Retailers Compete on Supply Chain - Part Deux

I have talked for years in speeches and in advising companies that the supply chain will become the competitive advantage for those trying to move products to market.  Especially if you are a retailer, you compete on supply chain in a major way.  In a blog post recently, titled Execution IS a Strategy I also talked about how great execution, more and more, differentiates the different retailers.  The same product is on the shelf and it is just a matter of who executes better. 

Adrian, over at Logisticsviewpoints highlighted the new service from Sears called "Fulfilled by Sears" (Posting titled: In Logistics, Somebody has to Own The Assets) which is an interesting development following my theory above.  Essentially, Sears is leveraging their fantastic Sears Logistics Services to become a world class 3PL in fulfillment services.  This follows the same developments at both Amazon and Wal-Mart. 

The question is why would a retailer dedicate talent, capital and executive time to opening up their logistics networks to anyone who wants to sell?  Wouldn't this be considered a distraction (especially since Sears at least is in the middle of a fight for pure survival)? The answer is twofold:

First, the simple economics are that each of these companies have to make huge infrastructure investments to keep their own business alive.  If they can leverage this infrastructure cover the variable cost of adding new clients and also contribute some to covering the fixed cost then they will be helped financially.  This is the same reason 3PLs have multi-client facilities - leverage the fixed costs.  Essentially, anyone selling through these networks is actually helping these retailers cover the cost of their huge logistics networks.

Second, they are basically saying they are the best 3PL in the nation and you should use them for that purpose.  They are competing  on logistics and supply chain strategy.  Once they get you into the fulfillment services they can sell you more and more logistics and supply chain  services. 

The group which should be very interested in this development are the true 3PL organizations.  For the vast majority of these networks, the "big 3" use their own labor and their own buildings along with, for the most part, their own software.  This is a play right out of "Porter's Five Forces" where a customer goes upstream and takes business from their suppliers. The buyer clearly is holding the power and the suppliers (i.e. 3PLs ) should be concerned with what Porter calls "Buyers threat of backward integration".    More on this interesting development later.

Does Re-Shoring Mean a Return to Industrialized America?

I really like the article Kevin O'Marah wrote over at SCM World entitled: Re-shoring is a Red Herring.  He rightfully points out that while re-shoring is great for a variety of reasons we should not hold out hope for the whole scale re-industrialization along with the many jobs it brings.  The days of just graduating high school and going to work at the local plant are over even if manufacturing returns.

One of the reasons this is true was described in a Logistics viewpoints' prediction for 2013 where Adrian Gonzales identified "the robots keep coming". Also, back in February I wrote  a post titled: "Robots and Other Supply Chain Trends" about an interaction Kevin and I  had about the idea of robotics and how robotics is a key factor of what will allow re-shoring while not employing a lot of people.

Bottom line: Re-shoring is great for America, great for supply chains and great for the consumer (Lower cost, higher flexibility) but is not the dream people are making it appear relative to jobs and the middle class economy.