Is agile fulfillment the solution to retail’s renaissance?

Photo: Getty Images
Aug 07, 2017
Peter Charness

Through a special arrangement, presented here for discussion is a summary of a current article from the TXT Group blog.

Clearly, it’s not the best of times for a traditional retailer. The stock market is at a new high, unemployment a new low – normally plenty to warm a retail heart. However, the upward trend is store closings and pity parties. Worse, if you didn’t move early and quickly to online, has that high-growth opportunity passed you by? wins about 50 percent of every incremental online dollar and just welcomed their 50 millionth apparel customer.

As in any other structural change, there will be winners and losers, as Darwin insures only the strongest (smartest) survive. Some will win by gaining market share from failed competitors, most need to adopt new business practices and operationalize significant changes in shopper interaction. The picture of the “new normal” is still hazy but there are early indicators of the types of capabilities that retailers should understand and align with to insure they are renaissance ready.

Firstly, you (still) need great product, ideally an exclusive brand that you control. Also, a quick adaptive supply chain, fast-fashion technique will spread to more industries, so hone your skills at designing or acquiring more products with shorter life cycles.

Secondly, you need to master the “fulfillment chain.” Unlike the supply chain, this is about planning and placing product and information along the path to purchase that your shopper will utilize — researching and ordering on the web, while leveraging the multi-function store, (a showroom, a shop and a fulfillment/return center). A high functioning fulfillment chain is the mixed mode successor to the pre-renaissance model of buy in store, or on the web, with chaotic and expensive intersections in between. A modern fulfillment chain needs to make sense for your customer, organization and bottom line.

Retailers have thrived in the past by creating repeatable, high-scale, low-cost, hardened processes built on monolithic systems that supported a (formerly) profitable business model, but destroyed agility. Thriving in the future will involve turning that model on its head and creating high-scale, maybe not so -low cost but highly-agile capabilities.

DISCUSSION QUESTIONS: Do you agree that retailers will need to focus on agility over scale around fulfillment to manage retail’s ongoing shifts? In what ways can retailers achieve a cost-effective fulfillment chain?

"There are incredible opportunities to leverage digital tools to increase agility without limiting scale."
"Stores need to consider how to use their stores as miniature, real-time fulfillment centers, enabling smarter use of the space."
"Agility over scale works for small, it won’t work for large."

Join the Discussion!

12 Comments on "Is agile fulfillment the solution to retail’s renaissance?"

Sort by:   newest | oldest | most voted
Lyle Bunn (Ph.D. Hon)

When manufacturing capacity far exceeds buying capacity consumer preference must dominate the operating principles of the supply chain. This is Amazon 101, which physical retailers are fundamentally wrestling with. Boutique retail understands this and brands are adjusting to this new survival reality. Agility calls on more stock refreshment, shipping and promotional planning but the rewards are in the increased traffic that comes with a desire for discovery and conversion related to more unique products. Being nimble in merchandising pays big rewards.

Bob Amster

Retailers will need to increase their focus on agility of fulfillment. That agility will be supported or provided by a combination of computer systems that integrate all the fulfillment locations and permutations seamlessly, in real-time, combined with the ability to procure product — down to the SKU level — more quickly than had been possible more than three or four years ago.

Tom Dougherty

Is this a choice between two values? Clearly retailers need to have both. If survival of the fittest is real (as you describe) then agility and scale need to join forces.

Tom Erskine
6 months 13 days ago

I disagree that retailers will need to focus on agility over scale. They need to do what modern, digital, organizations manage to do — focus on both. And it isn’t something they “will need” to do. If they’re not doing this already, it’s too late.

I know that “digital transformation” is a term that gets overused, but the retail supply chain is a poster-child candidate for the definition of this term. At virtually every step in the retail supply and fulfillment chain today there are incredible opportunities to leverage digital tools to increase agility without limiting scale.

Brandon Rael
Retailers, particularly fashion companies, are under significant pressure more than at any time before to evolve to a more agile manufacturing and fulfillment model. By taking a more predictive, strategic approach to merchandising, planning and fulfillment, as well as evolving to a more streamlined supply chain operating model, retailers will have a fighting chance to compete in today’s marketplace. The agile fulfillment supply chain model has worked very successfully for the fast fashion houses such as H&M, Zara, Forever 21 and so on. Vertically integration focused retailers such as Bonobos and Warby Parker can produce very nimbly, a customized product, following an excellent in store showroom experience. One of the better examples of traditional brick and mortar retailers evolving to a more agile, speed to market model, has been Tommy Hilfiger, who is part of PVH. The company underwent one of the biggest business model shifts in its history when it moved to a “see-now, buy-now” runway show called Tommy Now , last year. This essentially shortened the normal 18-month production process into just six… Read more »
Alex Senn

Agile store ops are a necessary strategy within the retailer’s roadmap. More and more the stores need to consider how to use their stores as miniature, real-time fulfillment centers, enabling smarter use of the space. Consumers want quick and efficient shopping experiences. Understanding this and integrating frictionless checkout experiences not only helps the consumer but the retailers.

This also creates valuable data which allows retailers to automatically improve their ability to target customers and increase purchase frequency.

Ralph Jacobson

All businesses, not just retailers, need to become more agile. In fact all business partners in the retailer’s ecosystem must be able to respond in almost real-time to the ever-evolving operational landscape that is driven by consumers, competitors and external forces. I believe that many retailers will actually continue to operate their fulfillment functions five years from now the same way they do today. The trouble is these retailers will not be growing profits at the same pace as the agile innovators will be. It’s as simple as that.

Ken Morris
The simple answer is that you need both scale and agility. That said, retailers in fashion need to quickly adapt to new trends and distribute merchandise quickly, in a fulfillment model that closely matches the likely omni-channel distribution of those products. They need to embrace real-time inventory across the chain and sell to the last item. It hurts retailers’ sales and customer loyalty when they are out of stock for the item customers want and they can’t get it quickly, so locating in a same day or 1 day fulfillment area is key. From this perspective, agility is extremely important for fashion retailers. For hard goods and department stores, scale is probably more critical, as these stores typically have large quantity of commodity products and there isn’t as great of risk for out of stocks. With advance planning systems tied to a real-time retail system, retailers can forecast demand and plan for replenishment (with safety stock) to manage inventory levels. With great pressure from Amazon and other online marketplaces, retailers selling commodity products must focus… Read more »
Dave Wendland

Achieving a cost-effective fulfillment chain requires that retailers stop trying to force fit an approach into their existing framework. I envision a FaaST (Fulfillment-as-a-Service Transaction) model where focus is on the entire consumer experience and speed of execution and not solely focused on pick, pack, and ship. I’d love to see how we can work together to transition to a FaaST end-to-end process and replace the outmoded, product-centric model.

Shep Hyken

Should agility be given more weight than scale? The best retailers have that in balance. And, those best companies run on highly refined repeatable systems that scale. That said, the old saying is: “The only constant is change.” The best companies know this, and their systems, while consistent, have room for flexibility. The solution is for a retailer to forecast using different models. Planning for what is most likely to happen without considering these other possibilities can be dangerous, especially as competition heats up and innovative companies disrupt the retail industry.

Phil Rubin
6 months 12 days ago

Agility over scale works for small, it won’t work for large. Agility is a strategy and implies a recognition that not all customers are on the same journey nor do they have the same wants, needs and expectations. To embrace agility but not in a scalable manner is a fail unless you’re a small merchant.

Scale is relative to which customers a retailer is serving. Part of loyalty marketing is the recognition that not all customers are equal (in value) and thus scale might not be the same thing as being able to do everything for every customer. Loyalty marketing discipline says this is likely a mistake. For example, Amazon scales its expedited shipping for Prime members, not for all customers. This is simple in concept but gets more complex in determining what services – fulfillment or otherwise – need to be developed and executed for all customers rather than select ones.

Ricardo Belmar
Agility will bring scale when executed properly. Amazon has shows this in abundance. At the same time, Amazon didn’t invent everything about digital transformation, business agility, and innovation. Retail is not immune to the need for agility and businesses in manufacturing and 3PL industries have learned this already and adapted to become more agile while still operating at scale (at least the successful ones have!). Amazon has been adept at both creating new innovations in this area and adopting what other successful enterprises have done. Retailers need to follow this path as well. Depending on the segment (hard goods vs apparel vs other soft goods) the answer will vary. Hard goods retailers have a little more leeway than apparel for example where fast fashion is now the new normal. Department stores are having the hardest time with this adaptation due to those monolithic systems they invested so heavily in over the years. The problem they face is that it will require an equally heavy investment of capital to replace those systems — the difference is… Read more »
"There are incredible opportunities to leverage digital tools to increase agility without limiting scale."
"Stores need to consider how to use their stores as miniature, real-time fulfillment centers, enabling smarter use of the space."
"Agility over scale works for small, it won’t work for large."

Take Our Instant Poll

Do you see more pros than cons in retailers shifting to more agile fulfillment methods versus scale?

View Results

Loading ... Loading ...