Retail Supply Chain 2012: Globalisation and Cross-Channel

Supply chain may well be one of the least flexible functions of the retail business. Compared to an ad that can be dropped or a product that can be marked down or recalled, if supply chain isn’t functioning well, the process to fix it can be long and painful.

Unfortunately, retail supply chain’s history of evolutionary-style changes is running headlong into retail’s transformation under the pressures of a global economy and cross-channel consumers. Between the three inter-related challenges of globalization, localized assortment, and cross-channel, retailers continue to grapple with supply chain basics while at the same time they must rapidly enable much more sophisticated supply chain capabilities than they have had to in the past.

How does all of this translate into supply chain opportunities and the investments that retailers are planning to make? Key findings from this report include:

• Retail survey respondents continue to be challenged by consumers’ price sensitivity and unpredictable demand swings – their top two strategic business challenges around supply chain. But far fewer survey respondents recognized that some of these challenges are related to the increase in cross-channel shopping that makes prices and inventory availability more transparent.

• For all of the investments that retailers have made in their supply chains over the last three years, a majority of survey respondents reported that they have not seen any improvements in supply chain lead times. However, Retail Winners have made a strategic decision to give up certain supply chain improvements in return for more flexibility around managing inventory.

• Survey respondents express a certain frustration with supply chain opportunities, reporting that they have no clear opportunities for improvements, other than just “fixing the entire supply chain”. Laggards in particular do not seem to connect related supply chain opportunities, for example the need for supply chain visibility as a prerequisite to more real-time monitoring of supply chain conditions.

• While a majority of retail survey respondents report that they have one central pool of inventory for managing cross-channel needs, very few report actually taking advantage of that central pool to provide for flexible fulfillment options, which suggests a certain amount of optimism and aspiration around what constitutes a “single pool of inventory”.

• A clear majority of survey respondents are either in the process of evaluating their supply network, just completed an evaluation, or are just about to start one – recognition that the supply chain model of ten years ago is now inadequate to meet business needs.

• Top supply chain technology adoption priorities for the next 12-18 months include: cross-channel inventory optimization, distributed order management, in-store wireless devices and applications, and integrated product catalog and product information management.

In order to manage the increasingly complex world of retail supply chain, RSR recommends that retailers take an honest look at their cross-channel fulfillment options, including a full evaluation of how stores may play a role in fulfillment. Hand-in-hand with that, retailers need to make sure they understand their supply chain costs at a more granular level so that they can be prepared to make informed trade-offs between flexibility and efficiency. Finally, increasing both internal and external collaboration is also key to get everyone pointed in the same direction as retailers and manufacturers both navigate the murky waters of consumer demand.

Download the report by Retail Systems Research HERE