Supply Chain Council of European Union |
Supply Chain Risk

Channel complexities: More to come

Retailers that aren’t adapting supply chains to keep pace with market trends risk becoming obsolete or missing out on their share of trillions in annual revenues and cost savings.

Those are the impeding threats to businesses – according to global research from supply chain platform provider JDA as well as separate research from research firm McKinsey & Company.

According to a whitepaper on the future sustainability of modern supply chains, JDA says contemporary companies have never had so many digital resources to help them identify, track and control their environmental impacts across the end-to-end supply chain.

Companies can not only fulfil their moral and ethical responsibilities — but can also capture their share of an estimated $12 trillion in annual revenues and cost savings from implementing sustainable practices.

Meanwhile, McKinsey & Company says 1.8 billion new consumers will emerge globally by 2025, which means a 75 per cent [JP1] increase on shoppers from 2010. McKinsey expects worldwide consumer products spending to grow at 5 per cent annually for the next 20 years.

But with more spending, there are definitely more problems for retailers to consider.

Depending on the size and operational maturity of a retailer, the impact of e-commerce on retail supply chains has been a different experience for each company, says JDA’s senior director of Industry Strategies for Retail in Asia Pacific, Nicolas Cron.

For those able to manage multiple channels in sales, orders and the picking process, the impact has predominantly been organisational.

“But for those with a mono-channel supply chain, it has been almost impossible to embark on the trend and it’s taken years to change their system, resulting in missing potential sales,” says Cron.

E-commerce has pushed retailers to investigate areas such as order management, demand forecast impacting products availability and in-store picking.

Cron says the demands of omni-channel retailing have forced retailers to consider a separate supply chain flow.

“The traditional retail supply chain flow of 15 years ago, which was a dream world for retailers as the supplier only had to deliver to a store or warehouse, is long gone,” he says.

And if retailers think that the complexities of multi-channel retailing stop with e-commerce, they are mistaken.

“Supply chains have been heavily impacted by e-commerce already, but this impact is nothing compared to what is coming with subscription, rental, second-hand, waste reduction, sustainability and the integration of local producers, says Cron.”

Reducing complexity

So with more channels impending, retailers today are turning to sophisticated means of supply chain transformation.

IoT technology has helped retailers improve efficiency – including product localisation in-store or warehouse, shelf monitoring of stock with robotics or cameras. While artificial intelligence is also helping to improve accuracy, utilising customer’s data science to integrate external parameters in forecasting and pricing management linked to product lifecycle.

“Automation is a trend and we cannot avoid that,” says Cron.

“Warehouses are now heavily automated, helping pickers and humans to be more efficient. It’s also reducing error rates and lack of product or out of stocks.”

But while automation is helping to save costs for retailers and be proactive, as oppose to reactive, Cron says the integration of technology needs to be effectively embedded from the consumer’s perspective.

“Working exclusively on the technology side might result in a bad shopping experience, impacting sales” he says.

“The big risk in being too automated with too much technology, is the creation of a purely sterile store, which is rejected by millennials and generation Z.

“Both want people in-store, they will not visit an antiseptic, impersonal store.”

Cron points to sporting goods giant Decathlon, whose Lab stores in Singapore represent intelligent use of technology, to enhance and not destroy the customer experience. The store utilises RFID tags to monitor stock at all times and automated checkouts. But if a customer wants advice on a product, expert associates who thoroughly understand the product, can be summoned at the touch of a tablet button.

“Automation is not only replacing human tasks, it can also be used to help humans do more with less stress,” he says.

Find out more about retail supply chain transformation.

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