Retail Supply Chain Management Challenges and Solutions: How Technology Can Help
Supply chain excellence is the backbone of retail success. Getting products to customers quickly, efficiently and profitably relies on optimizing complex, globalized supply networks. The increasing customer expectations, demand volatility, and omni-channel fulfillment are putting a strain on traditional supply chains, necessitating a technology-driven reinvention for retailers.
This comprehensive guide explores how pioneers are leveraging emerging techniques to build nimble, resilient and customer-centric supply chains.
The Need for Supply Chain Transformation
Traditional retail supply chains are rigid, linear systems with limited visibility and inefficient processes. Siloed planning, inadequate inventory buffers, and fragmented technology constrain performance.
Several demand- and supply-side forces necessitate a transformation:
Omni-Channel Customer Expectations
Customers expect consistent brand experience across channels, flexible fulfillment, speedy delivery and hassle-free returns. Retailers need integrated cross-channel inventory visibility and fulfillment capabilities.
Demand Unpredictability
Forecasting is challenging with merchandise seasonality, promotions and macroeconomic factors. Agility is key to address demand fluctuations.
Globalized Sourcing
Long lead times and lack of supplier visibility with overseas manufacturing leads to inflexibility. Nearshoring and dual sourcing can mitigate risks.
Logistics Complexity
Multi-node supply networks spanning sourcing, manufacturing and distribution are vulnerable to disruptions. Simplification and resilience-building is essential.
Legacy Technology Constraints
Disconnected systems and spreadsheets are inadequate to handle omni-channel complexity. Intelligent supply chain software is a prerequisite.
The Pillars of Next-Gen Supply Chains
Leading retailers are deploying five key capabilities:
1. End-to-End Supply Chain Visibility
Removing information blind spots is critical. Leaders connect partners through cloud integration, IoT sensors and blockchain-enabled supply chain traceability. This enhances transparency, planning and coordination.
Walmart uses blockchain to trace food origins, improving safety and cutting search time from days to seconds. Amazon’s ‘Frustration Free Packaging’ leverages machine learning to optimize packaging and reduce waste.
2. Advanced Demand Sensing
Retailers incorporate real-time POS, e-commerce data, customer analytics and macroeconomic trends into demand sensing models. This improves forecast accuracy over traditional models reliant on historical shipment data.
Lowe’s uses AI to synthesize data points to improve demand forecasting accuracy by 10% during volatile times. Nike’s demand sensing models ingest real-time online sales and social media trends.
3. Dynamic Inventory Optimization
Legacy retailers hold excess buffer inventory to cope with demand variability. Modern tech allows precise calibration of stock levels, placements and reorder points based on predicted demand. This reduces waste and boosts availability.
Zara developed a speedy demand-responsive supply chain. RFID tags relay inventory data enabling swift restocking of hot-selling items. Out-of-stocks are minimized.
4. Intelligent Order Fulfillment
Retailers leverage advanced warehouse technologies — pick-to-light systems, automated conveyors, smart packaging stations — to optimize order fulfillment. Sophisticated wave planning diminishes split shipments and prioritizes urgent orders.
Walmart uses autonomous warehouse robots to reduce click-to-deliver time. Lowe’s LEAP (Navigate Autonomous Assistance Program) uses autonomous carts to assist customers in finding products. This improves service levels.
5. Dynamic Logistics Management
Route optimization algorithms, real-time carrier matching services, and control tower visibility facilitate efficient order delivery. Unexpected disruptions are addressed via contingency sourcing and rerouting.
UPS uses ORION (On-Road Integrated Optimization and Navigation) to optimize driver routing based on real-time traffic, saving 100 million miles annually. Domino’s GPS tracking provides customers with order status and delivery ETAs.
Critical Enablers of Next-Gen Supply Chains
Prescriptive Analytics
Specialized analytical techniques — machine learning, optimization, simulation — enable smart decision-making by analyzing Big Data, finding insights, predicting outcomes and recommending actions. This amplifies human intelligence.
Starbucks applies machine learning to millions of customer-order permutations to optimize staff scheduling while maintaining service levels. This increased efficiency by 10%.
Advanced Planning Systems
Integrated supply chain software synthesizes demand signals, inventory data, and constraints to create feasible plans across sourcing, manufacturing, distribution and logistics. What-if scenario modeling allows resilience testing.
P&G uses APS to develop constrained optimized plans across its global supply network encompassing over 100 plants and over a million SKUs. This enhanced service levels 4–6%.
Control Tower Visibility
Centralized data integration platforms use ERP, IoT, AI and other technologies to deliver real-time visibility into orders, inventory, shipments, and disruptions. Rapid remediation is enabled through control towers.
Nike’s Consumer Direct Offense control tower integrates data across markets to optimize inventory availability in key regions using speedy delivery mechanisms. Out-of-stocks reduced 10%.
Supply Chain Digital Twins
Advanced simulations replicating real-world variables model complex supply chain scenarios. ‘What-if’ stress testing evaluates strategies. Digital twins will become integral to supply chain design.
BMW uses digital twins of its international production network to identify bottlenecks through virtual stress testing. This helped expand capacity 35% without new facilities.
Platforms and Ecosystems
Retailers integrate systems across the value chain using open APIs and cloud integration. Platforms seamlessly connect partners — contract manufacturers, logistics providers, digital freight forwarders — into an agile ecosystem.
Farfetch’s connected retail platform joins brands, boutiques, distributors and logistics firms into a cohesive global luxury fashion marketplace. This amplified its assortment.
Key Takeaways
In order to succeed in an ever-changing and complex business environment, retailers must prioritize the digital transformation of their supply chain planning, execution, and collaboration capabilities. By incorporating emerging technologies such as AI, IoT, and blockchain, along with cloud platforms, prescriptive analytics, and control tower visibility, retailers can establish customer-centric, resilient, and efficient supply chains. Those who embrace these changes early on will gain a sustainable competitive advantage, while those who lag behind face the risk of becoming obsolete.
Versa Cloud ERP is purpose-built to empower retailers to achieve supply chain excellence. Its integrated modules provide end-to-end visibility, digital connectivity and advanced analytics for demand forecasting, inventory optimization, order fulfillment and logistics. Seamless workflows and automation boost productivity across procurement, warehousing, transportation and customer delivery. With Versa, retailers can rapidly embrace next-gen strategies to serve customers efficiently at the lowest costs. The cloud delivery model accelerates implementation and enhances agility. With Versa, retailers can propel their supply chains into the digital age.
