Reflecting on a challenging retail season
As retailers reflect on what has been a challenging holiday season, supply chain constraints will feature heavily in their considerations.
Planned inventories to support holiday sales and promotions were disrupted. Supplier shipments were delayed, transportation costs rose, and suppliers looked to recover additional costs. Labour shortages across the supply chain were noted, and the need to maintain social distancing constrained flexibility both within their own supply chain operations, and the retail environment. External pandemic related supports kept demand strong, but many felt that these supports also had an impact on the supply of direct labour.
As one season comes to an end, preparations have already started for the 2022 season. What actions can retailers take to prepare themselves for an improved supply chain scorecard at the end of next season?
1. Look beyond traditional delivery metrics. In a year where the world’s supply chains experienced delays, businesses should look to secondary factors to support supplier assessments. These factors would include delivery performance to commitment, clarity in communications, adaptability and the current partnership approach.
2. Segmentation and prioritisation. Focus your collaboration efforts on those suppliers that are significant enough to impact on your business, and have a track record in delivery performance, product quality and innovation. Consider a formal segmentation approach, and plan for engagement with each of your key suppliers.
3. Improving communications and governance. Learn from the information gaps in the previous season, in particular where there gaps were impacting on the service provided. Identify the information that would have improved your ability to respond and react, and then invest in channels to proactively put this in place.
4. Consider the balance of geographic sourcing. Many companies are taking a longer-term view on nearshore suppliers in order to reduce lead times, carbon emissions, and exposure to global logistics markets.
5. Earlier planning. In an uncertain supply chain environment, allowing additional time to plan and position inventory is a prudent action that should be considered.
Internal supply chain actions
1. Improve inbound visibility. With extended inbound shipping lead times, having accurate visibility on shipment status, arrival times and availability is critical. Connect your TMS or other systems to carrier feeds, so as to integrate any updated arrival times into your inventory plans.
2. Manage available inventory across all business channels. Maintain an accurate view of available inventory and determine the best channels to maximise the customer and revenue value. Empty shelves do not support revenue growth, and a recent McKinsey study identified that U.S. consumers would rather switch brands or retailers than wait for an out-of-stock item or a delayed shipment.
3. Consider Incoterms® with suppliers. Many larger retailers have already taken on additional responsibility for inbound logistics from international suppliers, leveraging their logistics volumes and controlling the prioritisation of shipments. With this additional responsibility comes an increased requirement to manage international trade and documentation.
Pressure will be on supply chain teams to restore predictable delivery performance and costs for the coming season. With many external factors considered beyond the control of individual teams, we can expect decisions and actions that will mitigate the impact of known industry constraints.
As always with supply chain design – change will remain the one constant.
Supply Chain Enabled