SUPPLY CHAIN SOLUTIONS
regulations may be introduced that will impact on retailers’ costs and flexibility.
All these factors, individually and in combination, are likely to fluctuate in a fairly random fashion for quite a while before settling down to a new normal.
FLEXIBLE, AGILE, RESPONSIVE Clearly, the future shape of retail is uncertain – perhaps the only certainty is that change is inevitable. The retailers that survive and prosper will be those with supply, fulfilment and return networks that are flexible, agile and responsive – capable of adapting quickly to changing consumer lifestyles, thinking and demands. But critically, those highly responsive supply chains must be created with the sustainability of the business, and its future profitability, firmly in mind. In order to embrace the change, retail supply chains will need to adapt and move forward into the new norm. But what has this situation taught us about our supply chains?
The topics on the agenda will be many and varied. Some will be direct reactions to how the current supply chain has been impacted. Some changes may already be part of a company’s strategic thinking or were planned in, but the current situation may have amplified the need for change, accelerated the timing or re- defined its scope. The key will be agile planning and prioritisation, balancing cost and risk - particularly as we enter an uncertain period where many businesses will be purely focused on short-term recovery and survival. Importantly, not everything comes with a big price tag, but creative thinking, fleetness of foot and, to some degree, a leap of faith, will be required.
WHAT SHOULD COMPANIES AND SUPPLY CHAINS BE THINKING ABOUT?
Firstly, online. Businesses that have been forced into taking their first online steps, and those that have seen online sales as a marginal ‘nice to have’ need to start taking eCommerce seriously. This doesn’t just mean making the website fit for purpose. It means ramping up the capability to take and to fulfil orders. It means creating the ability to differentiate customer propositions, while offering an omni-channel experience that is consistent right across the brand. And for those seasoned multi-channel retailers and grocers that are seeing higher volumes, and therefore require reactionary capacity increases – the challenge will be in estimating the level of online demand going forward and ensuring that any service expansion is profitable and sustainable. Firms also need to rethink their physical estate. Certainly in terms of type and location – High Street, convenience store, retail park – but more fundamentally, how the estate is used. This is not a new question; the debate over the future
of the high street and shops has been rolling for a while. The current situation is merely forcing retailers to accelerate their deliberations and make some changes. This is not to suggest there should be no stores at all, but rather how does the physical retail world meet the digital, how do the advantages of a customer’s physical experience in touching a product and receiving advice from a sales assistant measure up to the convenience of online delivery? For example, should all or perhaps just parts of oversized or redundant stores be repurposed as dark stores for online fulfilment, or as city centre hubs for consolidating deliveries within low-emission zones? How do stores fit into strategies for local delivery, click and collect and returns? Should town centre stores be pure showrooms and sales/advice centres, with fulfilment from elsewhere? How do stores play a role in the new ‘community’ movement? And ‘pure’ online players may consider, as some already are, whether business would benefit from a physical showroom presence, whether their own or through partnerships.
Online or physical retail businesses need to give serious consideration to the returns loop. This is not just about the efficient passage of customer returns back in to saleable stock, but potentially it could be about the recovery, reprocessing, recycling of used and end-of-life goods and of packaging materials.
Alongside the recovery mode of dealing with huge swathes of unsold or unseasonal stock, piled high during the lockdown period, retailers will need to review their sourcing, stocking and inventory policies. How commercially viable is near-sourcing, multiple suppliers, just in time manufacturing and pull ordering? Many ‘fast fashion’ retailers already operate these more agile, short lead time, responsive supply chain models ¬– how can mainstream retailers implement similar principles, and do so profitably? Collaboration and visibility are likely to be key components.
All the points made so far have implications for the size, type and location of warehousing and distribution centres, and also for the sorts of relationships retailers will need to have with their competitors, suppliers, and logistics partners. All this of course has to be done while maintaining or improving efficiency and service levels, and maintaining an iron control over costs. This is particularly true online. As many firms are currently discovering, an online offer can be expensive to deliver, particularly when speed is prioritised. The key to sustainability will be balancing customer proposition and cost, and creating efficiency at scale. To achieve this retailers need to look inwards to understand their own processes and costs, and outwards to what their customers really want.
Those that succeed in the ‘new normal’ will have invested, not necessarily massively, but wisely, in a number of areas. Automation gives opportunities to improve labour resilience, to grow more cost effectively, and to be able to react faster and more robustly to fluctuations, whether those be spikes in demand or labour shortages. Importantly, automation is not just needed in the warehouse – much sourcing, procurement, supplier relations, transport and warehouse management, and the links between them, are ripe for automation. Well-deployed technology would free people to focus on the real value-adding decisions.
Digitisation at some level will be essential to create transparency and visibility, giving retailers more control and a faster flow of decisions and processes. The result will be a higher level of efficiency and service. This will not just be end-to- end through the supply chain, but also across the retail offer, giving an integrated and detailed view of stock, sales, orders, deliveries, and forecasts over all channels – enabling goods, people and management resource to be reallocated quickly to where they are most needed.
It should go without saying that the key to success in all of this is continued investment in people, at all levels. A supply chain is far more than its stock, warehouses, systems and vehicles.
IN THIS TOGETHER, FOREVER? On their own, retailers may struggle to adapt their supply chains and distribution networks. It is important therefore that some of the positive lessons from the crisis are not forgotten – in particular, the benefits of collaboration. There are many parts of the supply chain that do not really form the basis for competition between brands. As far a Competition Laws allow, collaboration, through for example the shared use of vehicles, warehousing and other assets should be continued and refined. It may turn out that in some areas, such as urban ‘last mile’ delivery, collaboration may even become a necessity. Finally, adversity brings new opportunities. Retailers and their partners must learn to capitalise on some of the ‘quick fix’ and ‘Heath Robinson’ solutions that the crisis has stimulated. Some improbable business models have emerged and, while many of these are likely to be unsustainable or unprofitable in normal times, some may have real merit, and with creativity these could be developed to real advantage. Certainly, retail needs to continue actively seeking out innovative ideas for a new normal that will certainly be dynamic, unpredictable, and full of opportunities.
Bis Henderson
www.bis-hendersonconsulting .com
louisa.hosegood@bis-
henderson.com
FACTORY&HANDLINGSOLUTIONS | SEPTEMBER 2020 35
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