The COVID-19 pandemic has had an outsized impact on business and society − and one of the biggest of these is the disruption of supply chains.
The Russian invasion of Ukraine looks set to cause further disruptions, particularly with regards to potential fuel shortages and the concomitant rise in global fuel prices.
The last two years have seen a massive increase in online sales. Research by Adobe showed that, by May 2020, total online spending was up 77% year-on-year, with this high growth set to continue.
The result though is a global shortage of the corrugated cardboard used to pack goods ordered online. Global shortages of silicon chips, glass and a whole range of raw materials are also emerging due to a variety of factors.
The retail sector is already beginning to experience stock shortages or, worse still, empty shelves − and there's nothing like unavailability of essential goods to alienate customers. Somebody entering a Clicks or Dis-Chem, for example, to buy their regular toothpaste and not finding it will have his or her loyalty shaken, not to mention his or her faith in the retailer's ability to plan better.
In short, in 2022 and beyond, an unpredictable and volatile supply chain environment will create significant challenges and opportunities for retailers. As always, though, there are solutions for those who can think laterally − and technology has a big role to play.
The first item on the retailer's to-do list should be to take steps to integrate much more closely into its supply chain. It's vital that a retailer has a clear view of its suppliers and their ability to supply stock.
An end-to-end, digitalised stock-control process is essential to eliminate errors and also free up staff.
This information should then be used to refine how often stock is ordered and in what quantities. This ‘stock transparency’ then needs to cover the location and quantities of stock across the retailer's distribution centres and outlets.
Unfortunately, many if not most retailers have poor stock control systems, so this is an area that needs urgent attention.
With sufficient accurate data, retailers should be able to manage their stock better to ensure empty shelves are minimised at the very least. A simple example could be that if only five boxes of an item are available, then ensure they are not all in one store.
It should be mentioned here that the accurate data required will not be forthcoming from manual processes − an end-to-end, digitalised stock-control process is essential to eliminate errors and also free up staff.
A digital retailer can generate and then process the accurate data it needs to support real-time decision-making.
Reacting speedily and then anticipating change
Retailers will also need the ability to identify ‘market transparency’, and then react quickly. Shifts in market demand could be driven by significant events − stockpiling ahead of an anticipated lockdown or a war, for example − or something subtler, such as a new fad driven by social media.
The retailer has to be able to adapt in real-time and should be looking to develop the ability to predict changes or differences in demand.
To take the example of the fear of war or political disturbance, the likely reaction of consumers in Sandton is going to differ fairly markedly from those in Soweto or Langa.
Data, once again, is absolutely key to ensuring this can happen.
A third requirement to help retailers survive supply chain turmoil is enabling ‘consumer transparency’. Many retailers have not yet fully cottoned onto the fact that consumers are using digital tools to improve their real-world shopping. For example, when supply chains are disturbed, consumers will turn to the web to help them plan their shopping to avoid unnecessary travel.
Very few retailers globally can use their websites to provide an accurate picture of what is on the shelves in a particular outlet − yet, today, vision AI algorithms exist that will count items on a shelf from a picture taken on a cellphone.
A big culprit here is outdated point-of-sale systems which do not link back into the stock control system, and which permit manual overrides. A fully digital system would not only streamline the customer experience, it would generate the information that builds customer loyalty.
Data, and the convergence of the real and virtual
It will be obvious now that accurate data generated by digitalised processes lies at the core of the response retailers can make to topsy-turvy supply chains. It is thus critical that they put the necessary technology in place to:
- Ensure they have better integration into their supply chains and the movement of that stock throughout their environment.
- Equip them to identify and react to changing circumstances, and even predict what will happen.
- Enable transparency for consumers.
There's an underlying principle here, and it's one that retailers must recognise: the real and virtual worlds are steadily converging in all sorts of ways.
However it all ends up − the metaverse is one possibility, but far from the only one − putting these measures in place now is an essential foundation for the future, as well as a way of turning supply chain disruptions into a competitive advantage.
In my next article, I will reveal why retailers need to look at the role of brick-and-mortar in an increasingly omni-channel world, as the world struggles back to something like normality.
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