Retailers’ supply chains are growing larger and more complicated. Fast fashion, short product life cycles, personalized and localized demand and always-on shopping have seen to that. The increase in competition as the same or similar products are now available to shoppers from countless retailers, on and offline, isn’t helping. All of this makes supply chain optimization a strategic asset in distinguishing one retailer from another.
Converting a supply chain from operational necessity to strategic advantage requires retailers to stop ignoring these imperatives:
Getting serious about managing inventory fluctuation
The first challenge managing inventory fluctuation is that no one thinks they’re ignoring it. And they’re not. According to the 2017 Warehouse Capacity Economics and Trends Report, 74% of respondents said inventory fluctuation is one of their key challenges. Yet the same report found there’s only been a one percent improvement on managing inventory fluctuations between 2015 and 2017. People aren’t ignoring it, they’re just ignoring the solutions that will actually help them manage it more effectively.
One major industry shift making retailers’ ability to manage inventory fluctuations more difficult is the omnichannel-created separation between the demand source and fulfillment source. Demand and fulfillment typically occurred at the same location, and even “traditional” e-commerce cleanly split the demand to online with fulfillment from a bulk warehouse. Omnichannel has blown these assumptions to smithereens. The omnichannel nature of retail has broken the connection between the demand source and fulfillment source, requiring more sophisticated data tracking and analysis of what inventory to buy and where to place it. Successfully addressing inventory fluctuation requires technology, data and analytical expertise to forecast need intelligently and on a granular level.
At the same time, retailers need a supply chain that can adapt dynamically to real time situations. The first prerequisite for reacting dynamically to changing conditions on the ground is having accurate insight into where each piece of inventory currently is. Utilizing RFID and other physical scanner technologies can improve inventory frequency and accuracy. The second is having back-office big data analytics coupled with team insight into when and how reality is starting to diverge from forecasts. Integrating inventory, order and warehouse management systems and automating business rules that can push out alerts or make adjustments to avoid the over and understocks that spark all that profit leakage.
Getting serious about managing inventory fluctuations means:
- Tracking demand and fulfillment separately.
- Using data analysis and behavioral analysis to accurately forecast what’s needed where.
- Improving the speed and accuracy of inventory accounts so they can be done more often.
- Using collected data and automated business rules to identify and dynamically adjust to changing conditions.
Optimizing the last mile
The most expensive mile in the retailer’s supply chain. More than ever, that last mile goes right to the consumer’s door and not a retail shop. In fact, when it comes to e-commerce fulfillment, the last mile has been found to account for 28% of the total delivery costs.
People now expect free shipping. They want it fast and it must be accurate.
But they will help you out. Shoppers are willing to go to a convenient location to pick-up their own online order if that means they can get it more quickly than through home delivery. As the demand for same day fulfillment grows, expect this willingness on the consumer’s part to grow as well. Of course, the operative word here is “convenient.”
In many instances, optimizing your supply chain may mean taking head on the challenge of increasing the fulfillment points along that chain. This could mean outsourced warehouse space to respond to fluctuating demand, smaller fulfillment/return centers located in the right places and using stores as micro-fulfillment locations.
With every new fulfillment and return location, the management and transaction overhead for the supply chain increases. Thus it requires planning, business analysis and collaboration to execute a last mile optimization plan that has a net reduction in fulfillment costs. This challenge doesn’t mean that it’s safer to avoid optimizing the last mile. Retailers without the capability to meet consumer demand for fast, accurate delivery will take the hit in lower overall sales as shoppers simply move on to the retailers that can fulfill their expectations.
No more procrastinating on making a complete digital transformation
Any link in a retailer’s supply chain that’s not yet made digital and able to communicate with other stakeholder systems and people is a link that’s costing that retailer money and probably goodwill as well, through poor customer service. Having spreadsheets that get emailed back forth is not a digital system.
From data collection to communication to analysis and decision-making, all aspects of the supply chain need to benefit from the speed, accuracy and visibility that an integrated network of digital systems can provide. Retailers need to stop (if any still are) thinking of the supply chain as a linear chain that only moves in one direction. Back to that omnichannel disruption of the supply chain, but supply chain is now a retail super brain with countless synapses connecting unlimited amounts of impulses, reactions and needs. It demands an operational framework that can get it under control.
Ending the procrastination on making a digital transformation means:
- Identifying what aspects of the supply chain either aren’t yet managed digitally or remain in a legacy, siloed system unconnected and invisible to every other system and team
- Prioritizing how to bring these identified links into a supply chain control tower
This is top level strategic stuff here. Nothing else a retailer wants to do by way of improving their supply chain can happen without bringing in the technology that empowers the team to make it happen.
Does your team have the technology and tools it needs to optimize each synapse of your supply chain? Our consultants can help you analyze where your most immediate and pressing opportunities are; contact us today to start the discussion.