E-commerce Surge Driving Faster Adoption of Digital Supply Chain Networks
Pre-pandemic, retailers and their supply chain partners were preparing for moderate, steady increases in online sales volumes every year. Those projections were blown away in 2020, as e-commerce experienced a 32.4% growth surge. As businesses struggled to handle an unprecedented influx of online orders, it became clear why a digital supply chain is essential to their future success.
“A lot of supply chains were never designed for very quick turnaround of consumer orders. They’ve had to adapt quickly, which in turn is requiring terrific visibility all the way through the supply chain,” said Colman Roche, vice president of e-commerce and retail sales at MHI Member Swisslog Logistics Automation. Tracking everything from the point of supply to the point of delivery to the customer requires digitalization.
“We’re able to kind of reach customers at a whole different level than we would previously, where we can connect with them, understand personal preferences, how they shop. Pair that with increased expectations on high service levels, the ability to take reactive information and be more proactive, and becoming digital is increasingly more important,” said Kevin Mahoney, a senior manager for Deloitte Consulting’s Retail and Consumer Products line.
The push for a digitalized supply chain is coming from the top. Gartner’s 2021 survey of company CEOs found that growth and digitalization were their top two priorities. “What the CEOs have in mind when they deal with digitalization is supporting growth. It’s really about e-commerce and customer interactions, which are two different things but still connected with supporting growth,” said Pierfrancesco Manenti, VP analyst at Gartner. “If you launch an e-commerce initiative, and the supply chain is not ready to deliver in a different way, you are not going to maintain the customer experience they expect. Therefore, you won’t get growth from e-commerce, you will have a disaster from e-commerce.”
In the past, concerns about the ROI on the software systems and automation required for digital supply chains have slowed adoption, but now cost isn’t as big a factor. “You can’t demonstrate ROI, because it’s not about savings versus costs, it’s about growth versus costs,” said Manenti. “Companies that don’t go in this direction are not going to have the same opportunities for growth.”