60 seconds with Brian Gibson, Auburn University

Brian Gibson, Auburn University
Title: Wilson Family Professor of Supply Chain Management at Auburn University
Location: Auburn, Ala.
Experience: Eight years of retail distribution management and 21 years of teaching, research and consulting
Primary Focus: Supply chain education, retail supply chains and talent management

Modern: Brian, you’ve been co-authoring a state of the retail supply chain report for the Retail Industry Leaders Association (RILA)for the past five years. What have been the most important changes you’ve observed in that time?
Gibson: One of the most critical aspects has been the strategic shift of logistics as a cost center to logistics as a customer experience facilitator. We’re focusing less on saving a penny in logistics while ignoring the impact on the stores and the customers. Supply chain executives are becoming more customer-driven and store support-focused.

Modern: What is driving that shift?
Gibson: In part, it’s because supply chain professionals have become comfortable in their own skin. They realize their value to the organization goes beyond cutting transportation and fulfillment costs. In part it’s because supply chain executives now have a seat at the strategic planning table. They have an opportunity to shape the decisions that affect customer satisfaction and company profitability.

Modern: I know you’re still compiling your findings, but at this point, what strikes you as most important in this year’s survey?
Gibson: What strikes me the most is the willingness of retailers to talk about their need to be profitable in omni-channel activities. It’s no longer good enough to say: Amazon’s doing it, so we’re going to do it. Retailers are starting to look beyond market share. They’re becoming more strategic and purposeful about omni-channel profitability.

Modern: This seems almost counter-intuitive, because marketing continues to talk about offering more selection, more value-added services, faster delivery and lower prices. Is that model sustainable? Or, put another way, have any retailers figured this out?
Gibson: Chasing e-commerce market share at any cost is not sustainable, in my view. You have to be rational about the products you offer online, the level of service provided to customers, and what you charge for delivery. If you don’t, margins will rapidly deteriorate to the point where e-commerce is a perpetual money loser. Retailers have to become much more strategic and bottom-line focused, especially in their fulfillment and transportation decisions. Fast and free is not sustainable. The interesting thing is, retailers understand the problem and are becoming more creative in their omni-channel approaches. They’re asking: How can I protect the margins for any given order?
Is it best to fill it from the store, transfer it from the DC to the store or bypass my network and ship it from a vendor? Those are all critical options that need to be considered to ensure you’re optimizing margins rather than narrowly optimizing availability, variety or speed. Retailers who take a purely marketing perspective will pay a steep price.

Modern: How important to the retail economy is Amazon?
Gibson: That’s a good question. I think some retailers are starting to question whether it is financially worthwhile to chase every Amazon initiative. Retailers have said to me that they’re not going to out-Amazon Amazon on everyday products. They realize that it’s impossible to make money trying to be all things to all people.

Modern: Look five years down the road. What do you expect the landscape to look like? 
Gibson: I think we will have a more realistic vision of omni-channel, though we will probably just call it retailing by then. People won’t care where their orders originate as long as the timing is right, the price is right, and we deliver perfect orders. The role of the supply chain will simply be to support the buy-anywhere customer in a cost-efficient manner. I think that we will also see smaller stores that carry less inventory and focus on the basics. When customers want a specialty product, unique color or odd size, they’ll preview samples in-store, order it online and have it delivered to their homes. Customers will grow much more comfortable with that model over the next five years.