Navigating the delicate balancing act that is supply chain management has also been one of retail’s greatest challenges. The omnichannel world with its endless mix of demand and fulfillment points has made keeping that balance even more complicated and precarious. This new complexity fueled by customer expectations and technology requires retailers who want to stay (or get) to the top of the pack to shift fundamentally how they think about supply chain execution. Where previously the focus had been on logistics, cash flow, contracts, and negotiations, the central focus today must be where the rest of retail focuses: the customer experience.
Can you sell and deliver to the customer what they want when they want it? If not, they have countless other options to turn to instead of you. Indeed, RSR’s Supply Chain Execution Benchmark Report (2016) writes that supple chain execution is “the next great retail imperative.”
In this report, RSR made a clear distinction as to how what it calls the “winners” are approaching supply chain management, as opposed to the non-winners. For its report, RSR defined winners as those retailers who have above average sales growth compared to the industry average for comparable stores/channels. Those retailers sitting below average are categorized as the non-winners.
Looking at their varying priorities and actions, RSR found that these two groups take very different approaches to supply chain management. These findings reiterate our point that supply chain management is the secret weapon of the best performing retailers.
Spoils Go to the Bold Retail Innovators
Experience develops expertise. It should be no surprise that the retailers successfully managing supply chain issues in an omnichannel world are more likely to operate in eCommerce and mCommerce channels, and are the early adopters of cross-channel order fulfillment.
Being an early adopter has meant these retailers have been able to establish processes and implement technologies to smooth out kinks that remain obstacles for lagging retailers. The takeaway here isn’t that you’ve lost the opportunity. Instead, we're here to tell you have the opportunity to piggyback on other retailers’ experience and implement more effective changes faster.
The winners also take what may seem to be a contradictory mix of strategic thinking and micro-tactics. RSR found they’re more open to the widest range of solutions, even if they end up implementing only a few of them. They also understand that fixing issues at a tactical level will help resolve the macro-challenges. One example RSR gives is that the winners do more to track demand source, instead of just fulfillment source, which is key to managing inventory distribution.
Last, the report found that the best performing retailers are bold enough to stand up to shareholders not eager to see increases in IT spending, so they can get the tools they need to maximize their supply chain management needs. In fact, RSR writes:
“What’s most interesting is that Retail Winners are determined to make changes, whether they find ROI in changes or not – 46% say supply chain execution is so strategic that it’s no longer about the ROI involved, vs. only 20% of their peers.”
Inventory Visibility is Paramount
Inventory overstocks, understocks, and excessive redistributions to meet demand are key drivers of profit leakage that smart supply chain management can stop. Retailers said having current, accurate visibility into where all of their inventory is at any given moment was their main concern and challenge. Inventory visibility outpaced other common supply chain issues like shipping capacity and supply chain length.
The retail winners showed the most interest in having real-time alerts for supply chain exceptions and online visibility into in-store inventory. They were also far more likely to say their planning systems, which track inventory used to fill orders from sources different from the demand source, do it “very well.”
Tracking demand source against fulfillment source is just one aspect of real-time inventory management. You can’t manage inventory in real-time if you can’t count it in real-time. Lord & Taylor implemented a RFID system, which allowed them to move from weekly inventory counts to daily and now use fewer associates to do it. In addition to saving on labor costs, the department store saw a two percent lift in sales and achieved a display sample accuracy of 95%. Other research has found that companies using RFID to manage inventory have improved their count accuracy from 63% to 95%.
Visibility Enables Predictability
Attaining accurate visibility empowers retailers to expand and improve their fulfillment channels. RSR points out that far more retail non-winners have no plans to implement in-store reservation of inventory for in-store purchase than do the winners. The research firm concludes this can only be due to the retailers’ lack of confidence in their inventory accuracy or fear of taking inventory off the floor.
The retail winners also use the data they can collect from their more omnichannel-ready tracking systems to better avoid over- and understock situations that leak profit. They’re using more sophisticated tools that provide more accurate forecasting that helps them invest better in their inventory and optimize their distribution of it. The winners use their system data analysis to identify what distribution sources and patterns provide the most profitable fulfillment path, which isn’t necessarily driven solely by proximity. Although having said that, RSR did find that far more retail winners want to do more with near-sourcing, as well as redesigning distribution centers, than do the non-winners.
But the whole goal of discovering whether fulfilling certain orders are done most cost-effectively from the closest point or a different distribution point requires doing the kind of inventory data tracking winners focus on.
Are You Ready to Become Bolder?
There are no participation trophies in retail. So the question is: do you want to operate like a retail winner or non-winner? Talk to one of our advisors today about how you can optimize your supply chain with our help.