Retailing is a cutthroat business with razor-thin margins and tough competition. You have to find every avenue to increase revenue and cut down costs.
The supply chain is a business function that you can optimize to achieve exactly that. It’s the backbone on which retail businesses are built and grown, and maintaining a robust supply chain is critical to supporting your retail operations.
Challenges in the Retail Supply Chain
Retailers have been having a tough time serving their customers since the beginning of the coronavirus pandemic. They have been scrambling to manage their inventories to meet consumer demand, which was due to supply constraints because of governments locking down businesses. Challenges in the global shipping industry have exacerbated already troubling supply chain problems.
In 2022, the biggest problem faced by retailers is excess supply and low demand. Manufacturers excessively corrected the supply problems faced during the pandemic resulting in excess supply. Central banks across the world are raising interest rates, reducing the purchasing power of consumers, which has aggravated excess supply. Once again, manufacturers are likely to overcorrect that by limiting the supply far below demand. This wide gyration in the gap between demand and supply is the bullwhip effect.
Rising costs in supply chain operations is another challenge retailers will have to overcome in 2023. Rising labor, energy, and commodity prices impact the cost of running the supply chain, making it difficult to maintain the profitability of retail operations. Sustainability challenges also trouble supply chain professionals from a long-term future outlook.
Retailers are forced to adopt an omnichannel strategy to serve their customers. Customers may visit the brick-and-mortar store, and they could visit the online store. They have the freedom to purchase your products through various online marketplaces. Catering to consumer demand from multiple sources is a tough challenge, but you need to deliver a seamless experience for users hopping across channels. This challenge of omnichannel strategies depends on supply chains delivering for their customers.
Robust Supply Chains for 2023
Supply chains will have to adjust to the wide swings in demand and supply in 2023. This means the retail supply chain and the supporting machinery have to accommodate these dynamic market conditions. The retail supply chain needs to be agile and nimble going forward; it’s required for serving customers with an omnichannel approach. This reduces the friction experienced by customers in the buying cycle.
The retail supply chain also has to tame rising costs of operations. This is achieved by improving the operational efficiency and life of supply chain assets, and helps you to eke out the most from existing resources. Some examples of such approaches are distilled in the following sections.
Supply Chain Visibility
The first step in strengthening supply chains is to gain complete visibility over your supply chain. This is possible with modern hardware and software technologies — tracking, managing, and routing inventory in the supply chain can be done from a central point. Management will have access to complete real-time information on the supply chain. This helps them to change the course of retail supply chain strategy according to shifting conditions, helping your supply chain remain agile and nimble.
Efficient Warehouse Management
Warehouses are the central nodes of any retail supply chain. They can be bottlenecks in the supply chain or profit centers. Efficient warehouse management means optimizing inventory, people, and processes in warehouses to deliver low turn-around times incurring minimal costs. You need to assess warehouse operations from the ground up to improve processes, and invest heavily in a well-oiled warehouse maintenance mechanism.
Many processes in retail supply chains are repetitive, and they can be automated by various means. This includes the introduction of autonomous robots to IoT devices in warehouses, distribution centers, manufacturing facilities, and transportation. Labor costs account for 60-65% of costs for warehouse fulfillment. Automation reduces the need for labor and associated costs. Also, automated processes are much less prone to errors. This again helps in reducing costs and streamlining operations in the retail supply chain.
Supply Chain MRO
Many equipment and machinery support retail supply chain operations, ranging from cranes and conveyor belts to trucks for transportation. If any of these equipment fails, the whole supply chain operation gets disrupted. An equipment failure will have repercussions upstream and downstream from the point of failure, so you need to invest in maintenance, repair, and operations (MRO) of your supply chain assets. Equipment that can be relied on round-the-clock helps to have an efficient supply chain, and benefits to its agility.
Retail businesses depend on robust supply chains to improve their slim margins. A broken supply chain can break the business for a retailer. Today retailers have to face many challenges to serve the customer — this ranges from macroeconomic changes to sustainability challenges aimed at the future. You need to bolster your supply chain by improving warehouse operations, supply chain visibility, introducing automation, and investing in MRO. These initiatives help to increase efficiency of supply chains and reduce the cost of operations. This means you can remain profitable in a highly competitive business environment.
— Bryan Christiansen, Founder & CEO, Limble CMMS