Retailers and brands continue to feel the extensive impact of the pandemic as we head into winter.
Unfortunately, the wave of unforeseen supply chain shocks that have been prevalent through COVID-19 do not show signs of abating. According to a recent McKinsey survey, the majority of senior supply chain executive respondents said the crisis revealed weakness in their supply chain and 85% struggled with inefficient digital technologies. COVID-19 has only made the cracks in their systems, processes and data even more visible, exposing the vulnerability to deficiencies.
Clearly, supply chain resilience has emerged as a key issue this year. To build better supply chains, retailers must embrace digital technologies as never before. In 2021, retailers’ approach should be to implement changes that boost reaction times, enable continuous planning and support increased product introductions. To inspire these positive changes, they must take back control now with the following supply chain strategies:
1. Focus on micro-seasons to take advantage of fashion trends
Presently, most retailers change product lineups four times a year, parallel to seasons. However, they should place their focus on “micro seasons,” rolling out 15-plus lines per year instead. This will allow them to respond quickly to unexpected fashion trends and also create a sense of scarcity (“buy now before this style is sold out”), bringing shoppers into stores to see what’s new, and ultimately increase full-price sales. To implement these techniques, retailers need to become more agile, and can do it with supply chain technology and processes that allow them to:
• Commit to production capacity with key vendors;
• Position core materials for quick availability;
• Adjust production schedules based on short-term sales predictions; and,
• Ship to stores and consumers directly from the factory.
2. Enable real-time adjustments with digital twins
Digitalization is essential for increasing supply chain resiliency. A digital twin of the real-life supply chain can help retailers identify critical issues at any point in the supply chain and adjust quickly with AI and machine learning. A platform featuring a digital twin can display a series of dashboards that integrate data across job functions, from supply chain to merchandise management data to customer insights and sales margins. Once a platform is in place and powered by AI, decisions can be made holistically and automatically, optimizing for delivery, price and margins.
For example, if a manufacturer’s timeline is delayed as a result of a crisis such as COVID-19 or other unpredictable disruptions, a digital supply chain platform will perform scenario analysis to find a solution to the delay. Searching the system to identify alternate suppliers and transportation nodes can allow the retailer to immediately switch to another supplier to satisfy demand.
3. Power continuous planning with A/B testing
Using a digital supply chain platform, retailers can complete A/B testing on supply chain processes. A/B testing enables continuous planning and connected execution throughout the product cycle. Doing so in 48-hour cycles instead of testing long-range for next year’s product line enables retailers to invest in the most popular products or lines immediately and replenish quickly.
Seasonal shifts are occurring at a much more granular level during COVID-19 as fewer people travel to different climates. By testing seasonal inventory early in the season and seeing how it sells, retailers can A/B test needs and deploy accordingly.
4. Make final production decisions at the last minute
COVID-19 challenged forecasting, seasonal planning and fulfillment across the retail industry. The retailers who most effectively modified orders, redeployed raw materials or adjusted production quantities were those who found success this year. In 2021, retailers will wait to make final production decisions until the last minute, in order to respond to the latest trends and demand signals. Digital supply chain platforms can help them take advantage of strategies such as postponement or just-in-time manufacturing, ultimately improving sell-through.
A more resilient and agile year ahead
As difficult as 2020 has been, retailers have learned a tremendous amount about the strategies that are needed to survive an extreme supply chain shock such as COVID-19. By implementing new digital technologies, retailers can position themselves for success in the coming year. By doing so, they will benefit from the resiliency, agility and speed they need to overcome the next supply chain crisis.
Mark Burstein is president of NGC.