While many retailers are better versed in meeting in-store customer needs, experts argue that they have many challenges when it comes to handling digital operations, more specifically with regards to warehousing. This trend is particularly troublesome during the winter holidays season when the company’s distribution centre is handling 2 to 5 times the typical workload.

Experts say that most businesses make more than 20 per cent of their annual revenue during this season – but when service failures occur during peak shipping days, it poses a major supply-chain risk that not only translates to the delayed release of customer shipments, but also poor inventory management resulting in stockouts.

According to a recent survey, 75 per cent of in store consumers experienced stock-outs last year, and 38 per cent claiming that it was a common occurrence. The incidence of stock-outs for online shoppers was slightly less at 63 per cent, but resulted in the harshest consequences. While 58 per cent of brick-and-mortar store incidents translated to lost sales with customers skipping the purchase or taking their business elsewhere, 65 per cent of online shopping stock-out incidents resulted in the shopper pressing the delete button and completely abandoning the sale

Effect on the retailer

Stock-outs are evidently damaging to current sales, but the impact can be more even more devastating to your brand and future business activities. Forcing your customers to seek a product – that you have run off – from a competitor diminishes their loyalty.

In fact, the survey mentioned above found that 38 per cent of consumers blame the retailer for stock-outs, irrespective of the cause. Retailers, in turn, express their frustration to the manufacturers and suppliers, creating more pressure and strained relationships for performance.

The problem is further compounded by omni-channel consumers who buy online and return the item in-store, which means that retailers should have products both at the shop and in the warehouse, in the right quantities and at the right time.

How retailers can address supply chain challenges

To address these challenges, retailers are trying creative distribution strategies that not only improve forecasts within conventional channel silos, but also facilitate inventory movement across multiple shopping channels.

For instance, some retailers have opted to fill their online orders directly from their store, while others are filling their in-store and ecommerce replenishment orders from a single distribution centre.

Depending on the distance between your store and warehouse, retailers may need the services of a third party logistics provider. When your inventory is moving fast during the holidays, these tips will help ensure good relations with your suppliers, logistics provider, and customers:

1. Good forecasting accuracyOne way to ensure that orders are always available in the right quantities and at the right time is by making realistic projections for order volumes and calls by hour, day, week or month in advance to give the provider enough time to plan accordingly.

   You will need historical data from last year, as well as any changes in the current year that are likely to impact your sales or orders, to be able to make accurate estimates of the increase in number of calls or sales for the season. This information will allow your third party logistics vendor to prepare appropriately for different days or peak hours during the holiday season.

2. Keeping the 3PL Vendor up to date on purchase ordersAs a retailer, you should be in constant communication with your suppliers and third party logistics vendors, informing them of any changes on purchase orders in a timely manner.

   For instance, informing them of advance shipping notices (ASNs) as soon as they arise, or any other changes in regard to the expected receipt items, quantities, or dates on purchase orders, will give the 3PL provider enough time to prepare adequately and deliver the item within your service level standard, as your customers have become accustomed.

3. Allowing room for flexibility with your carrierWhile you may be able to accurately project sales at different times of the year using data from previous years, you cannot always plan adequately for impulse purchases during the end of year festivities.

   More often than not, your logistics service provider will be required to make last-minute, just-in-time deliveries to your brick-and-mortar store to avoid stock-outs of a certain product. To accommodate such unforeseen incidents, you should develop a network with your 3PL vendor that allows for flexibility and can adequately handle last-minute orders.

   For such unplanned deliveries, it’s important to establish clear guidelines up front, especially regarding extra charges for fulfilment of the delivery.

Final note

With these tips, you can improve your inventory management for the peak holiday season, effectively increasing your sales and customer loyalty. However, to optimise your omnichannel strategy year round, it is critical to invest in software that can help you to better manage data and workflow in the supply chain by providing specific data for customer preference, inventory visibility, and logistics optimisation.

The remarkable growth of some of the biggest players in the sharing economy, most notably Uber and Airbnb – which have a collective worth of over $50 billion – is expected to disrupt different industries to some extent, in this case the taxi and hospitality industry, respectively.

Unlike traditional businesses that take years to create networks of both intellectual and physical assets on a national or international level, business that use the sharing economy strategy are built on consumer resources.

The fact that businesses like Uber don’t own any of the assets means that they don’t have to allocate their returns to asset acquisition, maintenance, or disposal, which makes scaling so much easier. Just to emphasise this point, Uber is currently available in 55 plus countries, and has recently ventured into business delivery fulfilment and food delivery – all in 7 years.

There are some new ventures that are trying to apply the sharing economy concept in the warehousing and logistics landscape. Flexe, for instance, is using the Airbnb model of renting extra space for short-term storage/warehousing purposes.

Disruption or Destruction

For product shipping, established businesses in the industry like FedEx and UPS build large and extensive networks to enjoy economies of scale and growth. This is a $1.25 trillion industry, which means that the logistics sector contributes 10 per cent of the nation’s GDP. This industry is large enough to accommodate new entrants in the space – whether they are multi-million or even billion dollar businesses, but the big players will still feel an impact.

One company applying the economy sharing model in logistics is Flexport. This company operates as a freight forwarder, navigating the assortment of shipping options that a client faces when shipping merchandise across borders.

In the conventional setting, the trader would have to find reliable shippers, sign multiple contracts, and go through a pile of paper documents. Flexport’s model seeks to simplify this process, so that shipping merchandise oversea is as simple as hiring an Uber and paying just what you owe.

The company offers a platform where different carriers display their services, allowing traders to manipulate different variables from the comfort of their home or office until they find a suitable arrangement. Shipping businesses also benefit from listing on the platform. They can respond faster to demand by easily changing rates and timelines to fill out lighter schedules, allowing them to convert excess resources into revenue.

Flexport has reported remarkable growth in its first two years, with the founder claiming 25 per cent revenue growth per month, as more customers learn and appreciate the transparency and simplicity offered by the platform.

At the local level, where customers don’t have to rely on third party logistics services when they need to haul something, Uber, Flexport, or Flexe can have a dramatic impact on the way business is done. Third party logistics businesses will have no option but to get listed on these services and compete for customers.

On the other hand, the appeal of third party logistics is in efficiency, reputation, and credibility, which will take time to be established with a Flexport business model. Timing is a critical factor in logistics especially at the local and regional level, where third party logistics excels.

The most likely scenario is startups like Flexport becoming platforms for conventional shippers and third party logistics companies to plan routes and combine trips for optimisation, essentially replacing the current logistics software systems.