Industry TalkRegular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.
Visibility – the saviour of retail operational excellence?
Bricks and mortar retailers are being challenged like never before. In their attempt to promise and profitably serve the demands of the ‘need it now’, digital savvy consumers, their legacy systems are creaking and processes are being truly exposed.
Retailers’ ability to meet and go beyond their customer’s expectations requires an efficient and well-connected logistics infrastructure, underpinned by real-time visibility enabling open communication lines throughout their order fulfilment journey. With the growing danger of more retailers disappearing from our high streets, now is the time for boardrooms to wake up to the new rules and to start embracing these solutions that can help ease their financial burdens insists Amir Harel, General Manager – Visibility Solutions, Zetes.
Unnecessary Lost Sales
Retail has never been tougher or more competitive. Consumer experience expectations have never been greater; what delighted us yesterday becomes the new normal tomorrow. The Supply chain which enables the new service proposition has never been more complex. Now is the time for retailers to invest the time and money required to operationalise those brand promises of speed, personalisation and better consumer engagement.
While retailers are compelled to make ever more exciting customer promises, the costs of delivering on those promises – from one hour click & collect to same day delivery – are also rising. Disconnected legacy systems, error prone manual processes, poor inventory management and visibility are all creating potential points of failure to disappoint the customer. As a result, the model is not only unsustainably expensive but hugely inconsistent –how much longer can retailers continue to promise the earth and fail to deliver?
Indeed, according to recent consumer research from Zetes, up to 35% of consumers’ peak season planned spend is lost due to products not being available at the point of transaction online or in store. Put simply, over one-third of retail sales potential is disappearing because retailers are not effectively gaining control and visibility over their supply chains.
Outdated Trust Model
This problem is not simply one of a retail model in transition, of retailers juggling with the demands of multiple channels and changing customer expectations. The challenge extends across the entire supply chain. How many retail operations managers have an accurate, real-time oversight of the upstream or downstream network, knowing with full confidence not only what has been ordered but when the order was shipped, when it is due to arrive and whether or not it is complete? The truth is very, very few. Instead they work on old fashioned trust and paper moving.
And yet that insight exists. The supply chain network is awash with data – the problem is that far too few retailers are systematically capturing that data in real-time and consolidating it to support better, faster and more effective decision making. Those who are ahead of the game have real-time, end to end supply chain visibility, from supplier to customer, that delivers a single, accurate version of the truth. This way of working allows them to achieve new levels of collaboration that transform retail operations – from innovative customer offer to problem resolution. In contrast, the rest of the retail market is still relying on EDI, emails, phone calls or even faxes, effectively trusting a supplier to deliver the right number, at the right quality, to the right place, at the right time. It is not working and no one person has the single view of the truth, so how can it?
As for the customer experience; when home delivery or click & collect is fulfilled from store, for example, there is a very real chance the product apparently in stock will be sold by the time a Store Assistant attempts to fulfil the order – resulting in one seriously unhappy customer.
Retail colleagues are demanding change. Yet while recent research revealed that 81% of retailers thought that creating a single-view of inventory with real-time visibility is critical, only 36% had managed to achieve this goal. How can any retailer hope to provide a 21st century customer experience when the supply chain is fundamentally constrained by limited information that is 24, 36, even 48 hours out of date? Where is the opportunity to mitigate the problems associated with under supply, late delivery, poor condition? To provide customers and Store Assistants with accurate, timely product and delivery information? Trust is no longer a viable supply chain model.
Without real-time and end-to-end supply chain visibility there is little or no chance of issues with order quality, quantity or timeliness being highlighted until the problem arises or the sale has been lost elsewhere. From capital tied up in the excessive stock required to mitigate the risk of under supply to brand damaging discounting, the lack of accurate, timely supply chain information is hugely damaging.
Supply chain visibility needs to be a board level priority. This is a top down initiative that requires senior commitment and a clear strategy. So, why are so many retailers still relying on multiple, disparate and legacy systems designed for a different business model to deliver the 21st century experience?
Think Big, Start Small
While many retailers may fear any attempts to create a real-time data model would be both disruptive and expensive, that is simply not the case. Rather than complex integration, or even worse considering a wholesale system rip and replace strategy it is relatively simple to add a visibility layer. This additional layer would essentially take the information outputs from existing systems, identify the relevant insight and create a business-critical dashboard that enables proactive management from supplier to store and consumer.
There is no need to do this all at once. Retailers can focus on those areas of the supply chain that are causing the biggest issues or might deliver the biggest wins. Onboard a small number of key suppliers first, for example, gain visibility, understand and resolve problems such as variance – then scale up to the next tier of suppliers and broaden the business adoption. The result is an immediate financial return, reduced errors and a dramatic cut in capital tied up in over-stocking.
Similarly, in store, Store Assistants with real-time visibility of stock across the business can be empowered to offer customers access to products not available in store today, such as shipping from other stores or delivery to a locker.
This is an agile model that enables retailers to think big, start small, scale fast and rapidly gain access to a continuous, visible information flow throughout the supply chain that can deliver significant and immediate wins in both financial returns and customer experience.
At the most fundamental level retail is about captivating the consumer, making the sale and encouraging brand loyalty. Right now, however, it is about saving the sale. Not just once, but for good. Of course, the quality of the consumer touch point is essential across every retail channel; and providing Store Assistants with the information and ability to save the sale is key. But underpinning that process must be an incredibly collaborative and transparent supply chain; a core set of effective back end processes that enable the customer promise to be delivered in an accurate, timely and affordable way.
To compete with the industry leaders, providing adequate visibility and insight to key people across the business is not an option; it is fundamental to deliver an affordable and sustainable 21st century experience.