For decades, effective and efficient supply chains have helped fuel retail growth around the globe but with the pandemic came major disruptions.
The retail industry has recently experienced significant challenges in keeping up with the demand driven by the boom in e-commerce. This demand, combined with manufacturing delays, port congestion and natural disasters, has led to pressure on global logistics.
When the pandemic restrictions eased, consumers shifted their spending habits to the travel and leisure industry as the world started to open up again. Now, with inflation at record levels, consumers are once again changing their behaviour and investing in non-discretionary, essential products rather than discretionary items such as furniture and home appliances.
The pandemic may have highlighted existing supply chain vulnerabilities that have been accumulating for years. Our specialists can help you understand the lessons from these disruptions and how your organisation can develop new strategies for a robust and flexible future.
Retail supply chains are facing longer wait times and higher costs
One of the most significant challenges experienced by retailers is the delay in getting products from overseas. Reuters reported that backlogs at ports and warehouses may not ease until 2023 at the earliest.
This has been compounded with a sharp rise in freight costs brought on by high demands and low supply.
Working closely with your suppliers to understand how their supply chain pressures — like a reduced workforce — will affect them (and ultimately you) is crucial.
Rethinking the future and your retail strategy
These increased costs and wait times have been affecting both brick and mortar stores as well as online retailers, with reduced product availability having an impact on store layout.
Many players have struggled with omnichannel success given the requirements it places on their supply chains—especially in terms of speed, complexity, and efficiency. Customers expect to receive their products anytime and anywhere with a very short time between order and delivery, along with excellent service and high convenience.
E-commerce fulfilment is much more complex than traditional brick-and-mortar or wholesaler fulfilment. When customers can order 24/7, demand is less predictable and more difficult to shape.
Supply chain disruptions have forced retailers to adopt an agile approach by rethinking their inventory management process and products placement through their omnichannel presence.
Leveraging data is key to setting up predictive modelling
Companies today have access to more data than they have had previously and are on a journey to make it useful. Businesses who invest in and prioritise building their data capability now will be better placed to create customer connection, take advantage of new opportunities, create new business models, and reinvent existing practices that orchestrates the end-to-end value chain.
With supply chain disruptions here for the foreseeable future, leveraging data and IT systems that can give customer insights will provide a competitive edge to retailers.
In addition to understanding the customer today, companies must also look to the future and stay flexible as the market rapidly changes. For example, while next-day service was a novel concept just a few years ago, it is increasingly common today. How future incumbents and disrupters will shape the market is still unknown. As such, serving the customer of the future requires unprecedented agility.
Close collaboration is key
Traditional supply chain models are primarily based on a quantitative approach to assess the fulfilment network needed for the business. However, in the current environment with constant changes in customer needs and increased competition, retailers need to adapt quickly with an efficient cross-functional team with the strategy, operational, finance and marketing departments working together to be able to deliver a flexible and responsive solution.
How BDO's retail team can help
BDO in Australia’s retail experts specialise in this area and have the relevant industry experience to help. Even in these uncertain times, opportunities for optimisation are plentiful. For more information, please get in touch with our team. We can help you with:
- Performance improvement services
- Data management
- Advanced supply chain analytics
- Warehouse replenishment systems
- Pricing analytics
- Supply chain process definition.