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What Comes First — Supply Chain Or Sales Channel?

With supply chains backlogged, cut short and all-around disrupted in the midst of the global pandemic, businesses had to act fast.

For many, that meant a business model pivot, a lofty feat for any company, let alone small- to medium-sized businesses (SMBs) whose survival sometimes depended on such flexibility.

For B2B businesses, the shift was a dramatic one toward a B2C, or even direct-to-consumer (D2C), model, with major ramifications for the ways these companies market, sell and reach their customers.

Luckily, even for SMBs without the resources to build fancy proprietary online channels, there are plenty of options like Amazon and eBay to reach a new set of customers. Yet Steve Denton, CEO of Ware2Go, a UPS company, warned that jumping onto eCommerce platforms is only part of the pivot challenge.

“If you solve the sales channel problem without solving the supply chain problem, you are going to create one-time customers who never come back,” he told Karen Webster.

Understanding how to optimize the supply chain through elevated logistics and inventory management is critical to meeting the unique demands of today’s consumer. And while it’s not an easy transition for SMBs, these businesses have a robust opportunity to strengthen their competitive edge through this supply chain optimization, said Denton, even amid one of the most tumultuous markets of our time.

Pivoting The Business Model

The pivot from B2B to B2C or D2C was a necessary one for many firms to survive, and one Denton described as a “tremendous shift.”

“Our retail clients were shutting down stores,” he recalled. “Our clients that were using distribution channels, distributors or other B2B types of mechanisms had to pivot to either enable their distributors to sell B2C, or they had to sell direct to consumer. If you want to do business, you need to be able to do both.”

When it comes to meeting customer demand, that shift means meeting or exceeding consumers’ expectations for an easy online shopping experience, in-stock items and fast shipping. All of that has significant ramifications for organizations’ supply chain and logistics management strategies, with Denton noting that organizations had to migrate away from less-than-truckload (LTL), while supply chain disruptions caused a rise in short shipping.

The climate introduced the need for a better grasp on inventory and shipping to ensure products are in stock at the correct locations when shoppers need them. That means diversifying the supply chain, often with the need for an expanded network of warehousing capacity — a tough achievement for SMBs with limited resources. It’s an even tougher feat for organizations that had set up their warehouses for B2B deliveries, said Denton.

A Competitive Strategy

Having real-time, accurate insight into inventory has become even more difficult as organizations have more choice as to which platforms they use to sell goods. Yet it’s even more imperative, said Denton, because unlike business customers, consumers aren’t willing to wait for an item to return to stock from one seller — rather, they’re going to spend their money with someone else.

“The biggest thing we saw around COVID was inventory availability,” he said. “If you’re an SMB, you don’t have 20,000 of this SKU. You’ve got 200, and you want to optimize it, so your catalogue needs to be updated in real time, constantly throughout the day, and you have to fence that inventory to your marketplace partners.”

It’s one of several examples of how organizations used to the B2B model must optimize their supply chains for the D2C and B2C space in order to not only survive but remain competitive.

To help these SMBs optimize their supply chains, Ware2Go recently announced an integration with Google Shopping, a tie-up that sees merchants able to display their delivery promises within Google ads. As Denton explained, it’s a way to maximize return on investment on marketing efforts while also stepping up to consumers’ shipping demands in order to attract and retain customers.

Businesses are already gearing up for the holiday season, one expected to be particularly busy for the eCommerce landscape. In the meantime, market volatility continues to shake up supply chains, with the pandemic and peak hurricane season introducing even more disruption to warehousing and logistics. Collaborating with third-party experts is critical to overcoming these challenges, particularly for resource-heavy SMBs, as is ensuring merchants and their third-party logistics (3PL) providers can support a business model pivot to D2C.

It’s all about approaching supply chain management as a competitive strategy, according to Denton.

“Fulfilment can be a growth-driver. Supply chain can be a strategic weapon for you,” he said. “You don’t need to be in nine warehouses to offer two-day or shorter ground time. The ability to use supply chain as a growth driver for your business has become amplified.”

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NEW PYMNTS DATA: HOW WE SHOP STUDY – SEPTEMBER 2020

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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