Consumers Triggering Major Changes in Retail Supply Chains
Office Depot’s distribution chief says competition and tech-savvy customers are upending traditional logistics strategies at stores
The head of distribution at Office Depot says new demands and competition in the retail world raise importance of good supply chain management. PHOTO: ASSOCIATED PRESS
Retail supply chains are being driven by customer demands more than ever, a logistics executive at Office Depot Inc. says, with “far more educated” consumers pressing companies toward customization, transparency and tailored delivery.
Rick DiMaio, head of distribution at the office supplies retailer, said the push to meet customer demands is forcing supply chain directors away from the rigorous standardization and certainty they have long sought in the past.
“The supply chain I grew up with ... is in direct conflict with what customers are driving us toward,” Mr. DiMaio said Thursday at an event organized by the Council of Supply Chain Management Professionals in Los Angeles.
Mr. DiMaio said consumers with powerful technology have the ability to make transactions “in their hand, pocket, what-have-you.” The result is stronger competition between retailers and greater attention in the supply chain to the end-buyers of goods.
As a result, Mr. DiMaio said, the logistics industry will have to adapt to several broad trends:
- Customers will soon be able to choose fulfillment options—from home to office, remote location or store—for almost any purchase. Mr. DiMaio said retailers may be able to coordinate deliveries to a specific area in a town and offer speedier service if the buyer agrees to receive a parcel at work rather than at home, for example.
- Shipping from nearby store locations, rather than exclusively from warehouses or fulfillment centers, will become much more common.
- Retailers will need to fulfill and ship orders seven days a week—no more weekday-only fulfillment.
- Customers will not pay for standard shipping service. “If anybody is thinking they’re not going to be in the free-delivery business in several years, I would say you’re thinking about that wrong,” Mr. DiMaio said.
- Same-day delivery will be available but customers will have to pay for it.
- Crowdsourced services enabled by technology will help in the “final mile” of delivery, Mr. DiMaio said, “but it’s going to find its level—because that industry’s not going to let it be completely turned over to a map on a phone.”
One thing he believes won’t go mainstream is driverless technology. “I don’t want to be on the roads if they’re all driverless,” Mr. DiMaio said.
Office Depot and Office Max, which are in the process of consolidating their operations after agreeing to merge in 2013, have been buffeted by the changes in the retail industry, and the company agreed in February to merge with Staples Inc. in a $6.3 billion deal. The companies expect the transaction to be completed by the end of the year, although the deal faces legal challenges.
Both office supply companies are facing declining sales amid stiff competition from online retailers.
Mr. DiMaio, a 25-year logistics veteran, said new challenges in the retail world highlight the importance of nimble management of the supply chain. “I don’t think there’s been a time that I’ve been in supply chain that’s been more exciting than right now,” he said.
