Retail supply chains are facing increased pressure to consolidate operations, enhance warehousing and inventory management and speed up delivery times - all while trying to reduce costs. The commerce industry has been dealt a handful of changes over the past few years, many of which have shaken up the traditional business model and forced businesses to reconsider how to optimize their supply chains. Between consumers' rising expectations and the rapid acceleration of e-commerce, the competition between companies is intensifying and fueling them to implement the best strategies available. Unfortunately, this has created some friction among various business segments.
Tension with transportation companies
One of the primary areas of concern at the moment has to do with the trucking industry. Last month, FedEx released a statement revealing that it believes retail companies should be responsible for paying higher shipping costs because, as it stands right now, many transportation organizations are struggling to maintain profits on the growing volumes of shipments. At the time, a FedEx representative explained that the e-commerce growth is forcing carriers to expand their networks and make capital investments. And it is not just that shippers are being asked to deliver more packages; they are also being asked to transport bigger ones.
This week, The Wall Street Journal reported that trucking companies are trying to decide how to approach operations and pricing when it comes to making e-commerce deliveries. One supply chain analytics expert told the news source that these shipments account for about 10 to 20 percent of the less-than-truckload market. The problem with the LTL carriers hauling big items, such as dryers or pieces of furniture, is that the vehicles are not suited for residential areas. The source noted that sometimes they hit trees or electrical wires. In addition, it takes the drivers a lot longer to unload these packages and making the deliveries can take twice as long as it would to operate in industrial settings. The minimum fee that many transportation companies have for making a residential delivery does not sufficiently cover the added labor, time and tools needed to complete these types of jobs.
FedEx and UPS have both increased their prices for delivering oversized products, according to The Wall Street Journal. If this trend continues, it is going to be problematic for retail supply chain leaders, as they continue to scramble for cost-reduction solutions and attempt to improve delivery times without exceeding budget.
Logistics and lawsuits
In the race to adopt cost-effective strategies for warehouse, distribution and inventory management, many logistics and supply chain leaders are realizing that onboarding and retaining highly skilled talent is an essential component of success. In an increasingly competitive environment, companies need to take advantage of every solution they can. For a handful of organizations, this has led to legal disputes.
This month, Amazon Inc. filed a lawsuit against its former supply chain leader, Arthur Valdez. The retail giant accused him of violating the terms of his non-compete agreement when he decided to leave the company and work for one of its competitors, Target Corp. It said that it would be impossible for Valdez to work for Target without revealing confidential insight and information he learned while overseeing the supply chain and logistics operations at Amazon.
And, as The Wall Street Journal pointed, this is far from the only legal battle that has emerged in the supply chain and logistics industry lately. In February, XPO Logistics Inc. also filed a suit against not one, but two of its rivals, R+L Carriers Inc. and YRC Worldwide Inc. The transportation company, the source added, is still in the throes of a litigation case that began four years ago, when C.H. Robinson Worldwide Inc. sued XPO for executive poaching.
"The whole issue of supply chain is moving so fast that… there's not a great deal of people who, at this point in time, are regarded as the leaders in their fields," Russell Reynolds Associates Head of Global Supply Chain Practice Peter O'Brien told The Wall Street Journal. "They're worth their weight in gold."
The source went on to explain that the nature of business is changing and it is causing a lot of disruptions and uncertainty for traditional retailers and trucking organizations. As a result, they are "obviously looking for a mechanism to defend themselves."
Retailers continuing operations despite growing challenges
Although transportation firms are increasing costs and logistics leaders are facing legal battles, retail supply chains don't have much choice but to continue working while they clamber and compete for increased market share and top SCM talent. The Wall Street Journal noted that Arthur Valdez started working for Target amidst the lawsuit filed against him.
Right now, some organizations, such as Amazon, are primarily concerned with making faster deliveries, even if it means decreasing its profit margins, the news source added.