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Home Industry Verticals Retail & Wholesale

Transforming retail and supply chain for new normal

FutureCIO Editors by FutureCIO Editors
October 26, 2020
Photo by Gustavo Fring from Pexels

Photo by Gustavo Fring from Pexels

COVID-19 has exposed critical shortcomings and leaving many companies scrambling to identify and invest in the right capabilities for the long-term. In the aftermath, supply chains have taken on new strategic importance.

The research, It's Time to Build Resilience into Retail and Consumer Goods Supply Chains, noted a new willingness among senior executives to make trade-offs between network cost, speed and resilience. Many who once viewed their supply chain as a cost centre now see it as a strategic capability.

Of the companies surveyed, 90% plan changes to their supply chain networks —and more than 40% expect to increase their total supply chain investment with the primary goal of increasing speed, agility and resilience.

Mikey Vu, a partner in Bain & Company’s Retail practice and co-author of the report, commented that when COVID-19 paralyzed global supply chains, it also triggered a massive surge in online sales—a double shock that few retailers and consumer goods companies were prepared to handle.

“Our research revealed that companies with supply networks designed for maximum cost efficiency were unable to respond quickly to these sudden supply shocks and demand spikes. The prize of efficiency came at the cost of resilience,” he added.

Shifting priorities

As a result, boards and executive teams are now taking a hard look at the lessons learned and reprioritizing their goals.  The study shows the share of executives rating cost efficiency as one of their top two supply chain goals fell by 13 percentage points, while agility rose by 24 percentage points.

Successful retailers and consumer goods companies have started constructing flexible networks of suppliers and manufacturing partners. That means setting up alternative suppliers, manufacturing sites and assembly nodes, and making the most of Industry 4.0 tools to optimize costs, improve visibility across the network and accelerate reaction times. As they take those steps, leadership teams are making critical trade-offs between efficiency, convenience and responsiveness to improve resilience.

In a second key shift, retail and consumer goods leadership teams are starting to include top supply chain managers in corporate decision-making, acknowledging that supply chain data and insights are vital to their business success.

Of the companies surveyed, 47% expect their supply chain organizations to provide input to most or all major strategic decisions, such as merchandising, store operations and product strategy—an increase of 17 percentage points over the 12 months prior to COVID-19.

The reason is clear. Resilience requires lifting the opaque veil that shrouded yesterday’s supply chains. Leading retailers and consumer goods companies are using cloud-based supply chain applications and other tools that can share information with their networks of suppliers and partners.

3 areas to bolster supply chain speed and agility

Omnichannel fulfilment.  Before the pandemic, retailers faced growing pressure to fulfill digital orders faster.

Nearly 60% of retailers and consumer goods companies now plan to increase their investment in multiple facilities that can respond to online orders.

Predictive planning and demand forecasting.  To improve supply chain resilience, retailers and consumers goods companies need better visibility into network constraints and bottlenecks, as well as additional channels to avoid blockages. The findings show 56% of companies in these two sectors plan to increase investments in predictive planning and demand forecasting.

Flexible Operations.  To weather future supply and demand shocks, leading retailers and consumer goods companies are seeking to boost supply chain flexibility. Many are teaming up with partners to speed fulfilment and delivery. The study found that 53% of retailers and consumer goods companies are planning to increase investments in flexible operations.

All three capabilities were important before COVID-19, and now have become critical to cope with an on-going surge in online sales. 

While many of the companies we surveyed said they are confident about transforming their supply chains for a new era, they are also grappling with obstacles that may slow progress. Forty per cent of respondents admitted they did not yet have the internal solutions or external partners they need to achieve their goals. And many lack the resources to invest in resilient supply chains.

Other hurdles include merchants that object to new decision-making models and archaic, in-house data systems that make it difficult to improve supply chain visibility. Companies will also need to coach supply chain managers on bringing strategic insights to the table and encourage leadership teams to incorporate new data sets and metrics into decision-making.

Related:  Singaporean consumers prefer being treated as individuals
Tags: demand forecastingflexible operationsForresteromni-channel strategiespredictive planning
FutureCIO Editors

FutureCIO Editors

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