Are retailers prepared to respond to increasing supply chain complexity?
Since the start of the pandemic, consumers have been mainly buying essentials, with a corresponding and dramatic decrease in purchases from categories like cosmetics, business clothing and sunscreen. Retail spending in the UK was down 1.9 percent last year and the U.S. saw similar trends in non-essential verticals.
Retailers have had to closely monitor what they order and stock as lockdowns have come and gone. They’ve also needed to update their channels and delivery methods to try to make up for at least some revenue lost to store closures and/or reduced in-store traffic.
Walmart is an excellent example of a retailer that has successfully taken new and unique steps to future-proof its business including adding local fulfillment centers and automated pickup points. Large grocers like Kroger and Albertsons are making similar updates.
As these new channels are implemented, however, the supply chain becomes more complex. Retailers must ensure that they’ve established a foundation of technology to handle this complexity — and even simplify it. It’s no longer enough to focus on the links between supplier and warehouse or distribution center and store. There are more delivery options to manage, demand points to forecast, inventory fluctuations to attend to and spending peaks and valleys on the horizon.
Last year, retailers needed to find ways to meet demand as quickly as possible to protect their margins, with little time to plan. This year, with the updated channels in place, it’s time to start thinking ahead and preparing for a potential spending surge due to pent-up demand.
Rather than continuing to use outdated or manual supply chain management processes, retailers must move to automated, data-based solutions. Improved forecasts help avoid the out-of-stocks that caught many off guard in 2020 while also eliminating incorrect assumptions about increased demand that lead to overstocks and stale inventory. They also help retailers react quickly and make the best decisions when stock is left over and careful markdown management is critical.
An investment in an automated supply chain system improves the flow of goods and gives customers better access to what they want to purchase across all channels and delivery methods. Adding updated tech now will speed the return to profitability while laying the groundwork for managing future demand shifts.
- Retail sales, Great Britain: December 2020 – Office for National Statistics
- Will Walmart gain an unrivaled edge by automating its local grocery fulfillment? – RetailWire
DISCUSSION QUESTIONS: What are the critical supply chain technologies required to enhance customer service levels and profitably transition out of pandemic mode? Which retailers are best positioned to meet this challenge and why?