Modern retailers face compounding supply chain challenges in the face of unprecedented consumer demands.
Key Takeaways
- 63% of consumers will try a new brand or go elsewhere instead of waiting for a restock
- In 2020, eCommerce grew the same amount in 10 weeks as it did in the last 10 years. Today, the chances of a vessel arriving on time are about 40% compared to 80% last year
- Companies need simple, scalable, and repeatable logistics solutions: A programmatic approach to logistics
This video premiered at the 2021 Gartner Supply Chain Symposium. The following transcript has been revised for brevity and clarity.
David Glick – Chief Technology Officer, Flexe:
Every link in the supply chain faces disruption—now more than ever. There are massive increases in eCommerce demand, port delays, labor shortages, and rising transportation costs. There is no end in sight. The pandemic continues to exacerbate existing issues, compounding constraints like labor and capacity with rising eCommerce sales and customer demands.
Megan Evert – SVP of Operations, Flexe:
There are bottlenecks everywhere. In 2020, we saw eCommerce grow the same amount in 10 weeks as it did in the last 10 years. Today, the chances of your vessel arriving on time are about 40% compared to 80% last year. And 63% of consumers will try a new brand or go elsewhere instead of waiting for a restock. Final mile transportation costs rose 24% in the last year. Industrial vacancy rates are sitting at under 5%, which is an all-time low. What makes these disruptions unique is the increase in volume. They aren't specific to one company, vertical, or link in the supply chain. Manufacturing issues and port shortages are happening simultaneously worldwide. We hear a lot about the “new normal” since the pandemic began. This might be it.
In 2020, we saw eCommerce grow the same amount in 10 weeks as it did in the last 10 years. Today, the chances of your vessel arriving on time are about 40% compared to 80% last year. And 63% of consumers will try a new brand or go elsewhere instead of waiting for a restock.
Matt Sykes – Senior Industrial Engineer, Flexe:
In retail, “omnichannel” used to be a buzzword. Now all retail is omnichannel. The rest of the supply chain has been slower to catch up. Logistics networks must now be omnichannel as well. They have to be able to handle multiple fulfillment types, whether it is fulfilling to the store, a doorstep, a locker, or everywhere in between.
Megan Evert – SVP of Operations, Flexe:
Retailers and brands face multiple disruptions at once while also trying to keep up and adapt to new market conditions and consumer expectations. This creates a whole set of challenges for the industry.
Matt Sykes – Senior Industrial Engineer, Flexe:
Businesses need to rapidly expand networks to meet increased eCommerce demand and delivery expectations. They need to redeploy goods based on inbound supply chain, port congestion, and transportation rates. They also need to rapidly restock store shelves to ensure impatient consumers won't go elsewhere.
David Glick – Chief Technology Officer, Flexe:
Historically, there were two ways to expand logistics networks. The first way was to build your own network. The second was to use a third-party logistics provider (3PL). Both have limitations. They take a long time to launch. They have fixed costs in term agreements. They are fixed in size and location. They are built for repeatability, predictability, and stability. That's not where we are today.
Megan Evert – SVP of Operations, Flexe:
On the other side of the market, warehouse providers are not flexible. They count on fixed forecasts and stability. It is extremely difficult for them to take on unplanned business or update their capabilities for their clients. There is little-to-no room to make changes quickly.
David Glick – Chief Technology Officer, Flexe:
I'm Dave Glick. I am the CTO at Flexe, and I am responsible for all products and engineering in the organization. Before Flexe, I spent 20 years at Amazon leading large teams to support their operations technology.
Logistics is complex. Everyone in the industry knows that. To an extent, now the whole world knows it, thanks to the toilet paper shortage of 2020. Many of us watched the industry evolve throughout our careers. We remember the days of lean management and Six Sigma. The old methodologies aren't enough anymore because the problems we need to solve are changing. There are, however, underlying principles that remain. Reducing variation is good. Solving for a discrete set of problems is good.
Retailers and brands need a third way to manage their logistics networks: an approach to rapidly scale their operations, expand fulfillment networks, and reduce the time it takes to launch new facilities.
David Glick – Chief Technology Officer, Flexe:
As people chase after Amazon, it's important for them to provide free and fast shipping to their customers. Amazon does this by putting inventory very close to customers. If you have a single warehouse in Ohio, a long-term commitment, you are not going to be able to meet a two-day or one-day shipping. That is the new customer expectation. eCommerce continues to grow. Customers expect their products every day on their doorstep. What do you need to do? You need to diversify your carrier network. You need to diversify your distribution network. You need to diversify your fulfillment network. What does that mean? Place inventory close to customers.
If you think about your network as a series of nodes and arcs, or warehouses and transportation lanes, you will want to simplify your transportation lanes. This often means increased complexity to position brands for capacity and customer delivery. Overwhelmingly, we hear from our customers, some of the largest and most innovative companies in the world, that they need a simpler approach. This approach complements their current fixed logistics network while also being a simple, scalable, and repeatable solution. Essentially, they want a programmatic approach to logistics.
Matt Sykes – Senior Industrial Engineer, Flexe:
My name is Matt Sykes, and I am an industrial engineer here at Flexe. I have several years of experience in the logistics and supply chain industry. As an industrial engineer at Flexe, I am responsible for building strategic partnerships with our warehouse providers by providing a suite of professional service offerings such as labor planning, layout design, and operational improvements.
Flexe logistics programs are powered by technology, run on open logistics networks, and optimized by our team of experts. We provide access to the one of the largest open networks of distribution, fulfillment, and transportation providers. And we have a variable cost model. Our customers only pay for the services they use, which spans from short-term capacity needs to running ongoing fulfillment programs year after year.
Megan Evert – SVP of Operations, Flexe:
Flexe is building something new, and we designed it around our customers' needs. It's a flexible solution that complements existing infrastructure. Our logistics programs address a discrete set of challenges, and our teams deeply understand logistics. We partner with our customers to identify the right approach and help them achieve the right outcomes. Through our logistics programs, our customers mitigate disruptions, build resilience, and create room to run new programs supporting business growth and expansion. We address capacity constraints, network expansions, and the creation of shorter transportation lanes for B2B fulfillment and eCommerce. This drives meaningful and rapid results for our customers. In fact, a recent study found that our customers see 119% ROI when working with Flexe.
Matt Sykes – Senior Industrial Engineer, Flexe:
Flexe delivers technology-powered omnichannel logistics programs to help retailers expand their distribution network and rapidly replenish stores. This means fewer stockouts and missed sales. Flexe offers a fast-to-launch setup in 2-3 weeks. We have a network of warehouses supported and optimized via our operational support program. The types of challenges that retailers face in a rapid replenishment program include difficulty forecasting and managing vendor retail delivery schedules. They don't have enough inventory in the right locations to prevent stockouts for fast-moving products. Retailers and brands don't want to waste resources leasing and staffing extra warehouse space for seasonal spikes.
Recently, a large coffee retailer was dealing with bottlenecks at the port and was looking to expand their distribution network and relieve capacity constraints for promotional merchandise to meet seasonal demand spikes and avoid stockouts and missed sales. In partnership with a number of warehouse providers, we worked with this retailer to expand their distribution network by five nodes, so they could forward-stock and replenish products to more than 15,000 company stores nationwide. We helped them move more than 6.5 million units of promotional goods in time for the upcoming fall and holiday season. Flexe implemented a new distribution program in a matter of weeks. A traditional solution required a fixed lease, leaving the retailer with empty warehouses and sunk costs for the majority of the year. This is just one example of how logistics programs accelerate time-to-market. The programs are repeatable, scalable, and available to even the world's largest brands.
Megan Evert – SVP of Operations, Flexe:
Consider new product launches. They can account for 26% of annual revenue. Earlier this year, one of the largest gaming and media companies in the world came to us to support an upcoming product launch. The success of the launch was predicated on getting all of their pre-orders to their customers on a very specific street date. They needed the fulfillment network to ensure it would happen. Integration occurred in eight weeks, including the technology integration. Our tech enhancements made it possible to wave and batch orders based on their end destination so that all the orders could arrive by the promised street date. The launch was a huge success. Over the course of 3 days, 75,000 orders were shipped and arrived on time to very excited fans.
Our team of experts worked with them to set up pack stations, build the right material handling equipment, and integrate our software. Within three weeks, we were able to launch. Within a month, we were doing 20,000 units per day, which is something that they'd never seen before.
David Glick – Chief Technology Officer, Flexe:
Nothing in logistics is easy, but there is one exception: committing to the outcomes you want. To provide faster, more affordable delivery, you have to put inventory close to customers. It is the only way to offer competitive delivery promises and optimize for ground transportation. Retailers and brands fulfilling directly to consumers must figure this out today. Otherwise, they won't make it.
In Q2 2020, at the height of the pandemic, a large retailer came to Flexe. Their online channel was exploding, and they needed more capacity on the West Coast. All of the big providers were full. We went to a tier 2 provider who had never done eCommerce fulfillment before beyond a few shipments per day. Our team of experts worked with them to set up pack stations, build the right material handling equipment, and integrate our software. Within three weeks, we were able to launch. Within a month, we were doing 20,000 units per day, which is something that they'd never seen before.
Matt Sykes – Senior Industrial Engineer, Flexe:
One of the things I love about Flexe is how we unlock new capabilities, including fulfillment, to mid-market providers. We help them optimize their operations within the four walls of the warehouse, increasing their offerings so they can meet the needs of enterprise retailers and brands. On both sides of the market, we help retailers, brands, and providers address today's most difficult omnichannel logistics challenges.
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