The supply chain of the future will be fully digital and super fast
Supply chain manager Li & Fung’s Spencer Fung explains why
Retailers today spend a lot of time optimizing the consumer-facing side of their businesses. But according to Spencer Fung, Group Chief Executive Officer of Li & Fung, there’s often not enough attention paid to the supply chain.
While many of the interactions consumers have with retailers today are now digital, he said, many of the components of the retail supply chain are still analog. And that’s putting a drag on one of the most crucial aspects of the industry.
“In the supply chain right now the whole circle takes about 40 to 50 weeks, from concept to store,” Fung told an audience at NRF 2018: Retail’s Big show on Monday.
With investment in the right digital technologies, Fung said, that process could be many weeks faster. And time, when it comes to retail, matters. Today’s consumers, Fung said, spend hours every day on their mobile devices, where they’re constantly exposed to new ideas and new products. They can see a dress on a celebrity on Instagram, for instance, and want to order something just like it right away. But by the time retailers can get that product developed and into stores, consumers may have have lost interest in it.
“If you can shorten the whole end-to-end lead time and make a decision in October of what to buy in December you can guarantee you’ll be buying something the consumer will want,” Fung said.
When a supply chain is digitized, Fung said, turnover increases exponentially, and markdowns decrease exponentially. Consumers and businesses alike win.
So how can retailers speed up the supply chain? Rather than waiting weeks for a physical clothing sample to be developed, for instance, retailers could design a digital sample and begin advertising it online. By measuring that online interest, they could determine with precision how much of the product to make, and craft the production cycle accordingly.
From concept to consumer, the process could take 20 weeks. It could even take as little as five days, Fung said. The shorter—and more digitized—the process is, the better the business prospects get for retailers.
“Speed seems to be the currency now in the world. Consumers move faster, so you have to speed up to service the consumer,” he said.
IBM is at NRF 2018: Retail’s Big Show at Booth #1922 at the Jacob K. Javits Center in New York City. Stop by our speaker sessions on January 16 to find out how we’re transforming retail.