Operations
09 January 2023
Supply chain in 2023: Normalcy returns, can West Coast rebound?
Import volumes fell below 2 million TEU in November, according to NRF's Global Port Tracker.
Photo by Barrett Ward on Unsplash
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In the supply chain, a new milestone was reached at the nation’s ports in November: Import cargo volume at the nation’s busiest ports fell below 2 million Twenty Unit Equivalents (TEUs), a measure which describes a 20-foot container or its equivalent.
After clogged supply chains in 2021 gave way to record volumes when bottlenecks eased up last year, import levels have been falling in recent months as more capacity opened up in shipping channels. Container prices plummeted along with it.
To start 2023, import levels are expected to remain at that level for most of the spring, according to the latest Global Port Tracker report from the National Retail Federation and Hackett Associates.
“Ports have been stretched to their limits and beyond but are getting a break as consumer demand moderates amid continued inflation and high interest rates,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold, in a statement. “Consumers are still spending and volumes remain high, but we’re not seeing the congestion at the docks and ships waiting to unload that were widespread this time a year ago.”
After falling when the economy shut down in the first weeks of the pandemic, import levels first rose above 2 million TEU in August of 2020. They stayed above that level for more than two years, save for one month.
It’s a sign of pre-pandemic dynamics returning in the systems that are responsible for transporting goods.
“After nearly three years of COVID-19’s impact on global trade and consumer demand, import patterns appear to be returning to what was normal prior to 2020,” Hackett Associates Founder Ben Hackett said. “Nonetheless, as inflation eases and consumer spending returns, we project that growth will slowly return going into the second half of the year.”
The latest data from the Global Port Tracker is as follows:
- In November, ports handled 1.78 million TEU, down 11.3% from October and 15.8% from November 2021. The last month to fall below 2 million was February 2021.
- In December, the projected total is 1.88 million TEU. Final numbers have not yet been reported.
- 2022 as a whole is expected to fall just shy of 2021’s record of 25.8 million TEU, with 25.7 million TEU.
- Looking ahead, the Global Port Tracker forecasts that volumes will hit a low in February 2022 before import levels rise back to 2 million in May.
Will West Coast ports regain their lead?
Looming over supply chain discussions for 2023 is a big question: Will activity at West Coast ports pick back up?
The queue of ships off the coast of Los Angeles was the prime example of supply chain congestion, and it was finally cleared in November 2021. However, many logistics managers diverted ships to other U.S. ports on the East Coast as they sought to avoid the wait. At the same time, labor negotiations between a key longshoreman’s union and managers at the California ports remain unsettled.
It all resulted in the Port of New York and New Jersey overtaking the Los Angeles and Long Beach ports as the top traffic-getter for the last three months, including during peak holiday shipping season in the fall.
A recent CNBC survey of 341 managers laid out the current uncertainty among supply chain managers:
Nearly a third of logistics managers at major companies and trade groups say they do not know how much trade they would return to the West Coast once an International Longshore and Warehouse Union, or ILWU, labor deal is reached, according to CNBC’s supply chain survey.
Eighteen percent of respondents said they would bring back 10% of their diverted trade, another 12% surveyed said they would bring back 20% of the trade they moved away, and another 12% were more bullish, saying they would bring back 60% of their diverted trade.
…Of those surveyed, 49% said they did not divert trade, compared to 40% who said they did.
This remains one dynamic of shipping that is not yet back to normal. As congestion eases up, the finalizing of a labor deal would likely provide a boost. On the other hand, an expanded Panama Canal and more embrace of nearshoring could create conditions for this eastward shift to be one of the lasting changes of the pandemic period of supply chain chaos.
Even with conditions eased up, managers should continue to monitor developments in the supply chain closely for potential savings, and efficiency.
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Shopper Experience
08 June 2023
AI, but make it fashion: Rent the Runway, Stitch Fix look generative
"Fashion ecommerce is one of the most cumbersome customer experiences that exists," said Rent the Runway CEO Jennifer Hyman.
Photo by Daniel G. Wells III, used under a Creative Commons license.
The rise of generative AI is bringing with it a groundswell of interest and concern about how the capability to automatically synthesize information and create something new will change how we work.
Given that AI will sit within the architecture of our digital lives, it’s also worth considering how the technology will introduce new tools for other aspects of life, as well.
For two ecommerce innovators in the apparel space, it’s a time to explore how it will transform shopping. Rent the Runway is set to roll out new AI-powered search capabilities, while Stitch Fix is drawing on a long history with data science and machine learning to personalize the inventory buying process.
Here’s a look at the initiatives underway at each company, and their visions for the future:
Rent the Runway: From search to concierge
Rent the Runway is putting a focus on the customer experience this year as it seeks to retain more subscribers and continue a yearslong push toward profitability.
This is resulting in the introduction of a variety of new initiatives, from the addition of an extra item to all orders to speeding up page load times. Yet as CEO Jennifer Hyman zooms out, she sees change being necessary on an industry-wide level in fashion. Beyond adding new features, AI can play a transformational role.
“I think that fashion ecommerce is one of the most cumbersome customer experiences that exists. You are searching through pages and pages and pages of content to find the items that you like and no one likes doing this,” Hyman told analysts on the company’s earnings call this week. “As an industry that still is selling physical products, AI is going to be -- fashion is going to be a major beneficiary as an industry.”
As a rental service, Rent the Runway has a distinct niche in fashion that lends itself to AI’s advantages, Hyman said. As opposed to a retailer that a consumer may visit a couple of times a year, RTR is used frequently by customers. So Hyman said there are opportunities to turn Rent the Runway into a “utility” by creating a more seamless experience.
This frequent use also provides a “highly unique” dataset, Hyman said. They know what a customer is planning to do based on what they rented. They know whether she liked or disliked an item, and many customers are reviewing 10 items per month. They know her size and how an item fits. This can be put to work in tools that allow customers to ask questions, and find answers.
The first application that combines AI and these advantages will appear in the coming weeks, when Rent the Runway plans to launch a beta of AI-driven search. The tool will allow customers to search for common terms or use cases for an item. So a person will be able to write “Miami vibe,” “‘clambake in Nantucket,” or “tropical motifs,” and receive results about what to wear for such an occasion.
The goal is to help customers sift through the endless aisle, and instantly finds what's right for them.
“I think that across all fashion sites, all over the world, the way that people are searching for product is fairly vanilla, it's fairly functional, right?" Hyman said. "You can go to a site and search for a T-shirt, you can go to a site and search for a black-tie gown. The fact that we're going to be able to enable our customers to search how they actually want to use this closet in the cloud, to search for items to wear to my beach bonfire this weekend, that is a completely different way to search, and I think that it really brings out the value proposition of what a closet in the cloud is all about."
Hyman sees this as a first step in the company using AI models to improve the product experience, and expects more tools to appear in the coming months. RTR is also introducing an SMS concierge experience for onboarding that allows customers to text with a member of the customer service team. The company is already exploring ways that AI can be incorporated into that tool, as well.
In the longer term, Hyman said the company has a vision that will leverage AI to allow customers to communicate with Rent the Runway asynchronously across different modalities, and have a stylist that is constantly available to recommend items, pick out new inventory and answer questions.
“If we are utilizing AI appropriately over the next few years, I see no reason why someone even has to come to our website,” Hyman said.
Stitch Fix: Inventory buying and beyond
Stitch Fix has long married AI with human curation to provide outfits on a subscription basis.
“For years, we have utilized capabilities in generative AI, injecting scores and language into our personalization engines and, more recently, automatically generated product descriptions,” CEO Katrina Lake told analysts. “We have also developed and implemented more advanced proprietary tools such as outfit generation and personalized style recommendations that create a unique and exciting experience we believe is unmatched in the market.”
A new area where the company is applying AI is inventory buying.
“We have historically utilized a number of tools to make data-informed decisions with our inventory purchases,” Lake said. “Now, directly leveraging our personalization algorithms, we have developed a new tool that creates an exciting paradigm shift, which will utilize math scores at the client level to drive company-level buying actions. We expect the clarity of demand signals at the individual client level to drive more proactive and efficient inventory decisions as a company. And because of this, we expect to see higher success rates on fixes and drive increases in keep rates and [average order value] over time.”
Early results are promising. When compared with existing buying tools, testing showed a 10% lift in keep rate and AOV. By the end of this quarter, Stitch Fix expects 20% of all purchase orders to be algorithmically informed.
With experience using AI and a team in place to build, Stitch Fix is investing in the technology. Like Rent the Runway, it also has a unique dataset that offers an immediate advantage.
Here are Lake’s thoughts about how Stitch Fix’s AI strategy:
One of the things that I love about our experience is that we have generative AI that's really in more of a visual format. And so, the outfits that we have in our app, those are actually taking into account your preferences, what we know about you, and then in combination with what we know that you own in your closet. And to be able to kind of continue to push that technology and to be able to continue to give people more value in their experience with Stitch Fix, that's a really good example of, I think, a capability that is, firstly, really aligned with our capabilities around data and personalization and really unique to us.
And then I think it's also really compelling because I really think that pushes us as we think about what that addressable market is. I think if we can push outfits to be something that can be an asset to everybody, I think that is a universal thing that people would love to be able to have, is to have access to advice on a daily basis around what to wear and how to wear it.
While these are distinct companies, their plans lead us to a common conclusion: While the talk around generative AI might be new, many technology-forward companies already have assets sitting inside them that can be leveraged to build new tools. Uncover what’s already there, learn about the AI’s capabilities and develop a solution that's right for your organization. Then, talk to customers to determine how to improve it. It might mean commerce looks different, but that’s okay. The point is to create a better experience.
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