The Changing Face of Retail Supply Chains

A retailer is a final stop for goods in a supply chain before the consumer buys the product. Being the gatekeeper for consumers; retailers hence have a crucial role to play in the rest of the supply chain.

European supply chains have been highly consolidated and have a reputation of being efficient, even with cross-border presence. All European countries, including east European regions, have seen a strong network of retail supermarkets, hyper stores, and discount stores. The average consumer has had a greater choice, convenient availability, and better prices.

Today with the internet being a big part of consumer lives, retail formats have drastically changed. Online-only brands like Amazon have transformed the way supply chains operate. As a result, traditional retailers have witnessed a sharp decrease in margins and are left with no choice but to innovate!

“Retailers report that 19% of their sales are no longer purchased in physical stores and they expect this share to increase to 27% by 2020”. [1] Sales from online retail stores are steadily rising. Back in 2014, this global market’s value amounted to $1.34 trillion. In 2018, it was already $2.84 trillion. In 2020, it’s forecast that the revenue will cross $4 trillion. By 2021, it’s expected to reach $4.88 trillion. [1]

Major European retail chains like Carrefour, Morrisons, Decathlon, and Migros have not only integrated private labels to their portfolios but are also self-producing some of their vertical items. Hence we see priorities shifting from bare negotiations with top brands to plan & purchase of raw materials for in-house production.

Key necessities for retail supply chains:

• Check customer pulse: Retail chains, with the strength of the scale they operate at, have the capability to observe and document consumer demands. Real-time feedback is key for retailers that have in-house produced goods on shelves with other brands
• Increase vertical options & not just premium brands to cater to all economic classes; this can help improve margins drastically
• Hire agile procurement workforce: Category specialists need to be replaced with OR extended to the scope of product development, category management that have some analytical backgrounds
• Digitalised solutions: Since everyday tasks involve not just negotiations, but calculating product value, market feasible prices, brand bonuses, multiple quotations and contacts, solutions that can function in real-time are of critical importance.
• Enable tighter compliance and controls: Traditional warehousing is getting replaced by cross-docking based on demand. Replenishment tracking using technology to monitor need in real-time is necessary
• Maintain information transparency — Some retailers have begun sharing point of sale information with their suppliers (e.g., Zara). This ensures suppliers with direct feedback from the consumer.
• Collaborate with suppliers: Retail chains in the UK, France & Spain have now started including suppliers in their supply chains with the goal to reduce total costs & improve overall efficiency.

Supply chain networks in the retail industry are some of the most complex networks. The consumer is in need of speed and convenience in each phase of the buying cycle, and retailers are expected to be equipped for the challenge. The European regulatory changes like Brexit have imposed uncertainties in Procurement & Sourcing systems.

Such challenges are an opportunity for procurement to provide value by levering technology such as:

· Speeding up the source-to-pay process

· Optimise & standardise no. of suppliers & reduce spends

· Incentivise suppliers on delivery time, quality, services & price by real-time tracking

The new paradigm of retail format now calls for retailers to be equipped and efficient in their supply chains. Advanced & scalable automation technology that is intelligent, easy to use & integrate will be the need of the hour. The use of such technology solutions will not only keep suppliers satisfied with process transparency but will also enhance customer responsiveness, sustain savings, and reduce cycle times.

How Zycus Helped Transform the Procurement Organisation at a Global Retail Giant

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References

[1] https://review42.com/retail-statistics/

[2] https://www.shopify.com/enterprise/the-future-of-ecommerce