How retailers can effectively manage supply chain uncertainty

Caroline Ellis, Commercial Director of Advanced Supply Chain Group (ASCG), part of the Reconomy Group, tells A1 Retail more.

Many retailers saw noticeable losses during the latest seasonal peaks after a period of delays caused by numerous supply chain challenges. Our latest research* found that one-in-five retailers reported Christmas trading, including Black Friday sales, was between 21% – 30% down on forecasts, whilst a similar number saw pre-tax profits at 16% – 20% below expectations. This meant that over £5 million was lost in seasonal sales for a third of retailers, whilst 13% missed out on sales revenues worth over £1 million.

Despite these significant seasonal losses, we have started to see retailer confidence growing amongst those businesses that are proactively addressing disruption and taking action to enhance supply chain stability in the face of current and future challenges.

One of the key actions we’ve seen from retailers who’ve best tackled the disruption of the last 24 months has been prioritising investment to overhaul legacy supply chain systems and off-the-shelf management programmes that don’t have the capabilities to react to a business’ individual needs.

Our research highlighted that almost a third (29%) of retailers are prioritising investment in supply chain software in 2022. This will help them improve stock visibility and management practices to better equip their operations to deal with uncertainty, as well as evolving consumer trends. There is growing shopper preference for ‘buy now, pay later’ options like Klarna and increasing demand for same day deliveries. ‘Try before you buy’ is also popular amongst shoppers, who feel much more comfortable ordering higher volumes of goods in the knowledge they won’t keep them all.

These trends are unlikely to affect just the sale of products and goods being sent to shoppers – we’re also likely to see an increase in products going back into supply chains. As a result of these changing consumer behaviours, 57% of retailers think they’ll face a higher volume of returns in 2022.

When considering investment in supply chain software, retailers need to prioritise three key areas to maximise the impact of any investment and build greater resilience within existing supply chains.

1) Think data-first

Sophisticated supply chain software should provide retailers with real-time information about stock inventory and access to insights that can help predict future trends and fluctuations. With greater visibility of sales and returns data, retailers can create more accurate forecasts ahead of seasonal peaks, as well as creating supply chain management models for multiple different scenarios to be better prepared for potential delays and disruption. If retailers closely examine the data that any supply chain software is going to provide, and think critically about how they can use this to inform business decisions, it will help them to create greater stability in times of uncertainty.

2) Find an end-to-end solution

To make informed decisions about supply chain performance, retailers need to find a software solution that not only delivers on data, but that can be integrated with their supply chain partners to deliver visibility of the whole supply chain – from source of supply right through to sales channels. This will feed knowledge and insight that makes supply chains better, faster, and cheaper.

3) Build a long-term strategy

2021 saw retailers move away from lean just-in-time supply chain models, in favour of holding more stock in warehouses to mitigate delays. While shorter supply chains can seem easier to manage, retailers need to consider the approach that’s going to be best for their operation in the long-term. With better data insight and end-to-end visibility, retailers can build contingency plans that go beyond immediate fixes, which can often be costly and time-intensive. This will prove a more effective method of regaining control over the movement of goods and allow retailers to be more agile in their response to changing market activity.

*About the research: SAPIO Research surveyed 212 retailers nationwide in January 2022. Senior professionals with responsibility for stock inventory management were asked for their opinions on trends affecting supply chain operations.

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