've talked about here is not like, yes, customers, carbon, cost, but potentially in that order, like the customer is first on that list. So if they're able to position their business as a service, as a value add, as a loyalty and differentiator for their customer experience, as opposed to just being another cost on your bottom line, I think that's the type of companies that are going to be successful, the retailers are looking for answers in this space of the changing customer experience. Take a listen to what Chris said about that.

Chris Halkyard 31:55

We are all, and when I say we, I mean everybody involved in consumer selling, we're still suffering a bit from the hangover of COVID-19. Everything shifted, everything got more expensive. Rent got more expensive, transportation got more expensive and less efficient. And some of the KPIs, the key performance index, is that all of us used to look at to try to drive performance, a lot of those numbers have changed, especially on inventory ownership. How much should we own? What should the inventory turn be? You're not really convinced that the global supply chain is back in shape now, it's just, you don't know how fast you're gonna get product in and you don't know how much it's going to cost. So a lot of companies that are really focused today, they're gonna spend a little bit less attention on what that looks like, versus, what does my customer want and how can I get this product there? And that's going to manifest in several different ways. Companies are going to want to decentralize their supply chain, they're going to want to minimize risk. If all of your eggs are in one basket, in today's modern age, you're in a lot of trouble.

Ben Dean 33:01

Don't focus on cost, focus on differentiation and service. On those differentiators, Chris went on to say...

Chris Halkyard 33:07

eCommerce itself did roughly a trillion dollars in 2022. And that's estimated to be, you know, significantly higher in the years to come. And about 20% of the global volume around the world. So nothing is growing quite as fast as that and everybody is trying to figure it out. You know, Amazon is roughly 40% of that in the US. So there is a lot of share to be captured. I think that companies that are focusing on that, really investing in marketing, learning who their cohorts and their customers are, and what they're going to do to try to keep those customers, that's going to keep them in the game and keep them profitable.

Ben Dean 33:46

What I found really interesting was a new take on what you need to own versus what you can go to third parties to solve for within your organization. Here's Chris again.

Chris Halkyard 33:56

Well, the first thing you really want to do is you want to gain some trusted suppliers, some trusted third party suppliers. I've been with organizations that are, you know, we want to do 100% proprietary and I've been one of those people, you know, the more proprietary you get, the more ownership you get, the more ownership you get, the more loyalty and just a better general performance. I think as an axiom, that makes sense. But in the real world, and the spikes and the volatility of the supply chain that we can expect for years to come, you've got to diversify that you've got to get additional warehouse space. Any solid supply chain is going to have multiple options, because if your supply chain is setup where you're restricting or constricting growth, you're not doing your job.

Ben Dean 34:41

Yeah, I love that Chris ended here on another differentiating factor. Multiple options in your supply chain, or thinking of it as supply chains. Resilience has been a strong emphasis in the post-COVID world and Chris really sums up with that and talking about diversity of supplier base.

Jordan Lawrence 34:57

Yeah, so maybe I'll tack on one additional point here. The flexibility of the supply chain org, and the willingness to take risk is really imperative, because there is nothing that replaces firsthand empirical knowledge of how a solution does or does not work inside your organization. And the only way to do that is to be willing, Karl, you've brought this up a couple of times, to test and learn, to have that firsthand exposure. And I think we all know it. Everyone wants to be progressive and forward thinking in the risks they take in their supply chain org and doing what is using the best, newest technologies. But the willingness and the execution of that, I find, falls short in most cases.

Karl Siebrecht 35:46

Yeah, you know, and you said as much, that's one of my hot buttons. But it's so true. I mean, let's just sort of think back on a couple of examples of this. Two come to mind, you know, Michael was with us, he was at Walmart for a number of years. He was there when Walmart made the decision, the bet, to buy Jet.com. And that was as much about buying capability and expertise to sort of increase the learning speed of the world's largest retailer, to figure out what is this eCommerce thing really all about? It's not that they hadn't done anything, they had already been investing and had developed capabilities. But this was an investment to accelerate that learning cycle and to test and try other things. And of course, you know, I wasn't there. I don't know, certainly, what happened, but there was a lot of learning, you know, there were people and capabilities that they built on top of, there were other things that they tried and didn't like. And they've evolved tremendously since then. So there's one example of test and learn with a pretty big, you know, test. It was more than a test, I don't want to minimize it, right. That's one example. Another one that comes to mind is, you know, another big retailer, there was a lot of press about Target. So in COVID, this huge, urgent push to at a much more rapid pace, develop ship from store capability. You know, there are great stories written on this about how quickly they were able to move. And a lot of that was based on earlier tests they had done, and some smaller things they had tried. So they weren't starting from a blank sheet of paper. And I think Target is well known for this, being kind of one of the best at trying different things at scale and keeping the things they like and scaling them out. And then kind of ditching the ones that didn't work.

Ben Dean 37:29

So interesting you bring up Jet. We're talking about, hey, free shipping, it doesn't actually exist. It's subsidized through other means, and Jet incentivized consumers to bundle orders and do things in a way that made supply chains efficient, and maybe wasn't the right time or place. But that was a pretty clear customer demand indicator when Jet didn't succeed. The customers said, we won't alter our behavior to make your supply chain efficient. You alter your supply chain to make our behavior justifiable.

Karl Siebrecht 38:05

Such a good point. So there was an experiment in the form of a company. And look, you know, I'm no expert on it. But I think there were some elements that worked and others that just didn't, for the reason you point out. Lots of goodness, lots of richness in this conversation. Jordan, anything to inject here as we start to wrap up?

Jordan Lawrence 38:26

You know, I think themes are emerging as we continue these conversations, around digitization, visibility, the ability to test and learn, new solutions. There are a handful of things that just keep coming up and of course, customer centricity being front and center across the board. So looking forward to the continued conversations we're going to have.

Karl Siebrecht 38:47

Ben, Jordan, thank you so much. I look forward to continuing this conversation with our next episode.

Jordan Lawrence 38:54

Great as always, we'll talk again soon. Look forward to next time. See you there.

Narrator 38:58

You've been listening to the Logistics Leadership Podcast presented by Flexe. If you'd like to learn more about the podcast or join the Logistics Leadership community, check out this episode's show notes and visit flexe.com/logistics-leadership-podcast. Keep the conversation going: Email us at leadershippodcast@flexe.com. The Logistics Leadership Podcast features original music by Dyaphonic. The show's producers are Robert Haskitt and Adam Kapel. Here's a quick pro tip: Instead of chasing down the next episode, why not just follow the show and have it appear in your feed automatically. Thanks for joining us!