Issue link: https://cp.revolio.com/i/646848
Looking back at the supply chain environment prior to the e-commerce boon, there were many more static points, as well as fewer touch points. Many retail supply chains consisted of two basic channels. One channel was where local goods (domestic) were more fluidly transferred from suppliers through cross docks, or shipped direct to store. These goods typically flowed more rapidly and in a smaller quantity in order to ease inventory carrying costs. The alternate channel to this fed products from a further distance (usually imported goods), that made their way in larger quantities in order to ease ordering and limit out of stock potential. These products were typically held in a bulk as managed inventory and distributed to the store level as needed. But in each of these channels the next trip from the DC was typically a short trip to the store by truck. Today the supply chain continues to diversify in an effort to become more fluid. But the addition of e-commerce has taken the predictability out of the equation for the downstream process. In our current retail world, the "off-line" or "in-store" sales still dwarf the on-line sales. And because of this important fact, the economics related to designing packaging for the "worst case scenario" isn't a valid option. In most cases, a traditional retail supply chain relied on using the basic ISTA Series 1 or Series 2 test standards. The basic hazards of transport box handling were tested for drop, vibration and compression. However the modern supply chain has become more fluid. This transformation has come about because costs for inventory and customers increasing demands for availability have required the change. However the biggest driver for this more fluid environment has been the increase in e-commerce. The increase in e-commerce has given rise to the broader multi-channel retail (or interconnected retail) environment. In this model, the customers are given multiple options for purchasing goods (in-store, on-line, mobile, etc.) and multiple options for delivery (in-store, ship to home, pick up at store, etc.). These options are becoming more common in the retail industry and by 2016, more that 10% of retail transactions will be through e-commerce (Souze 2015). The challenge to the packaging designer is that each different mode of customer deliver poses different handling environments and unknown risks. Beyond that, the opportunity for the consumer to be the final decision maker in this process leaves uncertainty of what options for delivery might be more prevalent than others. For a packaging engineer, options for delivery in "the final mile" pose different criterial that would normally considered in package design and testing. For example, if the package is going to be used in a "pack and pick" environment, what is the right test method? Should the master pack be tested to ISTA 2? Should the individual retail packs be tested in an over box to ISTA 3? Should both tests be done? What if there's other product mixed in the over box? In reality, many of these questions are just not feasible to answer, and can't be anticipated. And with that, it's recommended to start with much more basic questions. The first questions should be - what is the most important delivery channel I need to solve for, and how can I mitigate the next most likely variable? In nearly every current brick and mortar retailer that has an e-commerce presence, the answer is the same. The most dominant delivery channel is going to the store shelf, but the most demanding is shipping through the dotcom channel. In this case there are only two options for the packaging engineer. If the cost of packaging changes for the dotcom delivery channel are very small related to product cost (or related to the opportunity for damage), then go to the higher level of protection across the board. This situation is not the usual case. In most cases, if the cost of packaging changes will negatively affect gross margin dollars, then a more cautious approach is needed. 14 ista views • February 2016 • www.ista.org Adapting to the Re-configuration of the Retail Supply Chain > CONTINUED FROM FRONT COVER Figure 1: Global E-Commerce Spending in US $ (Source:Statistica.com)