The future of retail supply chains

The future of retail supply chains

Milan Panchmatia 4C Blog

4C Associates’ Milan Panchmatia examines how retailers can adapt their supply chains to take advantage of new opportunities.

The retail industry is one of the fastest changing on the globe. New technologies are being developed at a rate never seen before and the level of competition in the field is greater than ever. Small, agile companies are finding ways to satisfy increasingly demanding consumers, while established businesses struggle to untangle legacy solutions.

Retailers need to balance offering customers the flexibility and accessibility they demand, whilst maintaining security of supply across vast supply chains. In addition, businesses must ensure far removed suppliers abide by set rules and regulations. A significant challenge, given the cost pressures faced by many.

Moving the goal posts

The growth of online shopping has revolutionised the retail industry. The idea that bricks and mortar shops will exist purely as showrooms, for customers to touch and test products is already a reality in some sectors. While this does present a number of opportunities to streamline costs, it also raises a number of challenges. Putting to one side the issue of reduced consumer loyalty, there is also the challenge of getting products to them.

Shoppers expect a wide array of options when it comes to delivery and do not want to pay extra for the luxury. The omni-channel delivery model which was developed to help retailers stand out, is now so common, customers expect nothing less. The same principle applies to returns, although, I won’t dwell on this challenge as I have done so at length in another post. So how can retailers make it work for them?

Tailored approaches

Subscription services such as Amazon Prime offer a glimpse into the future. The online retail giant has signed up an estimated 50 million Americans to its service as of November 2016. Research by the Motely Fool suggests that Prime members are key to Amazon’s profit margins, not only because they buy more than regular users, but also because as subscription fees grow, they eat into fixed costs such as on demand video services. Shipping costs remain variable, however, as most Prime members are likely to have been heavy Amazon users, these costs are also offset.

Of course, not every company boasts the same client base and unique market position as Amazon and other businesses need to identify their own opportunities. SCM World’s Future of Supply Chain 2016 survey, illustrates just how rapidly new technologies can disrupt embedded processes. Over the course of just two years, there has been a huge jump in the number of supply chain professionals who see 3D printing as a potential game changer (from 6% to 35%).

Major companies, including Invisalign, Medtronic and Johnson & Johnson have already embraced the potential of the technology and are using it to drive efficiencies within their supply chains. Each of these businesses operates within the medical sector, highlighting the fact that future supply chains will be increasingly tailor made to fit industry, sector, business and individual consumer needs.

Planning ahead

In the future, retail supply chains will need to be completely re-imagined. There will be no one-size fits all solution and businesses will need to develop their own version of ‘best practice’. Identifying and implementing process improvements will require a holistic approach to the entirety of the supply chain – including an integrated strategy for returns.

The businesses which thrive will be those which innovate best. While just a few years ago, 3D printing seemed like a concept plucked from science fiction, major companies are already reaping the benefits of implementing it within their supply chains. Understanding and leveraging the potential of new technology, developing mutually beneficial relationships with key suppliers and analysing – not just gathering – data, will form the pillars of success.

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