Retail is a major part of the U.S. economy. Be it hardware stores, big-box discount chains, clothing outfitters, or sporting goods distribution center locations, retail is as diverse as it is contributive. Indeed, there are roughly 4.2 million retail establishments located nationwide, employing approximately 32 million people and adding $4 trillion to the gross domestic product per year, according to the National Retail Federation. In fact, just in California alone — the most populous state at 39.5 million — around one in four jobs there are supported by the retail industry, making it the single biggest sector in a state with an economy bigger than those of many countries, including India, the United Kingdom, and France. That being said, none of these noteworthy accomplishments and contributions would be possible without retail logistics.
There are more paths to purchase for customers than ever, such as mobile devices, laptops, and in person. Similarly, the manner in which customers receive their purchases run the gamut, from curbside pickup to threshold delivery to overnight shipping by mail or priority shipping. No matter which methods buyers choose, the expectation is that they’ll get their miter saws, HD TVs, batting gloves, and soccer balls quickly and conveniently. And if a customer needs to send back an item for whatever reason — made possible through reverse logistics — seamless convenience remains their assumption.
With so many retailers competing for customers’ dollars through various incentives ( such as free shipping, two-day shipping, BOGO offers, etc.), logistics management can’t just be serviceable or good enough; it has to be exceptional. However, with the aftereffects of the COVID-19 pandemic taking their toll on the supply chain, successful logistics management is easier said than done.
Oracle Transportation Management Cloud is your logistics execution solution. But before we get into the particulars of what Oracle Transportation Management Cloud does in terms of business process optimization, let’s explore some of the logistics challenges that retailers have faced over the last two years:
Challenge No. 1: Climbing costs of transportation in Retail Logistics
Retailers receive their merchandise by multiple modes including truckload, air, ocean, rail, and parcel. Whichever way it arrives, fuel powers the trip. Fuel prices tend to fluctuate more so than other costs, but lately, they’ve been going in just one direction: higher.
As a result of this trend, and because the cost of transportation comprises much of their operating expenses, retailers have to be more judicious about what merchandise comes with which shipping companies. Thus, instead of using several carriers, they may choose only two.
But doing so can create inventory issues if a carrier experiences challenges of its own, which motor carriers certainly have. One such challenge is insufficient labor. According to the American Trucking Association, the current truck driver shortage totals 80,000. If the trucking industry’s high rate of turnover persists, that shortage could double within 10 years.
Bottom line: The issues that the trucking industry faces are being felt by retailers and their logistics management teams.
Challenge No. 2: Competing with e-commerce corporations
In a number of ways, organizations like Amazon have been a huge benefit to the retail industry in general and the retail supply chain in particular. Because the e-commerce giant partners with smaller retailers and third-party sellers —which don’t have the same global distribution footprint, network, or marketing capabilities — Amazon provides retailers with business and customer connection opportunities they likely wouldn’t have otherwise.
But at the same time, Amazon is ultimately a competitor and is vying for the same customer loyalty as other retailers. And because the multinational corporation has so many distribution center and fulfillment center locations around the world — which span between 600,000 and one million square feet, according to its website — they’re a hard company to top when it comes to delivery. In some parts of the U.S., for example, a customer can get same-day delivery for certain items.
The high bar that e-commerce companies like Amazon, have set when it comes to speedy delivery forces smaller retailers to be highly efficient with shipment management and distribution. Customers expect a delivery experience – the Amazon Experience – that is as good or better than larger retailers. Effective logistics management plays a role in that.
Challenge No. 3: Rise of returns in Retail Logistics
Whether it’s a pair of dungarees that doesn’t fit or a smart device that is defective, the retail items that customers receive don’t always arrive as expected. And with more paths to purchase items, there are also more ways to return them. In fact, according to a projection from the National Retail Federation, retailers expect that $761 billion worth of merchandise sold last year will be returned in 2022. That accounts for nearly 17% of all retail sales activity in 2021.
It would be one thing if returns didn’t require any resources to make possible. But between packaging, handling, delivery, and restocking fees, reverse logistics costs money. For every billion dollars that a retailer makes in sales, $166 million is lost due to returns, according to NRF data.
However, with successful supply chain management and responsive customer return policies, reverse logistics can turn into new business opportunities, noted Steve Prebble, chief executive officer of Appriss Retail.
“Retailers must rethink returns as a key part of their business strategy,” Prebble said. “Retail is dealing with an influx of returned items. Now is the time to stop thinking of returns as a cost of doing business and begin to view them as a time to truly engage with your consumers.”
Challenge No. 4: Adjusting to new ways of doing delivery
COVID-19 changed the world in a number of ways, from introducing and reviving words in the lexicon (e.g. social distancing, remote learning, flatten the curve, personal protective equipment, etc.) to making work-from-home employment arrangements a standard job perk. But it also changed how people shop and have their purchases delivered. Buying products and services via the internet was already highly common pre-COVID. Low-contact services were a fairly new phenomenon, such as curbside pickup or obtaining medical supplies by delivery. These options are likely to stay given their popularity and success in terms of order fulfillment. Indeed, as a poll from Gallup found, 81% of respondents said they’d continue to use the low-contact services that drug stores provided even after the pandemic ends.
In some ways, this is good because it gives retailers another avenue to connect with customers and expands their avenues for product distribution. On the other hand, many retailers were under the impression that low-contact services were temporary and neglected to leverage the resources early on that could make this delivery method a permanent fixture. Thus, they may be playing catch-up if demand continues.
Much like the supply chain, the retail industry is constantly evolving and does so in response to customer demand. But you can ensure your business adjusts to these dynamics with Oracle Transportation Management Cloud. Through applications like transportation order management, rate management, shipment management, global visibility, and business process automation, your business can leverage the efficiencies that are available with a single transportation management solution. Some of the benefits of OTM Cloud include:
- Supply chain resiliency
- Increased performance and reliability
- Decision support to identify affordable delivery carriers
- Automated support for multiple types of tender processes, such as conditional bookings and tender acceptance
- Real-time status updates from transportation service providers
- Seamless freight claim management and error-free customer billing capabilities.
- Meaningful analytical insights and dashboards
All this and more are available with the Oracle Transportation Management Cloud. When paired with Oracle Global Trade Management, it allows retailers that rely on imports to more comprehensively handle all the nuances and variables associated with global retail logistics management.
As retail logistics management specialists, Inspirage is ideally positioned to perform the implementation of your new Oracle Cloud transportation management system. A long-time partner of Oracle, Inspirage specializes in helping organizations reach a higher standard of business and logistics management excellence. Contact us today to learn more and visit our blog for more supply chain optimization insights.
