With the arrival of the COVID-19 pandemic, 2020 quickly became the Year of Disruption for the business community. Arguably the very first lesson we collectively learned was that a lean supply chain — the gold standard of operational excellence for a generation — was a liability in times of crisis. Leanness was out, and resilience became the new operational goal.
Resilience boils down to cultivating the ability to roll with the punches, and the past year has offered plenty of punches to learn from. With a new year well underway and recovery — however, it’s defined — on the horizon, it’s an opportune moment to review some of the lessons of 2020 and how e-commerce merchants can apply them to build a more resilient business.
Flexible People Build Flexible Companies
Many e-commerce merchants have flourished during the pandemic, while others have struggled and been obliged to shorten hours or lay off employees. Whether shrinking or growing, that kind of change means that your staff — or at least key members of your team — has to be able to take on different and sometimes unexpected roles or grow and flex in unpredictable ways.
The University of Pennsylvania’s Wharton School of Business cited that kind of flexibility, the willingness and ability to go beyond a job description, as a critical factor for retailers in the COVID-19 era. To an extent, you can hire for this — candidates with a breadth of professional and life experience may be more adaptable than those with more tightly focused backgrounds — but it’s also important to recognize it and develop it in your existing personnel.
Practice Risk Mitigation
Commercial kitchens use HACCP (Hazard Analysis Critical Control Points) to identify and mitigate risks. They identify points where food safety could be compromised in their production process and then establish checks and procedures to prevent those risks. A global supply chain is more complex to manage than a kitchen, but the basic principles — identifying what things can go wrong and where and when they could go wrong and planning a structured response — are transferable.
This isn’t exactly uncharted territory. In the Harvard Business Review, Tom Linton and Bindiya Vakil were already exploring supply-chain risks and how to address them by last March. At that point, most of the companies reviewed predicted a return to normal within a few months and hadn’t spent much time on crisis planning. That’s a decision that doesn’t look good in retrospect, but if you fell into that trap, you can at least comfort yourself that you had plenty of company.
The spring of 2020 gave an almost perfect example of how supply and demand interact with supply-chain risk. It’s textbook stuff taught in supply-chain management classes, and academics will be parsing out that gap between theory and practice for years (the process is already underway, in fact). As Linton and Vakil point out, part of the problem is a lack of transparency up and down the chain. Many merchants had no clear picture of where their products were sourced, so every disruption was an unpleasant surprise.
Leverage Technology to Build Transparency
That leads us directly to the need for transparency in the chain. Writing in Inbound Logistics, academic and author Paul Myerson prescribes a heavy dose of technology, the best tool to help you create that transparency. With the range of technologies now available — RFID tags on products, “smart” Internet of Things (IoT) devices to tell you what’s loaded and shipped, GPS tagging to locate shipments in real-time — it’s possible to follow an order from manufacturing to your warehouse and from there to the end customer. If your suppliers can update you electronically at that level of detail, you won’t even need to enter the information manually.
If you’re not yet in a position to invest in that level of technology, you can still gain its benefits by partnering with a suitably tech-forward third-party logistics partner. They’ll handle the details and provide them to you in a format you can work with. You’ll still need to use that data intelligently for planning purposes, but AI and machine-learning tools can even help with that.
Broaden (and Diversify) Your Base of Suppliers
That, in turn, leads us to the question of how you choose which suppliers you deal with. Those who have invested significantly in technology will be better placed to participate in a transparent supply chain, though that won’t necessarily be a deal-breaker. It’s just as important that your suppliers can inform you in detail where their suppliers are located so that you can diversify.
As 2020 showed, the proverb about having all of your eggs in one basket is unhappily accurate. Shutdowns in mainland China, Korea, Taiwan, and other manufacturing centers caused global supply chains. Diversification was one of last year’s harshest lessons: selecting suppliers who can source materials or products from multiple countries or regions is a huge factor in business resilience.
Distribution Needs to Be…Distributed
The same rule applies to your distribution network at the customer’s end of your supply chain. Whether you handle distribution and fulfillment in-house or outsource it to a 3PL (or both), a distributed network is innately more resilient than one built around a single hub. If your warehouse or distribution center is in a state or community that’s locked down, your ability to deliver in a timely fashion goes out the window.
We may never see a crisis like COVID-19 again in our lifetimes (one can hope!), but the same reasoning applies to natural disasters such as floods, earthquakes, and severe storms, which occur to varying extents every year. If your distribution network doesn’t have enough redundancy built in to cope with that kind of disruption, you should think seriously about partnering with a 3PL capable of bringing that to the table.
Your Website (Probably) Needs to Improve
“COVID forced everyone indoors and online,” says Scott Stanchak, the NBA’s vice president of emerging technology and an instructor at New York University’s graduate program in integrated marketing. “This meant increased traffic for websites and apps, many of which couldn’t handle the extra visits and purchases. Consumers had money to spend — even when the economy looked bleak —, but many e-commerce retailers outside of the big names hadn’t yet invested enough to create great experiences online.”
This means reviewing your site regularly to ensure it competes well against your peers (don’t take your web team’s word for it; hire outsiders to give you a bluntly objective opinion). “This is not a one-time thing, but a long-term game with consumers,” Stanchak says. “Merchants need to focus on building relationships. They visited your website or app for a reason. If not a purchase, focus on getting their contact information to start forming a relationship. People have choices, so why give them the option of going somewhere else? How do you get consumers to choose you?
“Not enough businesses truly invest in creating a great online experience. It’s making sure your end-to-end experience online (product offering, checkout process, shipping logistics, etc.) is as optimal as possible. As I tell my classes, it’s not as simple as going from A (customer visits your website) to B (customer receives the product). There’s a number of steps in between that can prevent or add friction to a consumer getting to B. How do you make that process as easy as possible?”
Work On Your Relationships
Businesses are built on relationships — with suppliers, with clients, with investors, with employees, and especially with customers — and the pandemic altered those relationships in some fundamental ways. At the University of Chicago’s Booth School of Business, Professor Waverly Deutsch surveyed dozens of entrepreneurs in the United States on several topics, including those changes.
About two-thirds of respondents reported a change in relations with employees and customers, and over 40% reported a change in relationships with suppliers and within the executive team. Nearly a quarter of entrepreneurs surveyed had been forced to change suppliers and said that negotiations with new suppliers involved more flexibility and give-and-take. Sales cycles with B2B customers have similarly lengthened, with more negotiability in terms and conditions. Investors are more willing to buy in without meeting in person, a relative rarity before the pandemic.
For many entrepreneurs, the most significant change was the relationship with employees, many of whom are (or were) working remotely. Keeping that option open in the coming years may help with recruitment and retention. You may also want to work on your management style: Deutsch’s research showed that businesses with authoritarian leaders were less likely to flourish during the crisis than those following other models. Hold off on that one, though, because her research also indicated that this isn’t the time to throw even more unpredictability at your team.
Tech Helps Keep Your Warehouse Moving
During the pandemic, one of the recurring stories was people losing their jobs or facing cutbacks. Still, another was the difficulty of finding enough warehouse staff to keep the orders moving. The need for distancing, extra sanitary measures, and personal protective equipment didn’t help, either, and big players like Amazon generated much negative publicity over their workplace environments.
Populating the warehouse with the best tech you can afford helps smooth out those difficulties. Robotics, IoT tagging and AI-optimized warehouse organization, and picking lists can all help improve your efficiency in boom times and help you run leaner when the going gets tough and staffing is in short supply. Again, if you don’t handle your warehousing and distribution or can’t budget for that level of investment, it’s something you can acquire through a 3PL partnership.
Business Resilience Is a Habit, Not a Destination
The pandemic has made for a chaotic, stressful, and occasionally exhilarating ride within the e-commerce industry. The pre-COVID-19 status quo is definitively broken, but you shouldn’t think in terms of arriving at (or even creating) a new one. If you allow yourself to become complacent, you’ll be forced into the same cycle of on-the-fly improvisation when the next crisis comes along.
“Resilience in e-commerce,” Stanchak says, “is knowing that the customer experience can always be better, testing hypotheses to try to make that experience better, and implementing those that work. Then doing it all over again!” That cycle of applying 2020’s lessons, learning from the outcomes, and refining and repeating the process won’t just make your business more resilient: it will make you a better merchant.
At Taylored Services, we’ve been privileged to see that attitude firsthand over the nearly three decades we’ve been supporting retailers and e-commerce merchants. It’s also how we approach our own business and make us a superior logistics partner along your journey. Contact us today to learn what we bring to the table and how we can help you build resilience into your business.
References:
Wharton Magazine: 10 Steps Retailers Can Take Now for Post-COVID Success
https://magazine.wharton.upenn.edu/digital/10-steps-retailers-can-take-now-for-post-covid-success/
Harvard Business Review: Coronavirus is Proving We Need More Resilient Supply Chains
International Journal of Operations & Production Management: Research Opportunities for a More Resilient Post-COVID-19 Supply Chain – Closing the Gap Between Research Findings and Industry Practice; Remko van Hoek
https://www.emerald.com/insight/content/doi/10.1108/IJOPM-03-2020-0165/full/html
Inbound Logistics: Lessons Learned: Risk Mitigation Strategies for the Future
The Booth Review: COVID-19 is Changing Key Business Relationships