Retailers’ top supply chain challenges for 2014
With a new year come new challenges and opportunities. As consumer patterns continue to evolve, so must retailers and their supply chain operations, influenced by technological advancements and other external factors. Coming off a modestly successful holiday shopping season, retailers are geared up for 2014 and prepared to address what promise to be the top five challenges of 2014.
Omnichannel
Not surprisingly, the changing retail landscape and the omni-present topic of omnichannel will continue to dominate retailers’ thoughts in 2014. The buzzword may have worn out its welcome in 2013, but retailers realize that the concept of a unified, silo-free customer experience is critically important. In 2013 we saw unprecedented growth in online sales: a recent report from IBM showed that online sales leapt in all categories in the fourth quarter and department stores and home goods retailers led the way with respective 62.8% and 46.4% increases over 2012. And shoppers on smartphones and tablets represented almost 35% of online retail traffic — a 40% increase over last year. Customers’ desire to get what they want, where and when they want it — and at the best price — places tremendous pressure on retail supply chains that are traditionally designed to service brick-and-mortar stores, on a pre-arranged schedule. From forecasting to inventory visibility to responsive distribution and delivery, the competition for who can offer the most seamless customer experience is going to be even more intense in 2014.
Systems/IT
Hand in hand with the transformation to omnichannel is the need for more flexible, comprehensive technology and systems. Retailers are striving for an entirely new approach to serving the customer, but are often armed with legacy systems not necessarily designed for this new world order. A recent report found that supply chain operations at an average retailer involve five separate software systems. WMS, TMS, ERP, POS . . . the alphabet soup of discrete, legacy systems doesn’t often lend itself to supporting the holistic customer engagement that’s a goal of omnichannel.
Talent management
RILA recently surveyed supply chain leaders at several top retailers, and found that talent management is one of the top supply chain challenges facing retailers today. As supply chains become more complex, and are increasingly recognized as an enabler of business goals and potential source of competitive advantage, there is an escalating need for a greater number of savvy professionals with experience in multiple disciplines. The challenge of recruiting and retaining high performers is constantly on the minds of supply chain executives. Although the past five to 10 years have seen an increase in the number of colleges and universities offering advanced and undergrad programs and degrees in supply chain, there’s still a shortage of supply chain specialists — one that will only intensify as the Boomer generation is beginning to retire.
Infrastructure and transportation
The country’s aging highway system and other infrastructure issues will continue to be a top issue for retail’s supply chain chiefs, heating up this year with the expiration of the current MAP-21 surface transportation authorization legislation, on Sept. 30. Retail represents roughly 20% of the approximately $13.6 trillion trucking industry; with the Highway Trust Fund nearing insolvency, discussion of possible fuel tax increases will likely resurface. Couple that with an increase in the viability of CNG/LNG trucking, a driver shortage, Hours-of-Service regulations and the lack of a national freight policy, and you can expect to see plenty of focus on transportation issues in 2014.
Ocean shipping and ports: Although there’s continued interest in reshoring or nearshoring, a majority of retail goods still come from abroad, which means that ocean shipping and port issues will continue to be a critical concern for retailers in 2014. Supply chain executives will be paying close attention to the West Coast ports, where the labor agreement between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) will expire on July 1. The West Coast ports handle more than half of all U.S. container volume; with several contentious issues on the table and the memory of the 2002 port strike in stakeholders’ minds, retailers will be shoring up their contingency plans and watching closely when negotiations begin this spring.
Never a dull moment in the ocean shipping industry — the industry’s continued volatility, rate fluctuations and capacity issues will stay in the headlines for 2014. The supply chain world is keenly anticipating news on the fates of the new P3 Network and the expansion of the G6 alliance. Alliances of such an unprecedented scale will dramatically change the face of ocean-going commerce, and retailers are on the front lines.
These topics were identified by the supply chain leaders who developed the educational program for the upcoming Retail Industry Leaders Association (RILA) Retail Supply Chain Conference. Each of these areas, and many others, will be explored more thoroughly when industry leaders gather for the Supply Chain Conference in San Diego, Feb. 23-26. With a program developed by and featuring many of retail’s top supply chain executives, the event is the longest-running supply chain conference devoted to retailers is focused on top issues, leading practices, and actionable takeaways.
Jess Dankert is director of supply chain at RILA, a leading trade association representing the interests of retailers and their trading partners. To learn more about RILA or the supply chain conference visit www.rila.org/supplychain.