Covid-19 rewrites supply chain rules

Though retailers were already evolving their supply chain models to serve a multichannel digital strategy, coronavirus has accelerated this shift and amplified the challenges

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The number of channels that retailers sell through has exploded as companies embrace social and digital platforms to reach new customers. The way in which businesses approach supply chain software has evolved in line with this, as organisations increasingly move away from off-the-shelf solutions and instead invest in bespoke systems that better fit their supply chain model in the digital age.

At the heart of this shift in strategy is the desire for a more accurate, real-time view of stock inventory. With the right technology, retailers can optimise stock availability and performance powered by analytics insights that enable them to make better-informed decisions about retail selling prices, consumer promotions, stock levels and replenishment. Ultimately, this allows them to focus on their most profitable items.

The coronavirus pandemic has amplified the importance of stock availability to consumer satisfaction and brand loyalty, and in many instances exposed the fragility of global supply chains. While consumers were initially forgiving of out-of-stock situations, that soon changed when they felt retailers had had sufficient time to adapt to the conditions. If shoppers couldn’t get hold of products or there were extensive shipping delays, they took their business elsewhere. Realising the delicacy of brand loyalty, retailers are now eager to change their supply chain models to ensure they can minimise stock shortages.

“The pandemic showed how lean many supply chain models are,” says Claire Webb, managing director at Advanced Supply Chain Group, which offers a complete end-to-end supply chain service. “They are designed to get the right products to places at the right time, with supply closely matching demand to avoid margin dilution. This leanness was quickly affected by lockdown and we expect lean practices like ‘just in time’ to drastically change because they are less able to cope with increasing unpredictability; they quickly become ‘just out of time’. Supply chains will evolve as retailers aim to better mobilise stock, keeping it more agile to sweat its value across multiple routes to market.”

When the UK entered lockdown in March, the government was clear that logistics professionals needed to keep supply chains moving. Advanced reacted quickly while protecting its staff and customers. As well as setting up sanitiser stations, implementing social distancing, increasing site cleaning and developing new shift patterns to create team bubbles, the company also opened designated wellbeing rooms and provided staff with access to a 24-hour human resources helpline.

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It rapidly ensured customer supply chains were COVID-compliant, helping its clients, including large furniture and homeware retailers, to respond to overnight spikes in consumer demand and build customer loyalty during a time when many shoppers were left frustrated by not being able to get hold of products.

A recent survey of 200 retail professionals by Advanced found retailers will gain supply chain resilience by prioritising investment in smart, connected technology that improves accuracy and visibility of stock management. This will involve optimising the accuracy of stock inventory management and stock performance. To ensure maximum value from every sale, retailers need their supply chain models to deliver real-time data.

The pandemic will also alter the traditional periods of peak retail demand, according to nearly 90 per cent of survey respondents, with two-thirds assuming the changes will have a negative impact on key sales periods such as Christmas. Economic uncertainty and low consumer confidence are expected to cause a decline in sales, but the research also suggests sales spikes during lockdown mean many consumers have already purchased big-ticket items that they would typically splash out on at Christmas time. Year-on-year online retail sales surged 32.7 per cent in May and 33.9 per cent in June, according to the Online Retail Index from IMRG and Capgemini.

Conservative spending during traditional peak periods and general uncertainty around demand places even more importance on stock performance. This will heighten the need for retailers to ensure they’re monitoring stock and have an accurate view of sales, so they can act at the right time to avoid the costs of stock depreciation and write-offs.

“The so-called ‘new normal’ is dominated by unpredictability and a constant state of change, which can happen almost overnight,” says Ben Balfour, commercial director at Advanced. “You can’t fully protect supply chains against this, but you can strengthen resilience by acting quickly and decisively. More than ever, supply chains must be data driven and this data needs to be accurate and readily available. Retailers should ensure all their different data sources, whether that’s the retail sales channels, the supplier of goods or the partner moving goods, are constantly communicating with each other.

“More than ever, supply chains must be data driven and this data needs to be accurate and readily available”

“This will provide retailers with the ability to analyse and understand trends in supply and demand, and make more effective decisions about moving and replenishing stock. Retailers are investing more in contingency plans to counter economic uncertainty and the unpredictability this causes in supply and demand. This often means supply chains grow larger as back-up suppliers are brought on board and more localised fulfilment is used to protect against delays and stock shortages. A bespoke supply chain software solution can evolve with the supply chain, rather than failing to keep up with changes.”

Advanced develops stock management and supply chain software and systems that suit retailer objectives, rather than working backwards and using an off-the-shelf product to determine what a retailer can have. Supply chains are made up of so many different components and often bring together various operators, processes and systems. IT will sit at the heart of all this, acting as the control centre that keeps everything synchronised, making bespoke supply chain software and models crucial.

“Supply chains will need to be increasingly agile in the future, so they can quickly adapt to unseen peaks and troughs in demand,” says Webb. “This will drive innovation in ‘open’ software, similar to what we’ve seen in the finance sector with open banking. Retailers want supply chain systems that can easily integrate with the processes and systems used by their customers, suppliers and partners, no matter who these are, where they are based globally or when they become active in the supply chain.

“As software creators and innovators, Advanced is highly experienced in integrating different systems and processes into one central supply chain model. We’re well positioned to determine what will be required to develop open supply chain software.”

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