For years, the goal of many supply chain organizations was to stay lean by preventing waste and eliminating excess inventory. Then came the shock of the pandemic, when that lean mindset, coupled with shipping delays and a huge increase in demand, led to barren store shelves. Consumers turned to online shopping in droves. The logical response was to ramp up production and stock the warehouses to fulfill as many orders as possible. But this reaction may have been shortsighted: Once consumers returned to normal shopping, dining and travel habits, their use of e-commerce dwindled, too. And this, plus rising interest rates, is leaving many companies with an enormous amount of excess goods.
“Nothing for retail inventory planners has been easy over the past three years,” reports Ben Unglesbee for Supply Chain Dive. “After the shortages of 2020 and 2021, the industry spent the past year trying to unload products as consumers cut their spending in the face of steep inflation.”
Now, many digital-first businesses — including Allbirds, Everlane, Glossier and Warby Parker — have transitioned from online-only storefronts to online plus brick-and-mortar. The founders of Warby Parker launched their website intending to disrupt the existing eyeglasses industry, explains Kate King in The Wall Street Journal. Yet, by the end of 2022, the company had 200 retail stores, which generate 60% of total sales. And 40 more locations are in the works for this year alone. King goes on to say that, back when the company was founded in 2010, selling online was the cheapest way to reach as many customers as possible, as quickly as possible. Today, rents are less expensive, and digital advertising is more costly. Plus, consumers have realized that in-person shopping is useful, informative and often fun.
“Even though the era of bare shelves is not far behind the industry, many are learning to live on leaner inventories and plan to chase products as needed in 2023 and beyond,” Unglesbee explains. In his article, he quotes Joe Feldman, senior managing director for Telsey Advisory Group, who says, “A little scarcity is not a bad thing.” In other words, allowing customers to want a bit more — and see those products up close — might lead to a more consistent business model. By taking small steps back to lean, retailers are prioritizing cost control and margin protection over the risk of lost sales.
Of course, achieving the optimal balance of inventory versus demand, and e-commerce versus retail, is not an easy task. Supply chain transformation is crucial to reaching this objective and gaining a competitive edge. To make that goal a reality, become a certified transformation leader with the soon-to-be-released APICS Certified in Transformation for Supply Chain (CTSC) credential. The CTSC will leverage components of ASCM standards, including the SCOR-DS, Enterprise Standards for Sustainability and Digital Capabilities Model. The program launches this July, but you can download the CTSC Exam Content Manual today and prepare to transform your organization for the next big shift.