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Supplying Thought: Old McDonald Had A...Supply Chain?

25 Jul 2016 10:49 PM | Christon Valdivieso

Authored By: Christon Valdivieso

Edited By: Afton Knight

I was warned when we had our first child that life would change. While I did not doubt my friends and family, I suppose I did not fully appreciate them until last week. Last week, while reading another article about e-commerce (e-comm), I found myself singing ‘Old McDonald’ in my head. Sure ‘Old McDonald’ teaches children about animals and their corresponding sounds, but the facts about e-comm seem to be ‘here’, ‘there’, and ‘everywhere’. What is worse, far too many people in the workforce accept what they hear as fact. As managers, making the leap to leaders involves building the critical thinking muscle.

In today’s supply chain the major hurdle is a profitable e-comm wing. To create an e-comm solution businesses need to know what is really going on and how the supply chain can adjust? The problem, as indicated above, is that “research” is inconsistent and often misleading. For instance, The Philadelphia Business Journal recently reported on a study that found only 26% of businesses are using their websites for e-comm. From a consumer trend point of view a WWD article indicated “96 percent of Americans are shopping online…allocating 36% of their shopping budgets to e-commerce”. Taking these studies as fact, most companies would call a meeting to discuss how they are going to close the gap in their e-comm presence and capitalize on a booming field.

Unfortunately, these facts are misleading. First, e-comm is more than a “Pay Here” button on the website. E-comm is the digitalization of all the various steps of business including online catalogues, EDI communications, forecast and demand transmitting, and POS data sharing as well as online purchasing. The online purchasing and corresponding delivery service, e-sales, is a small part of the total e-commerce ecosystem. Additionally, the data on e-sales habits mentioned above was sponsored by an e-comm platform provider and directly conflicts a timetrade article that states 85% of consumers prefer to shop at brick-and-mortar stores. When it comes to e-comm data, businesses are exposed to a myriad competing information. Namely, while most conversations and articles headline e-comm, they really mean e-sales.

Supply chain leaders can create strategies despite inconsistent information through critical thinking and data-driven information. Critical thinking is imperative in creating a robust strategy that mitigates risk and is profitable. Throwing together an e-sales strategy to be “competitive” without thinking through the repercussions on logistics and distribution channels has proven disastrous for companies. While investments into logistics solutions have ballooned recently, less than 20% of major retailers are profitably executing Omni-channel supply chains. Thinking critically requires an ability to sift through the chaos to find the truth—relative to your business.

Nike, for instance, saw a 50% increase in online sales in 2016 and the consumer packaged goods (CPG) industry saw a 42% increase in 2015. Using actual data allows Nike and CPG companies to look at their supply chain with an honest and critical microscope. One Northern California wholesaler was recently purchased by a team that faced this issue. The former owners were eager to sell product through their online catalogue and online retail marketplaces. What the new owners found, was that 40% of the products offered online sold for a loss. What do these three scenarios have in common? Each example required companies to look at what is actually happening to their business. Instead of creating solutions based on information pulled from outside sources, they looked inward. For many companies this could involve hiring, contracting, or reassigning a data analyst to create data collection protocols and sift through large sums of data. Regardless of how relevant data—which can then be supported by outside articles and research—is collected, it is critical to creating a sustainable strategy.

Assuming your company has delineated the difference between e-sales and e-commerce, I supply this thought: Does your strategy resemble a nursery rhyme by following headlines or does it consist of a data-driven, well-supported plan of attack?


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