Retailers have been on the brink of many industry troubles in recent months. In the US alone, shortages of many everyday essentials have caused frustration among consumers, meaning companies have to work even harder to improve customer experience (CX). But this is nothing new, there were shortages at the start of the pandemic and car manufacturing, for example, has yet to recover from the chip shortage. With so many shortcomings Recent Target Announcement that overstocking (and therefore low prices) would cause it to miss its forecast came as a surprise to many.
Recent years have challenged the resilience and ingenuity of companies in many industries. Organizations in the retail space, specifically, have been forced to respond to uncertainty by directly focusing on how best to serve their customers. These companies turned to technology to enable solutions to their most mission-critical challenges, including improving business continuity, ensuring continuity digital transformation and increase customer happiness. tractor supplyfor example, it launched new services for its customers in the US, including curbside pickup and app-based ordering, in response to store closures.
These unpredictable times highlight the friction between Just-in-Time (JIT) and Just-in-Case (JIC) approaches. The JIT crowd knows they are maintaining maximum flexibility and minimizing liquidity tied up in stock, but can be vulnerable to supply chain disruptions and thus inventory shortages.
The folks at JIC know that empty shelves erode consumer confidence, and they don’t mind tying up more inventory to keep people happy. This crowd will trade higher margins and operational inflexibility in exchange for customer satisfaction and greater stability.
Striking a balance between the two mindsets is key for retailers trying to adapt to the issues facing the industry today. Operational resiliency is the top priority. The more committed a company is to JIT, the less resilient it will be because the stability of its supply chain is further out of its hands. However, retailer JIC also limits resilience financially because its margins will be lower. This affects your ability to invest in innovation, change or people. Somewhere in the middle lies the key to sustainable margins and fully stocked shelves.
Be more connected in planning and operations
Supply chain planning is nothing new, but the task is more complex than ever for today’s supply chain planners. Consumers want to see multiple product SKUs and faster shipping or fulfillment time. Distributed manufacturing hubs, shortages of raw materials and semi-finished products, labor disruption, and physical blockages of supply routes have recently increased and impact planning capacity. Add to that the macro factors of digitization, geopolitical instability, and economic uncertainty, and you can appreciate the maze that planners must navigate.
Supply chain delays and manufacturing shortages may be out of reach for retailers, but they aren’t completely helpless, either. There are ways they can take control of the situation to create better operational efficiency. The more distributed a network becomes, the more an organization must create connected networks from all components. The challenge is that expansion often happens faster than it can be linked technologically.
This is where being able to connect anything new to an existing process is a huge advantage for any business, especially retailers looking to add new suppliers or partners to their network. This digitization of the supply chain enables greater efficiency between moving parts and provides better analytical insight into where things are when a delay occurs. But this type of approach is based on a culture so that there is connectivity throughout the network.
Building a culture of connectivity ensures the engagement of key people when digitization of supply chains, logistics or retail. As with any technology project, if the people using it don’t want it, it won’t work. We have seen initiatives by companies to relocate production sites to reduce labor cost or shorten transportation distance to the US, minimizing potential physical disruptions. However, simply unrooting these features is risky. The biggest risk of change is whether these new partners share the same commitment to a digitized supply chain.
Building the digital backbone
The digitization of the supply chain requires a digital backbone which is based on three main components: collection, connection and optimization. Collecting all data relevant to a process or function from systems, people and devices is clearly the cornerstone. IoT in retail is emerging and could open the door to a range of new data that sharpens understanding of what happens in and around a supply chain.
All critical data must be usable by anyone who needs it, which is why a flexible integration layer is a key part of the digital backbone. Connecting the apps, businesses, or APIs that make up the network doesn’t deliver the answer, but puts the postman on hold. Analytics, especially of the processes themselves, not just the data sets, is the third important part of the digital backbone. Revealing hidden processes can provide opportunities to optimize through saved costs, resources, or time, or expose and fix vulnerabilities or points of failure.
The big holiday season is coming
Retail expectations are always high as the holiday season approaches, but there’s a good chance this year will make or break relationships between retailers and consumers. Economic uncertainty only compounds those expectations. While we haven’t yet seen the slowdown in spending that signals a recession, many analysts believe it will come. Every penny a consumer decides to spend will be scrutinized and will lead to higher expectations.
Don’t leave your shelves empty of holiday essentials or products the week before Thanksgiving. Don’t let consumers worry about not receiving their packages on time. The challenges that retailers must overcome grow every day, and the right technology and a drive to be truly connected help to. Relationships forged or maintained in the next six months, while expectations and concerns are high, could determine success for years to come.