Recovering from the Disrupted Supply Chain
Almost every retailer has felt the impact of slowdown in the global supply chain resulting in lack of inventory where the demand is. They face this unplanned reality at a time when consumption patterns and preferences have rapidly changed as demand gets increasingly digital. These turbulent times, along with the role of weather, have changed the way retailers do forecasting and planning for their supply chains, inventory allocation and replenishment.
The State of Supply Chain
Supply Chains are having a moment. With the threat of the pandemic still looming large and a number of economies still under lockdown, the disruption of the supply-chain is almost absolute, and at a global scale. As businesses open, supply chains are facing new realities besides creating a safer way to service the customers – Cost escalation. Be it the higher costs of containers, shipping, hauling, and storage that has led to higher raw material prices or the opportunity cost due to tremendous delays in deliveries due to weather uncertainties.
Impact on Retail
Retailers while facing challenges of their own are mirroring the woes of their Supply Chains that have traditionally been their competitive differentiators. According to a report by Advanced Supply Chain Group (ASCG), 66% of retailers in the US, experienced delays in stock deliveries and 63% reported problems with availability in 2021.
The report revealed that the pandemic had forced 82% of executives at top retailers to change their stock management practices, and 40% invested in improvements to their inventory management accuracy. The swings in demand and product availability have made planning the centerpiece of operations and with limited capabilities, it might become an awkward juggling act for quite a few. Add to that the complexity that weather brings in, not just to consumption changes but more so by impacting the supply lines due to disrupted productions, customer experience with fulfillment issues and increasing the costs that eventually hurts the retail revenues and margins. In the global supply chain, changes to climate patterns and more extreme weather events are forcing adaptations to production practices and technologies, causing adjustments to sourcing arrangements, and threatening the longer-term security of supply of key commodities. A consumption delta change by a few basis points can lead to increase in out of stock or over-stock inventory levels.
Weather is an important parameter to monitor and measure in the entire buying, allocation and sourcing functions within the supply chain. It is imperative for retailers to learn, adapt and equip themselves to manage these uncertainties, as we embrace ourselves for the long haul, battling the impact of climate change.
How to respond to the Challenge
With margins under pressure with a shift from in-store to online sales, apart from the relentlessly rising shipping costs, retailers are left with no choice but to strengthen their digital portfolios. The focus of new investments in technology has to be in newer modes of customer engagement and service to strengthen the future, but it’s the optimum utilization of current resources that is of paramount importance to secure them today- Forecasting & Planning.
Retailers and brands face a daunting multitude of short-term challenges around health and safety, supply chain, labor force, cash flow, consumer demand and marketing. Yet, successfully navigating through these challenges is not enough; what is needed is for retailers to prepare for the future and invest in functions that would help them achieve that – People, Plan, Partner
The top priorities of the retailers should be the following:
Retailers have an opportunity to use this challenge to redefine their relationships, reposition themselves in the minds of their customers and create an operating model that’s intelligent to forecast demand, accommodates the impact of weather in planning & placement and is resilient & responsive enough to fulfill that.