From baby shoes to custom shoes in supply chain reliability
Rumor has it the first real "supply chain" dates back to 1913 with Ford Motor Company’s famous assembly line. Automotive parts came in one end, and assembled vehicles drove out the other end.
But times have changed. Our version of the supply chain today has become much more complex. Along with this complexity, the role of supply chain management (SCM) has increased in importance.
In the late 80s and early 90s SCM became a major focus in retail environments as the idea of retail automation picked up momentum. It hit a major milestone in 1980 when Gartner created the term enterprise resource planning (ERP) — the infancy of end-to-end integration.
After the 90s, the retail space was well assimilated — especially across the supply chain. The dot com era in the late 90s and Y2K investments had brought many IT landscapes up to date, and technology was allowing retailers to advance from crawling to walking.
Yet, as mobile devices have put connected consumers at the center of the business universe, retailers are faced with a rising challenge.
Retailers are now dealing with hyperconnectivity — having a presence across all channels of retail. This revolution is forcing many retailers to buy channels that the new, fast changing shopper demands, along with elevated pressures of managing store and online inventory. While technology in this area, from forecasting to simulation modeling, is helping, the race is never-ending.
How to stay in the race in today’s omnichannel world
Recent studies have shown inventory issues are becoming more costly than ever. A report from the IHL Group found retailers worldwide lose $1.75 trillion annually due to the impacts of inventory management.
"Out-of-stocks, overstocks and returns are nothing new," said Leslie Hand, vice president of IDC Global Retail Insights. With 15 years of experience working for a large global grocer, Hand recently led a project to tackle what the company called "known loss" – retail shrinkage that can be identified — and believes while the goals have only changed slightly, inventory pressures have intensified in today’s omnichannel universe.
While manufacturers have addressed many of these advanced supply chain issues, retailers are still lagging.
To meet consumer preferences, retailers are forced to consider "real time retail" — a twist on traditional inventory management supported by data. This supply chain transformation empowers retailers to tailor inventory on a real-time basis, leading to thrifty outcomes.
For example, according to a case study by Oxford Economic, Pick n Pay, South Africa’s second-largest retailer, is leveraging Big Data insights to increase efficiency within its stores. Through centralized distribution centers, supply chain optimization and data analytics, the major retailer has gained consumer insight, ensuing measurable savings. In fact, the cost per case delivered to stores dropped by 6.5 percent in the last year and online sales have increased by 27 percent.
With the evolution of SCM, Big Data and analytics are crucial to tackling supply chain challenges. Through predictive analytics, supply chains can fine-tune operations for scalability and future increased consumer demand.
So what is the best next move for retailers? Use these supply chain solutions to improve stamina and beat the competition. For retailers, this means getting back to the basics of integrating the SCM platform portion of their business — now. As for the next generation of shoppers, generation Z will hit shops and mobile devices soon, swarming your selling channels. As a result, the right product must be in the right place — so be ready for it.
Whether it is mass-produced baby shoes delivered to Wal-Mart or custom shoes that millennial shoppers demand overnight from Adidas, the reliability of retailers’ supply chains will ultimately make or break them.
Tom Redd Tom Redd is the Vice President of strategic communications for SAP covering the global retail industry. He leads the team responsible for leveraging the driving internal and external communications via many channels. He is also an internal advisor for SAP Retail's global marketing across all regions.