Trots and Trends in Retail’s Supply Chain Management

As a retail brand, imagine being able to get automated orders from customers’ refrigerators or trace back with much higher conviction as to whether suppliers have maintained the established standards of quality control. Such a future is already knocking on the doors. Join us in this blog as we delve into the future of supply chain management in the retail industry covering influential subjects like IoT, blockchain, omnichannel, sustainability, and managing supply chain risks.

Technology-Driven Innovations

Artificial Intelligence (AI) and Machine Learning (ML)

AI and ML are the latest buzz in the space of applied technology – be it concerning our routine lives, the management and delivery of public services by governments, or the execution of business processes and operations. However, it is equally important to have a general understanding of how exactly AI and ML are helping us. AI is a broader concept that seeks to create programs or machines that can learn from their environment, use reasoning, and respond appropriately – all without human intervention except under fundamental circumstances. ML is a method of making a program or machine ‘learn’ to become ‘intelligent’ using algorithms.

In the context of retail supply chains, AI and ML are helping build more advanced systems as well as enhancing the capabilities of existing tools and techniques used in predictive analytics, making demand projection, quicker and lesser communication, and process automation. A counter question could be – we are already using these tools and techniques using advanced software applications, how do AI and ML make them better? The answer is enhanced capabilities extending to robotics.

Today, many large retail corporations use AI to keep an eye on the movement of inventory from sourcing centres to stores. The role of AI here is to simulate human efforts and improve the systems with self-learning and adaptation. The inherent ability of machines/software to handle massive volumes of data is also endowed with AI.

Internet of Things (IoT)

IoT refers to a technology in which electronic and electrical devices or machines are empowered with sensors, programs, and network connectivity for improved usage including remote management of devices. The common understanding of IoT is mostly confined to products of everyday use like home security systems, lighting, toothbrushes, refrigerators, etc. However, IoT has found as much significance for business applications as well. Shrinking size and cost of chips and other hardware played a big role in the accelerated adoption of IoT.

Today, IoT is gaining more prominence than ever in retail and supply chain management. A good example would be cold chain monitoring systems. The embedment of IoT sensors in logistic vessels and warehouses helps companies keep an eye on various storage parameters essential to maintaining the quality of products in transit or storage. The activity is not new but IoT has simplified it with real-time access to a wide range of data including location. Companies involved in the perishable foods industry are one of the biggest beneficiaries here.

Blockchain Technology

Think of blockchain as a communication and database system that is highly resistant to tampering or censorship. It lends better transparency, enhanced security, and monitoring abilities in supply chains. Decentralisation of information facilitates timelier information-sharing on the movement of inventory. Blockchain also helps improve accountability-responsibility. Every transaction bears the signature or mark of the person or entity who executed it.

Once any information gets registered in a blockchain, it is nearly impossible to be tampered with. For example, once the information of the source of supply is entered into a blockchain-based SCM application, this information could be accessed later to verify the origins of a product and other details to verify its authenticity. This makes many diamond companies one of the prime users of blockchain technology. It helps them trace the origins of diamonds. This also helps them ascertain the standards of ethics, responsibility, and sustainability maintained since sourcing. The business benefits of this are enhanced brand reputation, improved customer loyalty, and the elimination of counterfeit or adulterated products.

Omnichannel Retailing

Seamless Customer Experience

One of the essential requirements in omnichannel retailing is to provide a seamless experience to customers in their shopping journeys traversing through a series of online and offline touchpoints. As the use of digital technologies becomes more meaningful for both customers and businesses, it has necessitated the latter to blend the best of both online and offline worlds into one integrated shopping journey for customers. This has left several repercussions on retail supply chains. One such implication is transparency. Today, customers expect to have access to or get updated on the real-time statuses of their orders starting from source to final delivery. If this is not the case, their shopping experience might get shadowed with doubt and uncertainty. In order to deliver such transparency and timely communications, supply chains must be equipped with the right tools and technologies and accomplish retail and supply chain integration. The constraints of location and logistics cannot be barriers to providing the transparency levels expected by customers or intended to be delivered to them.

Inventory Optimization

Another facet of omnichannel retailing is offering products across all online and offline channels. This is important because the distinctions between online and offline capabilities must not exist in omnichannel. Customers need to have the option to buy from any channel. This necessitates distributing or allocating inventory in a well-calculated manner – also known as inventory optimisation. Demand predictions are never 100% correct but sound inventory optimisation helps prevent stockout and overstock situations in sales channels. Fashion brands and businesses with online and offline sales channels serve as good examples here. These companies have to respond quickly to changing market needs. When we say quickly, it is not that easy. A response might involve adding a new collection that may call for weeks of planning and adjustments in the supply chains. One way these companies achieve this is by fostering strong partnerships with manufacturers and suppliers and how they function. Further, these manufacturers and suppliers work on the same principle with their associates. This entire paradigm of ‘adjusting’ is majorly pre-established.

Order Fulfilment

Omnichannel has lent more complexity to order fulfilment processes and retail inventory control strategies. Retailers have to manage orders from multiple channels. Then, there could be diverse fulfilment choices offered to customers like store pickup, in-house vs 3PL home delivery, and in-store shopping. Fulfilling orders for visiting customers also technically counts as order fulfilment for management purposes. To be able to fulfil orders on time, inventory management must be on target cutting across all fulfilment routes. Customer expectations of quicker delivery and returns make the management of order fulfilment more challenging – now you not only have to be accurate with purchase and storage but also deal with the benchmark of maintaining competitive fulfilment timelines.

Many beauty and personal care brands and businesses simplify their order fulfilment and convert the challenges into an opportunity by offering the option of online ordering and in-store trial and pickup. This strategy helps them drive footfall to their stores, provide product validation to customers, and reduce the burden of online deliveries. This may not be 3600 omnichannel but it gets the job done.

Sustainability and Ethical Sourcing

Sustainable Practices

The growing mass awareness of sustainability and conservation has left its due implications on supply chains. Sustainability has emerged as a power value proposition given the growing tendency among consumers to choose brands and products that adhere to ethical and sustainable practices and standards. From procurement of raw materials and production/processing to packaging and distribution, more and more retail brands and businesses are now realigning their supply chains and incorporating the required measures to meet the objectives of sustainability. Among other things, this has affected the selection criteria of suppliers. Companies now look for suppliers who meet the standards of ethical sourcing. One important standard of ethical sourcing is working conditions in factories. In addition to looking for certificate-based validation, many companies have started conducting periodical audits to keep a tab on the adherence to the established standards of ethics and sustainability. The increased interest in sustainability has also necessitated greater transparency in supply chains. There is also a growing emphasis on local procurement. It gives retail brands and businesses the much-needed sense of affiliation in local markets. A related development is prioritising diversified procurement. Although this is not a new business strategy focus on sustainability has made it more prevalent. Some of the other widely sought-after suitability objectives/practices are:

• Reduced carbon emission
• Use of organic materials
• Minimalistic packaging
• Compostable packaging
• Recycling and reusability
• Smart and energy-efficient lighting
• Use of renewable energy sources
• Scientific waste management
• Offering refurbished products
• Consumer awareness programs
• Less paper and more digital

Traceability and Transparency

For sustainable supply chain management, traceability and transparency are two key ingredients. In infusing sustainability, companies not only have to check what is under their direct observation but also ensure verifiable visibility in supply chains. Technologies like blockchain make such traceability and transparency possible. Blockchain helps trace the origin of goods and verify adherence to established sustainability standards. The use of blockchain is common in the premium luxury retail sector. The hallmark of premium luxury products is quality. Retail brands dealing in such products cannot take chances when it comes to quality. If products fail to meet the promised standards, return and replacement are very much likely. Return or replacement of expensive products is always a costly affair. By proactively taking a step towards ensuring better quality of inputs in supply chains, companies are able to significantly lower the rates of return and replacement. There is always a price tag for investing in the right technologies but when done right, such investments yield long-term and far-reaching benefits.

Supply Chain Resilience in Retail

Risk Management

Geopolitics, technology, business alliances, trade agreements, market diversification and many other internal and external developments, both planned and unplanned, make supply chains vulnerable and subject to adjustments and improvisations. Since 2020, the global business community has witnessed many such developments which directly or indirectly have left imprints on their supply chains. It is more important that businesses add agility and resilience to their supply chain management. In this pursuit, managing risks in a planned and calculated manner is important to make supply chains more resistant and resilient to disruptive changes. Some of the sound strategies/practices in supply chain risk management are:

• Diversification in terms of suppliers, logistics, and warehousing
• Formulation of emergency plans – tested and improvised from time to time
• Outsourcing of non-core functions
• Strategic and adequate insurance cover
• Close working relationships with supply chain associates for better information-sharing and timely adjustments

From furniture to automobiles, many big companies operating at the global level have incorporated these strategies and practices as per their requirements. The use of advanced technologies like AI and ML has made risk assessments and finding solutions much more effective and efficient. For example, the use of AI-powered cameras in warehouses can detect anomalies in inventory movement and provide timely warnings to make corrections and adjustments.

Supply Chain Visibility

Towards building resilient supply chains, an essential requirement is effective risk management and for that, a critical requirement real-time visibility into supply chains. This real-time visibility helps make the necessary adjustments in the later sections of supply chains when anomalies or deviations are detected. Essentially, it allows companies to fine-tune their supply chain operations. Technologies like IoT are used, along with existing tools and technologies, to achieve this real-time visibility into supply chains. Think of going to buy something and you get updated information that the item is not available. Now you have time to change your purchase destination. In the absence of the update, you would have ended up spending resources in vain. For businesses, such information and updates are crucial to achieve cost-efficient supply chain management. For updated tracking and supply chain optimization for retail, technologies that are put to use include IoT sensors, RFID tags, GPS, blockchain, data analytics, advanced retail SCM software, and control centres.

Key Takeaways

Technology is at the forefront when it comes to envisioning the future of SCM in the retail industry. The growing capabilities of AI and ML technologies will find a larger and more important space in supply chains. With self-learning and the capability to auto-adapt, AI and ML brings a whole new dimension to technology. A similar technological development to watch out for is IoT. IoT is helping companies overcome many physical barriers by creating a network of devices/utilities with remote monitoring and management capabilities. The third in the list is blockchain technology which helps add superior standards of security and transparency in supply chains.

Omnichannel retailing is the next big phenomenon that is reshaping the supply chains of today and will continue to do so in the near future. As an increasing number of retail brands and businesses adopt omnichannel, they will have to make the necessary adjustments to meet the demands of omnichannel on all fronts including SCM retail. For example, as omnichannel calls for a seamless customer experience, the supply chains must be more transparent to customers.

The third on the list is sustainability and ethical sourcing. From a broader perspective, sustainability is the need of the hour. Companies that emphasise sustainability are also able to use it for improved brand recognition and sometimes even as a brand USP. However, sustainability can also be incorporated in small ways like emphasis on clubbed order fulfilment, use of paper bags, reduced packaging, proper waste management, use of daylight hours and solar energy, etc. To better monitor the adherence to the standards of sustainability and ethical sourcing, traceability and transparency are two essential ingredients made possible by the use of technologies like IoT and blockchain.

The growing interest and efforts towards adding more agility and resilience to supply chains is another emerging trend. For improved risk management, companies are emphasising diversification of supply lines, strategic insurance coverage, outsourcing, and close working relationships with supply chain associates. In this pursuit, the quality and reliability of supply chain visibility will play a critical role.

About Your Retail Coach:

YRC is a retail and eCommerce consulting house with expertise in startups, management, transformation, and expansion. With a scaling international footprint and over 10 years of demonstrated experience, YRC has worked with over 500 clients in 25+ sectors with a success rate of 95%.

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