AI, Robotics, Resiliency, Circular Economy and Other Topics at RILA Supply Chain Conference
The world around us is changing at a pace that most did not imagine was possible just a few decades ago. “Never Normal” is rapidly becoming, “The New Normal”. Market forces on the supply side, changing consumer preferences on the demand side and innovative uses of technology by retailers are all ushering in an era of productivity and convenience like never before. Many of these key themes were highlighted at the RILA conference this week.
The Circular Economy
Chip Bergh, President & CEO of Levi Strauss and Co, discussed the circular economy. Pulling from his direct experience with his 11-year-old daughter, Chip discussed the growing thrift market for fashion. “Gen Z kids are fundamentally going to be very different consumers than this world has ever seen. They are more connected, more knowledgeable and more concerned about what is happening on planet earth today than any generation before them”. It’s common now for the Gen Zs to purchase clothing from a thrift store and then post pictures of themselves wearing it on social media. In a few weeks’ time they resell those items on commerce sites like ThredUp.com and the process repeats itself. This trend may likely impact the future sizes of closets built in houses as large stockpile of clothing will not be necessary. This generation sees a lot of the world’s pollution and waste as a problem mainly created by the disposable economy that was created by the Baby Boomers. Gen Z sees it as part of their mission to change that trend and the reuse/reuse, circular economy is one primary way that they will have that impact.
That means that this next generation is not going to be nearly as large of a consumer as the generations before them. “News flash, that means for all brands, you need to figure out new revenue models as you might be selling less product in the future. That is one of the big things that is going to shape this industry in the next one or two decades. Gen Zs are hitting the consuming market right now and in time, they will be the largest consuming cohort of any generation,” Chip said.
The Holy Grail of supply chain is to postpone finished goods production until the order from the consumer has been placed. In fashion retail, this presents a real challenge as the model historically has been to pre-position finished garments in large retail outlets. Levi Strauss and Co’s customers can have their jeans tailor-finished and delivered to their door in a few weeks. Laser finishing has made it possible for consumers to have a unique pair of jeans. See the “Future Finish” technology at work.
Nike corporation launched their Consumer Direct Offense program with the aims of having a faster pipeline to serve customers personally and at scale. Marcus Bolden, Nike Direct Assistant General Manager of North America, stated that Nike chose 12 global cities to be the focus of this initiative. He also highlighted the use of geofencing as part of this program, stating that products that are created for one of those 12 markets are only available and sold within a defined geofence around each given market.
Regarding sizes for garments, Chip Bergh said, “In ten years’ time, sizes will go out the window. I agree with technological advancements, business models will be fundamentally disrupted. It’s either ‘get on board with it or get left behind’.” Chip continued by discussing emerging body scanning technology and how clothing will shift from sizes to custom on demand. Maybe it’s time for young budding tailors to consider a shift, too…
Supply chain risk and resiliency has been on top of most people’s minds with the COVID-19 virus outbreak. The outbreak that started in China is rapidly making its way around the globe and causing supply chain disruptions as key global manufacturing facilities remain closed. David Shillingford, Chairman of Resilience360, led a session on the retail impacts of the coronavirus. A few statistics that he presented really stood out; China produces up to 90% of active drug ingredients and 30% of global manufacturing. He provided detailed maps of the disruption occurring and offered suggestions on practical actions that retailers should be taking to address this challenge. One key recommendation was to map the end-to-end supply chain. Doing this allows you to assess the interconnected nature of how a supply interruption cascades across a retailer’s global supply chain and ultimately impacts customers. He advised that leaders map out the product, revenue and profit that is at risk and to design contingency plans and to use omnichannel fulfillment methods to fill as many orders as possible as a protection against revenue losses. Retailers need to put in place contingency plans now on how to address what may be a coming surge of online orders as people are restricted from gathering in public places or choose to minimize risk of exposure to the virus.
Never Normal is the New Normal
“Retail will change more in the next five years than it has in the last 50,” stated Nancy Giordano, Play Big Inc.’s Strategic Futurist, Founder and Chief Executive Officer. Nancy delivered a keynote titled, “Navigating the Big Shift: Tech, Society and Supply Chain”. She presented a very compelling case on rapid changes in the consumer market:
- Nondairy milk alternatives now outsell all dairy milk which will result in the number of cows in the USA decreasing by 50% by the year 2030.
- Tiny houses are printed on location in a matter of 12 hours at a cost of $4,000.
- Ovie Smarterware has come to market with containers that will warn you when your food is going bad with sensors that connect to Alexa.
- Sweden has placed the first fully autonomous 26-ton truck on the road for testing which will usher in completely new capabilities for transport when the technology scales.
- In a retail first, Walgreens has partnered with Wing Aviation LLC, an Alphabet company to test “store to door” deliveries of health and wellness items to customers.
- Unconventional partnerships are arising between Kohl’s and Amazon, even Honda and GM have partnered. Honda will invest $2.75 billion USD into GM’s self-driving car unit and utilize their technology in vehicles, yet they will remain fierce competitors in the market.
This rapid change has created a “Liminal Gap” where old systems are breaking down and new systems have not yet been invented to take their place. A way to combat this is to use volatility, uncertainty, complexity and ambiguity (VUCA) as a guide. The trick is to turn today’s VUCA into vision, understanding, collaboration and agility. One simple place to start with understanding is the voice of the customer. The very successful Live in Levi’s campaign was a result of a comment made by a customer as she explained that while she “wore” certain jeans for different occasions, she “lived” in her Levi’s.
Artificial intelligence (AI) is radically reshaping the world that we live in. Retailers have grown profits and increased market share with finely tuned recommendation engines that are used with connected shoppers. Retailers are making big bets that machine learning algorithms will help them sense and respond to trends much earlier than before. Nike showcased how they were able to automate their ecommerce piece pick operations with the LOCUS Robotics’ assistance. I spoke with a representative from LOCUS Robotics and he mentioned that initial investment paybacks can happen in ten months with monthly fees for the robots on an ongoing basis. This is probably one of the best examples that I have seen yet of robots working alongside humans to make them radically more efficient. The worker stays in a confined zone and the robots come to the workers with the totes that need to be filled. The system also ensures 100% pick accuracy with visual indicators. Take a look at how DHL uses LOCUS for e-commerce fulfillment.
Any anxiety about AI and automation eliminating jobs in the future was put to rest by the closing RILA presenter, author and entrepreneur, Byron Reese. He took us through the world history of technology advancements from the written language to the computer and now AI and robotics. Never has there been unemployment of more than 5-10% after technological advancements scale across the market. What does happen is the role of the worker shifts. While that exact shift may be hard to predict, the market forces do an excellent job of retooling the workforce for these new opportunities.
In addition to the very informative sessions, I had the opportunity to engage with many people who are part of the LLamasoft ecosystem. I never tire of seeing smiling customers or speaking with prospects about digital supply chain twins or the possibilities of micro-apps that are powered by AI. Overall, RILA LINK2020 was a timely conference that helped to equip leaders of retail to better manage and thrive in the change that surrounds them. I am looking forward to seeing you at next year’s conference!