Why Your Company Needs a PAL Supply Chain Strategy

Tue, Aug 4, 2020

PAL-supply-chain-strategyBusinesses have been moving towards a PAL (“Personal, Automate, Local”) supply chain delivery strategy for some time. But perhaps more than anything, it was the changes brought on by the recent COVID-19 pandemic that illustrate how crucial the need is for companies to focus on collaboration, visibility, and customer-centric thinking in order to survive and thrive in our current (and future) economy.

The pandemic has clearly shown that companies who utilize a rigid supply chain strategy will fall short when it comes to meeting consumers’ ever-changing needs and expectations for flexible, multi-option fulfillment options.

That’s why it’s crucial for companies to have a PAL Supply Chain Strategy. Here’s why each component -- Personal, Automated, Local -- are so important.

Personalized

Your customers expect a personalized experience from the beginning to end of their shopping journey. Consumers appreciate, for example, personalized products they can order in a subscription service. More and more, successful brands and retailers are adding AI-driven personalization to every aspect of the shopping experience, whether through new fulfillment options or through cross-channel messaging.

One company that has set the benchmark for automating supply chain strategy is Amazon. At Amazon, personalization is referred to as “customer obsession,” a term that reflects the ways that other companies can and should view the importance of personalized service and delivery in a changing economy.

Automation

An effective customer-centric approach demands an increase in automation. Personalizing a supply chain strategy will often mean incorporating automated customer communication at every step of the fulfillment process, from the moment that the order is first received and through packaging, shopping, and delivery.

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This is particularly important given the current COVID-19 outbreak. No matter what happens next, it appears likely that the pandemic will permanently change buyer behavior. So while automation has now been increasing for some time, customers’ ever-evolving needs and expectations mean that to stay viable, businesses will likely need to rely even more upon automation moving forward.

Companies need to automize a process that allows them to instantly and easily:

  • Set up store locations

  • Set up fulfillment preferences

  • Prioritize orders seamlessly

  • Manage inventory (on a per location level)

  • Route orders to the correct location

The applications of automation in commerce are virtually limitless. Some ways it looks like in successful companies include:

  • Using SaaS-based platforms to integrate APIs with already existing IT infrastructures

  • Deploying machine learning

  • Automating robotics processing

  • Utilizing big data analytics

In an era where many companies find themselves needing to decrease costs wherever possible, automation truly allows companies to efficiently save money in every conceivable area.

Automation particularly drives collaboration and visibility. It’s crucial for companies to be able to oversee how each step on the supply chain is performing; automation makes that possible.

Local

Health concerns and limited store hours and stock during the COVID-19 outbreak have meant that customers are relying upon online order fulfillment more than ever.

But there’s a catch. Customers have certain expectations about items they order online. They expect:

1. Free (or at least very inexpensive) shipping

2. Quick shipping (next-day or two-day shipping at most)

3. Free and convenient returns

When those expectations aren’t met, customers won’t buy. It’s as simple as that. Studies have shown that 54% of online shoppers will abandon a cart because of expensive shipping; 39% will abandon their carts without a free shipping option; and 26% will abandon their carts because of slow shipping speeds.

Responding to these customer expectations in a cost-efficient way requires one thing above all: businesses going local.

Businesses will need to move fulfillment closer to customers, likely with micro-fulfillment centers. Micro-fulfillment centers allow companies to utilize local stores for fulfilling e-commerce orders and BOPIS (“Buy Online, Pick-Up In Store”) orders.

Micro-fulfillment centers have other benefits, including:

1. Reducing final mile delivery cost

2. Fulfilling orders faster

3. Minimizing real estate costs by utilizing already existing store space

4. Assembling multiple orders

5. Fulfilling e-commerce orders profitably

6. Storing a much higher number of SKUs (and a higher quantity of each SKU)

7. Fulfilling orders automatically and immediately

8. Minimizing reliance on third-party shipping options

Minimizing reliance on third-party shipping options is particularly crucial, as paying third-party parcel delivery companies for overnight shipping is one of the most significant costs for online retailers.

The ability for companies to survive both during the ongoing pandemic and in the changing world that will follow, will be determined in large part by their ability to implement a flexible, responsive supply chain strategy that relies on a personalized, customer-first approach.

To do this, retailers need to structure their supply chain strategy around omnichannel retailing, with every single channel working together to minimize disruptions and increase uptime.

Businesses need to thrive in an increasingly contact-less era will need to understand the increasing importance of last-mile distribution options, and what that means for supply chain visibility, automated technology, and personalized service that allows for true growth moving forward.

Visibility into the fulfillment process -- from the standpoint of the company and the customer -- is crucial for success in an ever-changing global landscape.

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