DEEPER DIVES: The Next Wave Of Innovation Will Finally Solve A Massive Supply Chain Pain

Good Morning,

First, as always, thank you for joining.

The archive of past issues is still a work in progress. I am getting everything up, but it’s slower than I would like. I will update here when it’s all done, but you can check the list if you are looking for past issues as they live update as soon as I’m done.

I’m back with Matt and Jess this week as we’re doing our first LinkedIn Live Audio together. The focus is middle mile, LTL movements and zone skipping. We hope to see you there - LinkedIn live audio makes it wicked easy for others to grab the mic and share their take. We’re looking to make this a great conversation with multiple different people sharing insights.

A couple of viral posts last week had the newsletter subscribers go up by leads and bounds. To all of the new people. Welcome.

Here’s what this issue brings:

• The ability to control and shape the demand has been a dream for supply chain professionals. It’s an area that I’m highly focused on. Here, I share how emerging technologies and market approaches are laying the foundation to reshape how goods move to market.
  

• Instacart and Uber announced a big partnership this week. Everyone thinks it’s a waste of time. I think Instacart is building a Trojan Horse
  

• Quick and easy to start the week, I share my 5 best tips to get more insights from the information you record anyways

From Chaos To Control. Why Demand Shaping Will Dominate eCommerce And Re-Write Customer Experience

With every transaction, there is a delicate balance between supply and demand.

How much is produced (or made available) ties directly into what it is sold for.

That balance is crucial.

You have to create the right value to sustain your business while also being able to satisfy enough customers at the same time.

With millions of products across tens of thousands of categories, it’s easy to understand how this balance can fall out of sync.

When you are selling a product or service, you’re either trying to tap into existing market demand or you’re trying to generate your own.

You spend money on advertizing, samples, and promotions.

Then you work with teams behind the scenes on demand forecasting, production planning, and inventory management.

But traditional methods are wide-net solutions. They leverage mass media, trying to push to large segments of a population base to get an ROI on their investment.

And because you’re pitching to millions of subjective decision-makers (consumers), you end up having to guess.

Even with the best tools, there’s a lot of error in those guesses.

But what if, the days of big guesses are coming to an end?

Walmart, Amazon & TikTok Shops

Companies are getting so much better at building their springboards.

Sliding out what seem to be simple solutions, but that have so much more capability than people realize.

Earlier this week I wrote about Walmart and Roblox expanding their partnership.

These two started working together a while ago, creating in-game shopping transactions (Walmart Discovered). The first version allowed users to find new games, buy emotes, customize shopping carts and show off their favourite items.

Version 2? Expanding the service to allow users to buy real-world items as they game.

It’s a pilot project at the moment and is only selling 3 SKUs. I’m pretty sure Walmart isn’t going to let this go. Watch for it to expand through the rest of the year. I bet it will get major hype for this year’s holiday season.

How much do you enjoy shopping through a search on Amazon?

When you don’t know what you want, but have an idea. Or just kind of know what you might want and you’re trying to figure it out.

I hate it.

I find it brutal.

Page after page of the same stuff but with different logos. Or things that are almost the same but not.

Then having to check if the reviews are legit, and not some old recycled page with a new product listed on it (PSA if you didn’t know that can happen!)

Even Amazon knows it sucks.

It’s one of the major reasons they released Rufus.

If you haven’t heard, Rufus is an AI assistant that’s supposed to help users with their shopping sprees. Rufus has been trained on its product catalog, customer reviews, community Q&As, as well as information from the web.

Does that not sound like a much more enjoyable shopping experience?

TikTok shops are the front-runner in social commerce.

And by front runner, think Usain Bolt running against a class of kindergartners.

They have put the power of commerce and community in everyone’s pocket. Viral video after viral video is popping up from someone who’s not an influencer, is not being paid for their video, and is simply giving their authentic take.

How Are Those 3 Things Connected

When you control the platform.

And you command the attention.

You get to choose who sees what, where, and when.

That is INSANELY powerful.

Forget about running national or regional ads for millions of dollars and hoping enough of the right customers buy.

The next level of commerce that these retail giants are creating is all about control.

And it’s going to work so well because no one will even realize it’s happening.

The algorithms already shape and customize user feeds.

The entire user base has been accustomed to this “feature”.

With everyone being okay (and even wanting) their personalized feed, no one cares what anyone else sees.

When you can create and plan your demand spikes, how much more efficient and effective does your execution become?

They will be able to introduce new types of fulfillment features and create the perception of incredible speed while meeting nothing but rave reviews from consumers.

These positive experiences drive more word of mouth about the platforms and tools, getting even more users signed on, and further strengthening their position.

The meticulous planning and orchestration of assets will drop their costs, making it even more of a flywheel to put pressure on competitors in the space.

Personally this is an area of operations I’m heavily focused on. In every conversation with a service provider or retailer, I open up the social commerce execution strategies.

From a retailer’s perspective, having a partner that is flexible and agile enough to support a host of new innovation and connected commerce will be essential.

As a service provider, you are going to need to move far outside of the basic execution of parcel shipping. Retailers are going to be looking to increase the number of ways they are connected to their customers, and the types of offers they can make them.

Logistics is about to get VERY interesting.

The Commissions Are A Wolf In Sheep’s Clothing, Instacart Isn’t Trying To Save Itself On Uber’s Revenue

Uber can’t afford for their delivery business to start to drop off.

Like all of the gig models out there, they’re feeling the impact of rising labour costs and tighter consumer spending.

A partnership with Instacart makes sense for them.

They get more customers to experience their platform and are likely paying next to nothing for it.

Not the most direct order segment, but features like Uber’s Eats delivery scheduling make it easy enough for customers to place an order for dinner while making their morning grocery order.

And don’t forget, if there’s one thing both Uber and Instacart have mastered, it’s enticing customers with non-stop discounts and promotions to increase user adoption.

My interest isn’t with Uber for this partnership.

It’s with Instacart.

They are the ones with a deteriorating operational model and the ones who are looking to make strong pivots with their business.

A few challenges that Instacart laid out in their corporate documents:

• As Instacart continues to scale, maintaining and improving operational efficiency is a critical challenge. They are focusing on leveraging operating data to make shopping more efficient, such as increasing delivery areas and using machine learning to predict stock availability.
  

• Challenges with increased customer demand, especially during peak times like winter storms, to match shopper availability with customer orders to maintain service reliability.
  

• Continued work to improve their 'found and fill rates'. This indicates ongoing issues with ensuring products are available and can be found by shoppers as listed online.
  

• The competitive grocery market and consumer price sensitivity continue to pose challenges. Instacart is addressing these by digitizing deals and expanding promotions to attract price-conscious customers.

Instacart knows that it will always be in a disadvantaged position to improve its operational effectiveness.

They send gigworkers into stores to shop.

The complexity and uniqueness of each consumer order coupled with the fact that shoppers may have limited experience with a particular grocer is a nightmare to streamline your processes and reduce costs.

No matter how hard they try, they will always be chasing after improvements that are extremely hard to realize.

Some people think that Instacart doesn’t get much out of the deal.

I disagree.

They get the one thing they want more than anything else.

Data.

They already have a treasure trove of consumer grocery data. Deep insights into how people eat, what they order, and when.

Adding in data related to what people will spend extra on, how often they choose a restaurant versus eating at home, and what types of food they order while out, versus what they order when at home is an absolute gold mine.

I dug around but couldn’t nail anything down. What would make this partnership an absolute “game changer” for Instacart is if they got access to data from Uber Eats for orders that didn’t come from their system.

Their advertising business is making massive contributions to the company.

In 2023, it finished with 18% growth year over year. In Q1 2024, this is already up another 9% when compared to the same period in 2023.

The more data they acquire, the more opportunity they have to keep increasing this revenue stream.

Remember, Instacart didn’t hide its desire to be a technology company.

The company gathers billions of data points that feed into the largest and most sophisticated AI engine among online grocery marketplaces.

The data insights help retailers understand real-time inventory on shelves, shopping habits, and optimal product replacements, which are critical for maintaining high customer satisfaction.

Their biggest threat is if their shopping and delivery model becomes unsustainable or starts losing too much money.

Making partnerships with companies like Uber keeps their name in the news and part of the general consumer awareness.

They need people to keep buying to keep collecting data.

Everything else doesn’t matter.

Squeezing Every Bit Of Value From Your Systems And Processes

Every data field in every system you have can have more value.

When I work with retailers, I ask a lot of questions about their data.

What are their hierarchies?

How do they link different types of orders through different sales channels?

Some have amazing processes.

You can tell that they planned and have deep sophistication in their master data.

Most don’t.

Because systems and processes have evolved, what’s in the system today is often a carryover from what was in the “old” system.

Here are some of my best tips to get the most from the information you record

1. Have defined entry fields.
   Specific rules around what can go into a field, the data format, the length, special characters, etc
   

2. Use consistent prefixes or suffixes
   Most systems will allow you to define these types of elements for things like orders or PO numbers. By developing a key and applying it to all of your transactions, you dramatically enhance your ability to pull insights (quickly) from your data.
   
   Here’s an example:
   Web Order - WWW0123456789, WEB0123456789
   Amazon FBA - FBA0123456789
   Amazon (self-fulfilled) - AMZ0123456789
   

3. Build dimensions to main categories
   These are secondary elements that allow you to sub-segment orders or activity data into the types of buckets that help you make better decisions about your business
   

4. Carry a common key
   Very often unique IDs get dropped when recording data in one table versus another, or one system to another. Your ability to analyze your data across your business is directly related to how well and how easily you can connect different pieces of what you have to others
   

5. If you think you MIGHT need it, start recording it now
   Most businesses don’t grab onto a trend soon enough. You end up with millions of additional transactions that should have had new data captured with each order but you didn’t “really” need it right now, so you didn’t. The second something starts providing any benefit to the business, make it part of your standard data capture

That’s it for this week. Thanks for being here.