Supply chain fundamentals to help retailers get to their new normal faster
As a leader within the retail technology industry, we continue to work with our clients on how to improve and innovate, deal with the current COVID-19 crisis and adapt to the new normal, post the pandemic.
At Mindtree, one of the key areas that we believe will help retailers survive this crisis and come through is ‘what will come next on their supply chain.’
Pressure to be flexible
With non-essential stores being closed and without a clear path ahead of when they will be able to re-open, the dependency on eCom as a channel has grown exponentially. This in turn has exerted an additional pressure on the supply chain of these businesses.
Consumers’ expectations on delivery - the ‘two hour’ or ‘four hour’ versus ‘tomorrow or the next day’ has also seen a drastic change. Brands cannot keep to this promise, not only because of the growth in eCom orders, but also because of health and safety guidelines, social distancing and work from home that impact productivity within the warehouse, fulfilment and supply chain.
Organizations are being innovative and socially conscientious. The priority that a luxury brand would get on a logistics partner is now lower because of essential products. In some countries like France, Amazon has even been asked to limit its orders and deliveries to only essentials.
So how do non-essential retailers survive today and emerge into the new normal re-imagined and with the potential to thrive? What are the changes to the supply chain that need to happen? Unfortunately there’s no one-size-fits-all approach. However, there are three common best practices which I believe will serve retailers well no matter who or where their customers are.
1 - Build resiliency into your supply chain
Companies that are further along in their Digital transformation of the core of their supply chain journeys will fare better than those that are not as far along. However, building resiliency into your supply chain is something that will be key in helping adapt to the new normal.
Companies that have re-purposed their supply chain to manufacture, assemble and distribute products that are critical right now. For instance, PVH Corp, which has revamped their supply chain to send out PPE (Personal Protective Equipment) to support the NY health workers, or companies like Louis Vuitton and Barbour which have reimagined their production and distribution lines to create and distribute PPE’s within the UK, to support the NHS.
Some restaurants and pubs across the globe are transforming their spaces into grocery stores, initially with the view to get rid of the inventory that they had. However, now larger warehouse retailers are also leveraging these restaurants and pubs as smaller, easy to reach mini retailers.
Apart from the social consciousness of supporting countries and the world in need, this also creates a resiliency within their supply chain. Small business loans and lines of credit to secondary and tertiary suppliers within these companies’ supply chains, while helpful, need to be supplemented with the new demand that is created. This enables the entire ecosystem to continue to function, creating demand and energy into the value chain.
Supporting your multi-level suppliers and partners, some of whom are small businesses, will also ease the passage into the new normal. Otherwise, these partners will need to close down, which will impact the retailer’s supply chain, in what will be the new normal.
2 - Build an end-to-end communication loop that has security and data at its core
A focus area for all retailers is - How to wrap your arms around and make data valuable and connected. Some are further along the journey than others, but the importance of data and insights is sacrosanct.
This has become even more critical in the current COVID-19 scenario, as changes will continue to be made within the supply chain as well as to customers. As your supply chain is consistently being tested and changed – data and a connected analytics ecosystem is tantamount to being able to manage inventory, track orders from varying sources and manage ad hoc on-the-go requirements. All this while keeping customer experience as the focus.
The new world post COVID-19 has the potential to have a rubber-band effect on consumers. While they will be more conscious about spending, especially around their disposable income, they will expect the new normal to have the experience that they were used to before the spread of the pandemic. This will mean that in a very short period, consumers will have expectations including shorter delivery timelines, product and inventory availability, an overall consumer communication and an engaging personalized experience. A key manner for companies to address this is to leverage the use of their data to drive decision-making and plan for the new normal.
3 - Build last mile connectivity
This crisis has highlighted the absolute need for last mile connectivity, apart from reimagining traditional models of single carrier dependency and centralised warehousing.
Logistics providers and aggregators are already looking at ways to improve and cannibalize excess capacity within the logistics pipeline. Bidding wars on capacity and visibility to remote deliveries bubbles to the top, especially since retailers work towards providing free home delivery as an incentive to their customers.
Transparency into the delivery mechanics and using IoT-enabled trackers with AI and ML creating efficiencies on delivery routes and empty capacity miles [not only by the logistics companies, but within the TMS (transport management system) of companies’ supply chain] become critically important.
As the increasing demand of eCom and delivery grows exponentially - retailers must look at the current investments that they have made within their channel’s eco-system and look to re-purpose stores as warehouses. In effect, this translates to creating micro-fulfilment centres leveraging the omni-channel capabilities of the store. Leveraging physical stores that currently hold inventory as pure fulfilment channels will alleviate the pressure on the supply chain, as well as on the centralised delivery model.
Whole Foods and Kroger are some of the brands within the US that have converted physical stores into ‘dark stores,’ that are either working as ‘click and collect’ or as pure micro-fulfilment stores.
Through this, leveraging logistics networks like UBER, LYFT, as well as DoorDash, Deliveroo, GrubHub and other ride-share and food delivery systems that have been hit during this crisis, continues to enable a connected eco-system and ongoing demand.
If nothing else, this crisis has thrown up an interesting dynamic of – resiliency, agility and connections – the fundamentals that will take you into the new normal.