Embracing the Retail Revolution - Step #4: Creating resiliency through a more optimized n-tier supply chain

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August 26, 2020

Removing manual efforts to manage the supply chain

Turmoil and chaos can best describe the current state of the retail supply chain. While North American grocers experienced panic buying and empty shelves, demand across the apparel industry dropped off a cliff due when the emergency closures hit.

As stores see shoppers coming back in, non-essential retailers have been scrambling to deal with stagnant inventory. There are a variety of ways to deal with the inventory like partnering with suppliers to cancel orders, postpone shipments, and delay paying invoices, but most retailers will want to sell the inventory through promotions, discounts, product kits, or tent and sidewalk sales.

Retailers are executing promotions earlier than ever before, with the goal of drawing in customers. Generating revenue and traffic may be a higher priority than the profitability. Some may even store goods for next year to reduce deeper markdowns and next year’s buying cycle.

Many retailers created options like curbside pickup for the first time, reaching customers who wanted to shop but were unable to enter closed stores. With social distancing and curbside pickup remaining in some context for the foreseeable future, the potential need for new store configurations will drive assortment changes, possibly a reduction in assortment breadth/depth that impacts demand and amount of inventory needed in stores.

Other areas of the supply chain have been affected as well, impacting both current season as well as upcoming seasons like fall and winter. Factories in China, Europe, and the US experienced shutdowns earlier in the year. During the virus peak, the Port of Long Beach California saw a significant reduction in cargo and many cancelled sailings which ripples down through truck and trains.

These impacts not only affect the physical supply chain but also the systems generating the merchandise buys. Retailers have a wide range of tools for demand, visibility, supply chain execution, and finance, spanning complete reliance on spreadsheets or outdated time-series models through to more automated, AI-based applications. Manual efforts to manage the digital supply chain will only be exacerbated by the volume of adjustments needed for the short-term demand and inventory needs.

Enhancing supply chain control through AI

A resilient supply chain begins with a more accurate prediction of demand using AI-powered machine learning models to consider attributes, promotional details, external data and much more. The demand side is only half of the equation, warranting an AI-based optimization model to fully consider financials and constraints to make the most profitable allocation and replenishment inventory decisions. An automated, seamless approach will eliminate many of the manual activities needed to either push or pull inventory through supply chain.

Instead of analysts or allocators making all the decisions, optimization automatically recommends purchase orders, allocations, and transfers that can be managed by exception. Ideally, suppliers collaborate on demand and supply signals in real-time and will visualize the digital supply chain as it occurs. Suppliers should let retailers know if the demand can be met, including how much production can be ramped for high demand items or what the minimums are for another production run.

Retailers should invest in platforms that enable the supplier community to collaborate with retailers on production, visualize freight throughout the ocean and land journeys with machine learning models predicting slowdowns, and predict disruptions and impact on ETA. When disruption occurs and factories experience an interruption, changes appear in a control center to be re-optimized. All invoices related to the purchase order would be available on the platform enabling automatic payment.

Furthermore, with the swing toward a larger proportion of e-commerce orders, many warehouse management systems are unequipped to handle customer orders in an efficient manner. Warehouses using outdated systems aren’t designed for optimal storage and picking, leading to inefficiencies, increased costs, overtime and errors.

Adopting systems with 3D visualization of distribution center activities allow people to process images at a much faster rate than words and numbers. Users can now interact with analytics within WMS systems and connect to voice and RF devices. The future of WMS will join with augmented and virtual reality tools to provide holographic information as you walk the warehouse leading to quick resolutions of problems.

With the shift toward more online shopping, stores can also become fulfillment centers where inventory can be depleted across the company before placing additional orders to suppliers. Whether curbside pickup or delivery, demand is satisfied and inventory is optimized throughout the supply chain regardless of fulfillment channel.

Given how this year’s challenges are fundamentally changing the way supply chains will operate in the future, retailers should embrace an artificial intelligent modelling methodology with a vendor that comes alongside them.

For additional strategies for building the resilient supply chain needed for the Retail Revolution, download the complete Supply Chain Resiliency Best Practices Guide.

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