Supply chain problems are much in the news as global disruptions cast a shadow on the upcoming holiday season.
Peter Bolstorff, executive VP of corporate development, Association for Supply Chain Management (ASCM), spoke with Chain Store Age about the many omnichannel supply chain challenges retailers must overcome in order to succeed in the current market. He discussed how supply chain resilience enables retailers to thrive despite the many issues that are impacting the global supply chain.
What major supply chain challenges are retailers currently facing?
Retailers, both traditional and e-commerce, are experiencing at least seven pressure points as we head into the 2021 holiday season. First is the competitive pressure of fast, free delivery. The big players have invested in owning their supply chain network and transportation routes, and can therefore set the consumer expectation at the point of checkout, especially for those consumers that have joined their loyalty program.
Next is the quality and position of inventory in the distribution network given the sustained increase in consumers shopping online vs. in-store. There is also increased omnichannel pressure to innovate order, delivery and return models; i.e., curbside, home delivery, recycle-reclaim, and app-based order status.
Retailers also face challenges with supply capacity, risk visibility, increasing costs, and delivery reliability – especially international sources of supply. And there are unpredictable delays with ocean freight, including container capacity, port congestion, weather disruption, and the overall effect of stacked backlog stemming from previous disruptions.
Finally, retailers have to deal with labor constraints including recruiting, developing and retaining employees, as well as with operationalizing corporate social responsibility and environment, social and governance commitments made by the corporation.
How would you define supply chain resilience?
We look at resilience in two dimensions: operational and strategic. Operational resilience is the supply chain’s ability to bounce back and recover to a normal state of affairs. Strategic resilience is the supply chain’s ability to bounce forward and adapt to a new normal. Over half of the retail industry has no formal playbook to deal with disruption.
Can you provide insight on how retailers can become more resilient in their supply chain operations?
Retailers that are leaders in the supply chain, as opposed to laggards, are the most connected to their customers and understand the level of sensitivity to delivery lead time and the price associated with it. Product availability will be the competitive differentiator. Loyalty programs will encourage pre-ordering that come with substantial savings – like ‘everyday Black Friday price.’
Leaders are also able to sense demand patterns across channels and dynamically position inventory supporting e-commerce and store re-supply. At the same time, category managers have identified locally-sourced product substitution options for categories deemed a stock-out risk.
Leaders have leveraged COVID-19 guidelines to introduce touchless delivery options, such as carside delivery and curbside pickup, and have accelerated innovations and digital investments in ‘self-service’ tools that are both app-based and POS. At the same time, leaders are innovating how to optimize returns and reverse logistics that support both the customer experience as well as help achieve sustainability goals. Leaders are turning end-to-end visibility into consumer transparency.
In addition, leaders have identified high-risk suppliers and have instituted dual, or more, sourcing strategies that prioritize agility over cost; invested in collaborative tools that help assess supply capacity, order status, and/or delivery status; developed tighter strategic relationships with select suppliers to assist with the entire product life cycle; and utilized digital tools and risk playbooks to assess and mitigate both operation and strategic disruptive risks.
Furthermore, leaders have changed the line in the sand on what and how much to outsource. This idea of owning more of the supply chain puts retailers in more control over their short-term destiny. Recent examples include chartering a ship, adding your own private label, locally sourced products to the assortment, adding to your own transportation fleet, and hiring your own drivers.
And leaders have kept pace with the recruiting and retention trends including signing bonuses, work hours flexibility, and the promise of continuing education. But what really sets leaders a part is the intentional effort to transform their culture from analog to digital. Investment in robotics, artificial intelligence, autonomous material movement, drones, smart devices, and exoskeletal applications help associates use technology to make their jobs easier, safer, and more productive.
Finally, today’s consumers, especially Gen Z, are very concerned about how the products they used are made and sourced. Combine that with big corporate commitments for net zero by 2050, leaders are focusing on how and where to operationalize sustainability in their end-to-end supply chain. The list includes prioritizing products and packaging that are more circular, investing in emission reductions that both reduce cost and save the planet, and transitioning store footprints to carbon neutral.