Vertical Supply Chain – An Exercise in Thought

In June, LynnCo led a webinar for ARA members to discuss three strategies to consider when reviewing your supply chain: network optimization, inventory optimization (SKU rationalization), and final mile considerations. If you did not have the opportunity to attend the webinar, a recording is available at the bottom of this article for viewing in the members only section of aradc.org.

In the face of a resurgence of positive COVID-19 testing results, limitations placed on consumer activities have been partially mitigated by increased awareness of social distancing practices, and mask adoption. Many restaurants, bars, grocery stores, and other retailers have remained open, but foot traffic continues to decline as a result of social-distanced seating configurations and consumer return-to-quarantine lifestyles. Many consumers, business owners, and executives envisioned a steady return to “normal”, and many supply chain leaders assumed the same.  This belief downplayed the urgency to improve pre-COVID practices, however, the reality of COVID continuing and the expectation of future COVID-like events has reaffirmed the need to assess long term strategies and redefine existing practices.

Many retailers have been nimble in adjusting to the current environment by converting significant portions of brick and mortar storefront operations to pure or near-pure e-commerce centers. The ag retail vertical had already entered the e-commerce experience, but many organizations maintain multiple locations to facilitate local distribution. Regardless of the order origin (website, OMS, call center), distribution from regionalized locations presents many efficiencies, beyond better fulfillment rates, optimized delivery routes, and reduced procurement costs. The optimum locations for these fulfillment operations are open to adopt existing real estate investments as part of the site selection process.

When workforces are impacted by COVID-like events that cause a facility shut down, a network optimization study – a complex modeling exercise designed to determine the optimal locations for fulfillment centers- can identify alternative procurement and fulfillment locations. Contingency strategies are developed in conjunction with these alternative sites to plan for multi-sourcing execution, workforce attraction and utilization, management practices, and integration into the remaining unaffected supply chain network.

Inventory management strategies can also benefit from primary and contingency planning. SKU rationalization, stockout forecasting, replenishment processes are, but a few, of the adaptations to satisfy the migration to a greater centralization of demand fulfillment within a supply chain network. Local distribution centers can continue to satisfy spot ordering and fulfillment can be integrated into the overall supply chain network. With proper planning, the local center can ensure stock rotation and optimized final mile activities. These may serve to minimize obsolescence and reduce local delivery cost.

In closing, final mile utilization of non-CDL rated personnel and equipment is under increasing scrutiny by the FMCSA. The ability to lessen or eliminate oversight, by performing final mile with drivers and equipment not subject to DOT requirements, may be greatly curtailed. This has been an ongoing point of contention between safety advocacy groups, the transportation industry, and the FMCSA. While motor carrier reporting and management of these fleet types has been a part of their overall operations, the rise of contracting entities has raised questions. This increase in FMCSA evaluation can be expected to spill over to fleets that have always operated under this model.

We strive to remain relevant to our audience. Our next webinar and continuing thought paper offerings seek your input. Please share your continuing supply chain questions, thoughts, or comments to LynnCo’s Robert Wayson at LynnCoMedia@lynnco.com and he will work to prepare content that meets those needs.

ARA members can log in to the ARA Member Home with their email and ARA password to access the Ag Retail Supply Chain webinar recording by going to the Professional Development menu and clicking on ARA Webinars.