Retail Supply Chain After Coronavirus - Johnson Stephens Consulting

Steve Johnson, Senior VP – Consulting Services of Johnson Stephens Consulting, provides insights to Multichannel Merchant about how the Retail Supply Chain industry will reset after the Coronavirus.

Excerpts from “The Retail Supply Chain Reset After Coronavirus: Three Expert Views" are as follows:

Johnson agreed that supply chains need to be compressed, and over-reliance on cheap Chinese goods has to end.

“Right now, it’s hitting them hard,” he said. “I hear people saying, ‘I’ve got two months’ of supply of what I need, because I ordered before the Chinese New Year. I have one client with $74 million in furniture on the water, because they have to order so far in advance. It’s not going to be easy – it can’t be just a retailer or two making a change. They need to come together and make a collective effort on behalf of the country, or stay greedy when it comes to pricing.”

For example, the price of apparel from 1990 to now, he said, “is flat to slightly up. That is a symptom of this, going in for cheap imports and destroying industries.” Johnson said he’s been encouraged by the return of U.S. manufacturing in categories like appliances and furniture, although he doesn’t see textiles and apparel coming back here.

Retail and ecommerce companies that have invested in past years in expanding their distribution network are benefiting now in the coronavirus crisis, Johnson said, able to get orders to customers across the country faster.

“Some clients have limited distribution, maybe a single distribution center, so they have to shift to customers in certain geographic areas,” he said. “Some can’t operate at all right now. If I have multiple DCs, I have more touchpoints. It’s definitely showing up now. If you don’t have product in your eastern DC, you might have it in the Midwest and you can get it out the door.”

Johnson also said that robotics adoption is bound to grow substantially, given labor shortages and higher wages, among several other factors. Amazon’s implementation of a $15 minimum wage across the country, and now offering $17 per hour in the crisis, is putting pressure on all other fulfilment employers.

“We have a client that’s an $80 million wholesale footwear brand, selling to Macy’s and JC Penney, with not a huge fulfillment business but growing it,” he said. “Do you put in conveyors or robotics? I think robots make a whole lot more sense, especially if they can lease them. They’ll only need 7 bots to start, and maybe in five years it’ll expand to 30. They’re facing challenges as an SMB that can’t deal with the capital outlay of a three-level pick module. They’ll get as good or better production rates and it’s cheaper to rent.”

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