Pandemic Lessons Learned: Fixing Supply Chain Blind Spots
Blind spots were exposed in the retail supply chain during the pandemic. The RIS Supply Chain Technology Study 2020 identifies them and recommends investments to help retailers recover quickly from future disruptions.
Running out of Lysol, flour and paper towels was not unexpected when Covid-19 struck like a lightning bolt in early 2020. No one (not even artificial intelligence) could have predicted this once-in-century calamity.
Six months later, the data is clear and the RIS Supply Chain Technology Study reveals the top strategies and technologies retailers should focus on for the next 18 months.
Strategies for a Year Like No Other
The number one lesson learned, according to a huge majority of retailers is that essential workers in the supply chain need to be protected (88%) and they should also be fairly compensated (60%).
Two specific strategies that need immediate investment are contactless processes in the store (60%) and home delivery (58%).
Retailers also learned that pandemics are the greatest threat to the retail supply chain (70%) and beat out government regulation or taxes (60%), extreme weather (38%), and tariffs or trade wars (33%).
The top three supply chain strategies that will drive sales and margins by the end of the year are: maximizing digital channels (60%), scaling click-and-collect management for stores and curbside (55%), and optimizing omnichannel fulfillment to customers (53%).
The top three supply chain strategies for 2021 are: expanding collaboration with supply chain partners (48%), improving agility to respond to fluctuations in demand (45%), and improving the ability to leverage shopper behavior data (45%).
The top two supply chain obstacles that reduce efficiency and productivity, which therefore require immediate investment, are: inability to adjust or respond to fluctuations in demand (73%) and lack of real-time inventory visibility (71%).
Top Technology Investments for 2020 and 2021
At this moment, as we near the fourth quarter of 2020, retailers are actively improving these four technology capabilities: Sourcing, direct-to-consumer management, replenishment, and creating a real-time dashboard.
For 2021, active upgrades shift to Advanced analytics, AI/machine learning, building a supplier portal, and replenishment.
Top choices in emerging supply chain technologies are: partnering with tech-driven home delivery services, micro-fulfillment centers, and dark stores for fulfillment only.
The top three fulfillment opportunities that will drive sales are: optimizing for speed, scaling buy-online pickup at curb (BOPAC), and scaling buy-online pickup in store (BOPIS).
Top 10 Recommendations
An argument can be made that the processes and technologies comprising the retail supply chain are a massive compromise between cost, agility and speed. Press too hard on the cost lever and speed and agility decrease. Push too hard on the agility lever and cost increases.
With relatively equal weight placed on all links in the chain, the biggest loser is a lack of sharp focus on inventory at the commerce level as opposed to inventory in containers, ships, planes, trucks and trains. This is a problem because commerce-ready inventory is where the rubber meets the road, where products meet consumers, where shoppers acquire products.
Here are 10 recommendations that will shift the balance toward the consumer in the complex retail supply chain:
- Carefully manage essential workers in terms of protecting their health and providing fair compensation, which are the top strategic supply chain priorities today.
- Dedicate about a third of the overall IT budget (29%) to support supply chain capabilities if you want to match or surpass competitors in the marketplace.
- Maximize digital channel sales with short-timeline investments that optimize revenue through websites, mobile devices, and digital marketplaces.
- Improve agility to drive sales and margins in 2021 through supply chain investments that expand collaboration with partners and improve the ability to leverage shopper behavior data.
- Fix problems that reduce efficiency and productivity in the supply chain, especially those that hamper responding to fluctuations in demand and gaps in real-time inventory visibility.
- Sourcing is the top 2020 technology investment thanks to shortcomings exposed by the pandemic, which were caused by the lean supply chain and just-in-time manufacturing.
- Advanced analytics is the top technology investment over the next 18 months with a special focus on improving demand forecasting, consumer insights, and inventory planning.
- 3 key areas of emerging technology focus on the boom in home delivery: partnering with tech-driven delivery services, micro-fulfillment centers, and dark stores for fulfillment only.
- Focus on optimizing commerce-ready inventory, which is where the rubber meets the road for retailers that want to reduce out of stocks, oversupply and inaccurate inventory data.
- Seize fulfillment opportunities through tech investments that optimize new areas (curbside pickup) and established areas (buy-online and pickup in store, shipping from store to consumer, and same-day delivery.
While the pandemic revealed blind spots and shortcomings in the supply chain and especially inventory management, smart retailers are taking steps to correct them and build a stronger, more resilient supply chain that can meet the challenges of future disruptions.