Solving the e-Commerce Puzzle: An interview with Michael Gravier

Editor’s Note: In this exclusive interview, Michael Gravier, Associate Professor of Marketing and Supply Chain Management at Bryant University, share his insights on the current e-commerce challenges.

Supply Chain Management Review: How is e-commerce changing the way we approach logistics/distribution network strategy?

Michael Gravier: Most people underestimate the massive changes to logistics/distribution network strategy. Where traditional logistics and materials management focused on the manufacturing and production end of the supply chain, e-commerce focuses more heavily on the end consumer. Where facility location decisions used to change on a decade scale, e-commerce now must respond to fickle consumer markets.

SCMR: So what is the best approach for managers today?

Gravier: That name of the game is adaptability! Couple fickle consumer tastes that vary from region to region, or even neighborhood to neighborhood, with wider demographic trends like population shifts away from old centers like New England to new ones like the South, as well as changing lifestyle choices of Americans—and all while trying to achieve economies of scale to deliver one package at a time. This will require a network of smaller facilities closer to end markets.

SCMR: Any insights on how markets will change in the coming years?

Gravier: As America goes through the Baby Boomer aging bubble, there will be a changing need for where to locate distribution facilities. B2B distribution will confront a similar dilemma as more companies demand the flexibility that can only result from low inventories; it does no good to have machine learning and rapid 3D printing if you still have old inventory to get rid of! One predictable trend: people seem to be moving into certain mega-regions, which should figure prominently into any network strategy analysis.

SCMR: How is e-commerce changing the way shippers approach carrier relationships?

Gravier: The saying, “demographics is destiny,” will hold strong sway over carrier relationships as much as for strategy. For example, more households now have dogs than children, we're graying as a nation, and the percent of Americans who are foreign born is near all-time highs for our nation's history, which may increase international parcel shipments. This all means that shippers will have to achieve the flexibility to do business with different suppliers and customers.

SCMR: But “flexibility” in business relationships is often the antithesis of what most experts prescribe as good business practice because it implies switching relationships as needed, correct?

Gravier: That might be true, but the struggle to gain this flexibility has played into the hands of general parcel delivery companies like UPS and FedEx, and given rise to flexible intermediaries like Amazon, and we can learn from these companies how to approach carrier relationships of the future.

SCMR: Any other advice in this regard?

Gravier: Where possible, you standardize, and always, always act as the expert to help the customer make the best choice of service, even if that means that they go to a competitor. The leverage will be trust-building. E-commerce brings the information needed to allocate resources more efficiently, and the means to share information regarding performance and reputation of a company. Bearing this in mind will position a company well for when blockchain technology (or its successor) starts coming online.

SCMR: What about exposure to risk?

Gravier: Good question. There may be enough B2C e-commerce business to justify the appearance of competitors to FedEx and UPS, especially regional competitors in areas of population growth in the South and Southwest, so many companies will find themselves establishing relationships with new entities, and having to take a risk on unproven players.

SCMR: How is e-commerce changing the way shippers apply IT/technology/software?

Gravier: Advances in technology will make it easier for companies to reach consumers directly, especially since competitors to payment brokers such as PayPal seem a certainty. On the B2B side, e-commerce may have hit a temporary wall as technologies like blockchain struggle to figure out how to share the costs of infrastructure, how to impose standards on all participants, how to reduce calculative expenditures, and (most importantly) how to share the rewards.

SCMR: Has technology has reached a level of maturity that certain key players such as ocean shippers, industry clearinghouses such as ISO standards, and public-private partnerships will step up?

Gravier: This will take a few short years to sort out, and then the technology will explode. In the meanwhile, ocean shippers have tried to take the lead on blockchain technology, which may turn into a very important influencer of how shippers decide to use technology. One vastly overlooked area is edge computing—shippers live and die by information, and they will have to make most future investments on the frontlines where information is gathered and put to use if they want to find any meaningful improvements to e-commerce performance.

SCMR: How is e-commerce changing the way shippers are finding the labor they need?

Gravier: E-commerce has narrowed the field of eligible labor to the point that companies increasingly often launch training programs to get the talent required. Warehousing jobs are becoming more important, and these are more skilled jobs than in the past because modern warehouses engage in more value-added services. Automation in warehouses and shipping yards does two things. It alleviates repetitive work that humans are terrible at, and it multiplies the value of labor.

SCMR: So what's the end game?

Gravier: With labor able to produce more value, eventually wages will follow, so smart companies will invest not just in higher wages, but providing more comprehensive career environments for workers. Evidence increasingly shows that workers prefer meaningful work, so treating workers as commodities chases away the most productive workers, especially if wages experience upward pressure. We see a parallel trend in trucking, with certain companies doing a much better job of retaining and developing talent.

SCMR: But won't combating this trend mean that customers will only pay so much? Will shippers start tracking productivity per worker in order to ensure ROI for new technology and worker investments?

Gravier: Smart supply chain managers will need to fight the urge to hire and promote purely on ROI and performance metrics and keep in mind the important qualitative factors that good workers bring to the table, such as inter-personal skills, conflict resolution, ability to train others, and being a team-player.

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