Customer demand calls for agile retail supply chains

Omnichannel shopping and greater customer expectations require the retail supply chain to adapt – fast, says Dr. John Lockton, Managing Director of LCP Consulting and Management Consultancies Association (MCA) board member

Nowhere is the pressure to be agile greater than in retail. A shopper puts a foot forward and their mobile phone signals their movement. Their exact whereabouts, shopping history, preferences and aspirations can be available to retailers vying for trade. But this shopper will only remember and revisit the ones who offer a combination of service and product excellence.

Uber, Airbnb and, of course, Amazon are transforming consumers’ expectations of retail. The internet has changed everything. Google is increasingly influencing the retail supply chain. Many a purchase starts with a search, and Google offers a handy shopping option to help consumers compare brands and retailers. The consumer expects retailers to act like internet natives, no matter what their legacy.

A unified experience

Leading retailers know this. From the time consumers search to the moment they get the product in hand, these retailers see a unified experience that can differentiate them from the competition. This understanding has led to a race in the customer offer. Same-day, next-day, weekend deliveries are becoming increasingly common.

But firms upping the ante are also realising just what it means in terms of forecasting demand, understanding stock levels, integrating supply chains and creating delivery networks. Putting escalating consumer expectations at the centre of the business is becoming increasingly complex and costly, particularly for retailers maintaining a strong presence in physical stores.

Rethinking processes

Moving to this world is a tough transition. Retailers cannot create good stock visibility, accuracy and infrastructure overnight. The vast majority of pioneers in omnichannel recognise the need to re-engineer systems and business process, while those still challenged with creating multichannel retail tend not to see this need. The danger is retailers either falling short of customer expectations or creating systems which could be, in the longer run, economically undesirable.

Constantly meeting unlimited expectations just costs too much. It might be necessary to reduce the offer. The question is when and for whom.

An increasing number of businesses are focusing on a more pragmatic use of large data sets and business analytics to inform the management and decision-making processes. Black Friday is a case in point. While some retailers see it as unprofitable and unsustainable, others think it is an opportunity they can exploit.

Innovative retailers are seeing the benefits of adjusting delivery options in mid-sales cycle so the supply chain can cope with peaks in demand while still meeting customer expectations. To do so retailers need good visibility of stock and supply chain performance. Black Friday also demonstrates the dependencies in the online retail market. If retailer X does one thing, competitor Y will do another, creating a domino effect in the market and finding weak points in the supply chain.

Putting consumers at the centre of the retail supply chain can mean recognising operational limitations and seeking partners with complimentary assets. This can create strange bedfellows. Just a few years ago it would be unthinkable that consumers could order an item from an eBay seller and pick it up in an Argos outlet, housed as a concession in the local Sainsbury’s store. But this is happening now.

Agile is a small word, but it is a big deal, wherever you sit in the economy

Meanwhile, within the business, previously estranged functions are quickly having to get to know each other. What is the best delivery offer from a marketing perspective? What will it cost? What are the options in between? To figure out the answers, marketing and supply chain management need to sit around the table or, better still, be managed as part of the same customer-experience function.

Agile technology

New connections inside and outside the business, greater visibility of stock and the ability to exploit big data analytics all require agile technology development and management processes. But this is just the start. The internet of things promises to transform both customer experience and supply chain management, mushrooming data volumes at the same time. Businesses deploying agile technology and management processes will be best placed to execute continuing transformation.

While retail is at the sharp end of these changes, it will affect many industries. As manufacturing faces the challenges of both mass customisation and direct demand from the consumer, the impact will be felt right across the markets. Agile is a small word, but it is a big deal, wherever you sit in the economy.