Lessons Learned from Toys R Us: Supply Chain is Key
In my last blog post, I wrote about the ripple effect of Toys R Us’ bankruptcy filing and subsequent liquidation plans, reported last month. For consumers, including many of my parent friends, the question that is top of mind is which stores have the best discounts during the closeout. For the supply chain leaders I’ve been talking to, however, the biggest question is, “How can I avoid ending up in a similar situation?” What happened to Toys R Us can be seen as a cautionary tale for retailers and manufacturers.
As reported in the Wall Street Journal, Toys R Us CEO David Brandon cited the firm’s “inability to provide expedited shipping options, and our lack of a subscription-based delivery service” as causes of its problems. (Let’s set aside financial challenges caused by hefty loan payments from its leveraged buyout in 2005.)
From this experience, here are three steps your organization’s supply chain can take to remain competitive and stay relevant.
- Focus on enabling rapid order fulfillment. Today’s customers expect fast order fulfillment from online channels. Meeting this demand is table stakes to stay in the game. If your company’s legacy systems don’t allow you to fill orders and ship them fast enough, outsource to an organization that can do it for you. One supply chain leader recently shared with me that his organization is using a third party as a stop-gap measure to meet customer demand, but his company is replacing its antiquated system to save money in the long-run.
- Revisit your distribution network design. Over time, the supply and demand requirements of your network will change, and having outdated or inadequate facilities (e.g., location, size, or number of facilities) increases your supply chain costs. Because adding, removing, or relocating supply points in a distribution network is complicated, create an accurate model of your end-to-end operations to identify major opportunities for improvements in cost, service, sustainability, and risk.
One regional logistics leader from a technology company told me that his team used network modelling to estimate the impact on lead time, inventory, and transportation costs to change from a hub-based model to a direct-ship, hub-less model. Based on the results of the modelling activity, his team quickly gained management support to redesign their network.
If your inventory stocking locations are not in the ideal place to best serve your customers, one approach to consider is micro-fulfillment. Micro-fulfillment can range from tactics as drastic as storing your products in a private resident’s garage to leveraging artificial intelligence-based solutions like CommonSense Robotics. (Share your opinions on micro-fulfilment with APQC and our partner Supply Chain Management Review in this 5 question quick poll.)
- Refocus on the customer experience. Not all shopping happens online. Having the right product, at the right time, in the right place still matters. But how customers interact with products is changing. Innovative display design, faster no-waiting checkout, and customized products are a few ways leading retailers are changing the customer experience.
Amazon, for example, plans to open as many as six more Amazon Go stores this year. These ready-to-eat food stores don’t have cashiers or cash registers. Instead, “Just Walk Out Technology” enables shoppers to scan their phone when they enter, pick their groceries, and simply leave the store when they are done. Their order total is then automatically billed to their Amazon account.
In a different take on innovative, in-person shopping, Levi’s Tailor Shops, located within select Levi’s® stores, allow customers to customize, personalize, and repair their denim products with the help of in-store, expert tailors. The on-site professionals are able to fix, fit, or finish new and previously owned clothing items, offering one-of-a-kind customization and service.
As you prepare for what's coming next, I recommend you view the recent sad news about Toys R Us as a catalyst to go to your business leaders and make the case for changes and improvements in your supply chain.
For more on what you can do to fortify your supply chain, read 5 Tips for Better Demand Planning. And for insight into what’s on the minds of other supply chain professionals, check out 2018 Supply Chain Management Priorities, Challenges, and Tips.Tweet