Coronavirus & the Advantages of a Distributed Supply Chain Model

The impact coronavirus is having on our society and the way we do business is massive. Scars will be left, and some business models will prove to be more resilient than others when facing a crisis of this scale and nature.

The obvious is that retail is one of the most affected sectors, first by seeing their footfall decrease drastically, but then being forced to shutdown either by public pressure, government guidelines, or because a single co-worker became ill.

The shift to e-commerce is mandatory for retail businesses to survive, but even e-commerce is not 100% bulletproof. Companies relying on single fulfilment centers and warehouses for stocking and managing their online orders are still at risk of having to close their operations due to sickness or external pressure. Net-a-Porter was one of the biggest online retailers impacted by this pressure and decided to shutdown its entire operation, essentially haulting their e-commerce revenue for the unforeseen future (Financial times, 2020).

On the other hand, Farfetch, Net-a-Porter's biggest competitor, is able to thrive in this environment, and most likely capturing a large share of the online luxury sales throughout this period, but also potentially snatching Net-a-Porter clients for the longer term.

The difference between them? Farfetch has a distributed supply chain model

As a marketplace, Farfetch ships the large majority of its orders, not from a single warehouse, but from hundreds of fulfilment points spread across the world. Even the network of boutiques in Italy are able to fulfil orders, despite having their doors closed to the public. There might be cases where some boutiques need to shutdown their operation, but that will impact a fraction of Farfetch's supply, rather than its entirety, allowing Farfetch to keep its website and operations running.

The impact doesn't stop with lost revenue. Net-a-Porter buys a lot of the stock it sells, holding tremendous stock value throughout the season, which is currently sitting in their warehouses devaluing as the current season passes. Items will eventually move to markdown territory, slashing even potential future profits significantly.

It's time for businesses to re-think their Supply Chain approach

It doesn't take a global pandemic to realize the benefits of the marketplace model, with orders being dropshipped from the brand or retailer to the end consumer. This strongly mitigates risks of shutting down operations and losing tremendous inventory value.

Jetti is here to help. Some of our clients have shifted from a traditional supply model to a distributed one, others creating a marketplace from scratch, and the opportunity is here more than ever. Jetti can facilitate how you work with a network of Vendors that will fulfil orders for your marketplace.

Get in touch and we'll be keen to share further insights into how the marketplace model can be run and how we are here to support it.

Thank you, Jetti team

Next post:

Shipping Costs and Their Effect on Profitability

Written by Francisco on March 13th, 2020

What is Jetti?

Inventory, order and purchase management software in the cloud. A single, efficient system for your inventory and order operations.