Is it Really Retail Armageddon?

And, will new retailer requirements help suppliers & consumers?

As part of the hyperbole about ‘Retail Armageddon,’ there’s a lot of speculation about the multi-billion dollar impact of 2017’s retailer requirement changes. As a professional in the industry, I find it mystifying that it’s treated like an ‘opinion piece’ instead of a fact-based news story.

We have actually facts! We’ve analyzed the 2,000 supply chains we work with - in aggregate. We engaged a team of math and computer science experts use multivariate analysis and Analysis of Alternatives (AoA) to deliver something very simple: A cost-benefit analysis of all retailers’ new compliance requirements and penalties. 

It's Big Money - The dollars we’re dealing with here are astronomical. For example, 3% of the largest retailer’s US business alone is almost $10 billion. And, most major retailers have made big changes this year.

So, presumably we’re not the only company that has engaged a qualified firm to contemplate whether the benefits associated with retailer requirements are worth the cost. Just first hand, I know that the SupplyPike analytics team has been chewing through data at CPG companies to analyze the impact. We haven’t seen an analysis from retailers yet, but two of them are also starting to work with SupplyPike to figure it out better - because the wrong strategic supply chain decisions could obliterate a retailer’s price-leadership position.

The Costs of Compliance are High

There is enough data now to know what the different retailer requirements mean in terms of supply chain costs - depending on the particular retailer, the 2017 changes created between 5-11% in additional logistics costs. That's right - Shorter windows for delivery will cost money for the industry; just like guaranteed overnight delivery cost more when you order at home.

The Industry Benefits are Important Too

There are benefits for everyone, and they are important to suppliers, retailers and consumers. Out-of-stocks hurt everyone ...lost sales opportunities, dissatisfied consumers and lost profit. Supply chain variability also comes with a hefty price tag. 

People in operations and compliance are on the front lines. People in these roles are pivotal for all companies in the supply chain because they serve as the point person for ensuring vendors and their partners are reaching all retailer compliance standards. The analysts are heavily-versed in compliance principles for all major retailers in order to identify how vendors and their partners can better adhere to these parameters. 

Operations and compliance analysts help companies understand, navigate and overcome the narrowing windows and regulations being placed on them. Meanwhile, Supply Chain Analysts take heroic efforts to make it happen every day. 

Compliance analysts answer the $10 billion question everyday - is the juice worth the squeeze? They raise the bar for each supplier; improving supply chains one-by-one; and in concert with the data analytics. Know the requirements, fix root causes; then you’ll know whether compliance is hurting or helping.

Use Math; Not Magic - Each increase in compliance requirements creates costs. Each has benefits. But, each additional marginal requirement has an exponential impact on costs and an associated marginal benefit impact. This is math; not magic. Eventually, we cross a line, and we risk hurting the consumer. 

I feel like all of us in supply chain tech and services have taken our own version of the Hippocratic Oath -  either help or do not harm to the consumer! 

See how Millennials are Making Work Better

Talented up-and-comers are getting into Supply Chain. It’s a chance to collaborate with retailers, suppliers, carriers, warehouses and data scientists to improve consumers’ lives in a trillion dollar industry.

And, on the answer to the first question - Is this an Armageddon?

Simple answer: No! Retail is changing. The long tail is everything to consumers, and that will be very disruptive. Great retailers are here to stay, but they need to be ready to give consumers what they want (also not a new concept).

Didn't anyone else order any ridiculous Christmas presents today - things that arguable shouldn't even exist (i.e. items in the long tail)? Please share some photos if you can.

Dan is the President and CEO of CaseStack, Advisory Director to SupplyPike, and the author of Collaborate: The Art of We. You can check out Dan's Instagram.