Strategies To Support the Supply Chain During High Inflation


Months into 2023, the issue of high inflation continues to be a challenge for businesses and consumers across the globe, further pressuring an already strained supply chain. After a brief reprieve in January, the Federal Reserve Board has warned of elevated inflation going forward, which along with ongoing socio political upheavals will continue to impact the supply chain.

One way inflation impacts retail is by causing consumers to seek lower prices and seek out retailers that can meet that need. SymphonyAI Retail CPG analyzed 630 million transactions from 60 million shoppers in Europe, the United States, and Asia, and found inflation has powered these money-saving habits:

  • Nearly 85% of households bought at least one item on promotion in the fourth quarter of 2022, up from less than 83% in the first quarter of 2022.
  • The number of households who are considered “price-sensitive,” those shoppers who often seek low prices through promotions, increased from 26.1% in Q1 2022 to 28% in Q4 2022.
  • Households seeking private label as an alternative increased from 28.7% in Q1 2022 to nearly 30% in Q4 2022.

For retailers, knowing this behavioral data can help them manage a supply chain during unpredictable times. For example, they may need to launch highly targeted promotions to move products, reconsider assortments, review their optimal mix of national brands and own brands, and be as efficient as possible.

Here are three supply chain strategies in the face of inflation.

Get Smarter With AI-Powered Demand Forecasting

When demand patterns are volatile, retailers using legacy or manually driven demand forecasting models will run into accuracy issues. This can cost retailers sales and leave some store locations with too much product and others with too little. 

During a time of high inflation, rapidly changing prices and shopper behaviors can wreak havoc. Prices may peak in the milk category one week and maybe dip in flour at the same time. Retailers need insights into every corner of the store, as well as real-time shopper demand. Relying on outdated statistical models causes a gap in visibility. 

AI forecasting helps retailers, at a store-by-store level, gain powerfully accurate forecasts to drive better inventory planning and make better-informed decisions in space planning and assortment optimization. Ultimately, accurate demand forecasting helps chains execute an efficient supply chain across both stores and online channels that will respond with robust performance even during inflationary times.

Sync the Supply Chain To Master Data for Fresh Foods

Prepared foods are becoming major selling points for grocers, and they’re also less expensive dinner options for families looking to pull back on dining out but wanting convenience. Facing inflation, retailers can expect to see a run on prepared items and they need to be able to manage inventory effectively. Integrated kitchen and fresh management factors in how in-store prepared recipes consume produce to plan fresh supply accordingly.

Retailers can improve how the kitchen is managed by syncing master data across purchasing, fulfillment and store operations. The synced data provides visibility across sources such as local food vendors and can be managed alongside production schedules to keep a kitchen on course.

Another bottom-line benefit of keeping fresh and kitchen management in sync with the supply chain is it can help reduce food waste and spoilage. Retailers can gauge the entire production lifecycle and work with accurately forecasted production orders to keep the kitchen running and minimizing expense and waste associated with discarded food.

Improve the Quality of Data for Better Accuracy

Quality data is data with integrity. It is cleaned and refreshed so that AI models and data scientists can identify and react to new shopping behaviors or unusual occurrences in certain product categories.

AI models identify behavioral changes and buying patterns faster. When retailers can refresh data and add in more contextual data, even more insights can be drawn that might impact the supply chain. Contextual data such as weather, specific events in a community, and more can be factored into a machine learning model that tells a more complete story of what could impact products in the supply chain.

Retailers are swimming in data, but data cleansing is crucial to ensure the data is leveraged to deliver business value, feeding AI-powered forecasting and product replenishment.

Strategies for a Stronger Supply Chain

With no real slowdown of inflation and tough economic times ahead, retailers need to be prepared for a supply chain that will continue to see increases in food prices, shoppers seeking products with lower prices, changes in shopping behavior such as buying more store brands, and more.

To weather the storm, strong supply chain strategies need to be in place. AI-powered strategies make retailers smarter and can help equip retailers to keep product inventory at a manageable level. Ultimately, they can keep price-sensitive shoppers happy and loyal, too.

— Troy Prothero, SVP, Product Management, Supply Chain Solutions, SymphonyAI Retail CPG

About the Author

Troy Prothero

With more than 20 years of experience as a supply chain leader for both retailers and retail technology companies, Troy Prothero, SVP, product management, supply chain solutions, SymphonyAI Retail CPG, has extensive experience applying dynamic data analytics to managing and leading all aspects of supply chain optimization. Prior to joining SymphonyAI Retail CPG, Prothero held leadership positions related to the supply chain at SAS, Retail Solutions Inc., and Delhaize Group.

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