By Amanda Spencer, Global Industry Marketing Lead, Retail and Fashion, SAP
The holidays are just around the corner, but a record-breaking Black Friday, similar to years past, may be little more than a ghost of Christmas past. Times are tough for a lot of consumers these days. Sky-high credit card debts, shrinking personal savings, rising costs due to inflation, and widespread layoffs mean a significant slowdown in holiday spending is expected. Experts predict a fiercely competitive season as retail brands battle for every dollar.
Retailers are gearing up for the fight. Forward-thinking brands are deep into their preparations for this most-critical time of the year, aware that a robust supply chain gives them the best chance of meeting consumer demands. A strong supply chain can also improve efficiency and customer satisfaction, two qualities that will likely be non-negotiables for holiday shoppers.
An IDC study found that retailers are prioritizing supply chain resilience by taking several steps to reduce supply chain risks, including:
- Increasing supply chain visibility
- Diversifying suppliers
- Using AI to boost efficiency
1. Supply chain resilience starts with better visibility
Boosting supply chain visibility is crucial as it allows vendors to monitor products from origin to destination, providing real-time data on inventory levels, order statuses, and goods movement. According to an IDC survey, improving visibility is the top priority for many supply chain leaders.
Increased transparency is key to quickly identifying and mitigating potential disruptions, so that supply chains remain adaptable and responsive. Additionally, it helps track compliance with regulations and standards, further strengthening the overall resilience of the supply chain.
For best results improving supply chain visibility, retailers should focus on these areas:
- Real-time tracking: Implement systems that allow for tracking of products from source to store.
- Data analytics: Use robust data analytics to gain insights into supply chain performance and customer behavior.
- Agile response times: Develop the capability to respond quickly to supply chain disruptions or changes in demand.
- Integrated supply chain planning: Align planning processes to ensure a seamless flow of information and materials
- Predictive analytics: Implement predictive analytics to anticipate future supply chain challenges
2. Expand the range of suppliers
Another key component to supply chain resilience is diversifying suppliers. Retailers should source multiple suppliers and products for their manufacturing, logistics, and transportation needs to avoid the risks associated with sole sourcing.
In IDC’s study, 34% of supply chain leaders cited supply chain partner constraints as a top challenge.
A broader range of suppliers helps protect companies from supply chain interruptions, like delays and shortages. Here are some ways to diversify:
- Global sourcing strategies: Expand supplier networks globally to mitigate local disruptions.
- Balancing supply sources: Create a balance of suppliers across different regions and sectors to enhance reliability.
- Supplier capability insights: Gather deeper insights into supplier capabilities to inform sourcing decisions.
- Collaborative risk mitigation: Work with suppliers to develop strategies for mitigating risks in the supply chain.
- Flexible supplier agreements: Offer more flexible contracts in response to changing market conditions.
- Monitoring supplier performance: Assess supplier performance to ensure consistent quality and reliability.
- Diversifying logistics channels: Expand logistics options to more easily adapt to supply chain challenges.
3. Using AI to strengthen retail supply chains
With AI’s steadily growing capabilities, it makes sense for retailers to harness its powers to automate processes and improve supply chain resiliency.
For example, AI can crunch the data to predict future buying trends to align stock and spot inefficiencies. AI systems also can improve demand forecasting by examining sales and market data to produce accurate demand predictions.
Many retailers also are exploring ways generative AI can streamline supply chain management. According to IDC, companies are using the technology to:
- Get deeper insight into supplier capabilities and streamline supplier selection sourcing
- Optimize fulfillment processes with end-to-end fulfillment synchronization
- Automate product classification and specification to speed product introductions,
- assortments, and substitutions
Examples of retail resilience
For a lot of retailers, building supply chain resilience is easier said than done. Technology integration challenges, data utilization issues, and cost issues often hinder efforts to bolster supply chains. Strategic partners and smart investments in the right technology are key to navigating and overcoming these obstacles to building a more robust, adaptable supply chain.
Swiss retailer COOP worked with SAP to transform its supply chain capabilities. SAP Predictive Replenishment now optimizes COOP’s order proposals and makes sure inventory levels are keeping up with demand. SAP Order and Delivery Scheduling determines COOP’s optimal order cycles and implements them automatically.
COOP’s investment in digital transformation is already helping to reduce costs, boost operational efficiency, and elevate customer satisfaction for their distribution centers.
Another company, Mexican retail giant El Puerto de Liverpool, unified customer, inventory and shopping data to deliver omnichannel services to customers and inventory verification to store associates.
“It is clear that having a robust and resilient supply chain is not just a competitive advantage, but a necessity,” says Geraldo Munoz Martin, the company’s chief technology and information officer.
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This story also appears on The Future of Commerce.
