Chapter 3

Build a resilient supply chain

Retail is underpinned by complex international supply chain systems, with business operations spanning across
the globe. Additionally, it is subject to the changing needs and fancies of the consumer, who can decide yesterday’s ‘hot’ is now ‘not’ overnight. In this sense, retail has always been exposed to risk. Changes in consumer behaviour and ongoing disruptions are forcing many to rethink their supply chain strategy.
You must have the ability to avoid or recover quickly from supply chain disruptions. Whether it’s because of a
lockdown, staff shortages or container ship stuck in the Suez Canal.

You have to know now

• The frailties in your supply chain;
• How much stock do you need;
• Where your stock is;
• How you are going to get it to your customer;
• What to do about returns;
• Your competitive advantages and inefficiencies.

Nearshoring is not that beneficial

Logistical upheaval and inflationary pressures remain due to war, lockdowns and climate change. There is no simple solution or quick fix. Producing closer to home may give more continuity but is more expensive in almost all cases. Nearshoring risks a breakdown in your relationships with existing tier 1 suppliers and in most cases it will require significant investment to open new manufacturing sites. Without full engagement, localisation of the supply base can increase complexity and reduce economies of scale. What can you do is assess the resilience of your tier 1 supplier? Make plans with your tier 1 vendors to ensure flexibility and continuity of service delivery. You can also ask for data to improve demand forecasting. A supply chain is only as strong as its weakest link. Make sure your tier 1 suppliers have instigated reviews and action plans with their suppliers. A collaborative approach is essential to understand what the critical areas are for resilience improvements.

How much stock do you need?

You must know your customer inside out, only then you will know what to stock today and tomorrow. Traditional methodologies require interpretation and analysis by people to adjust algorithms, and that takes time and people, which most retailers don’t have. Invest in Machine Learning (ML) and Artificial Intelligence (AI) to enable automatic identification of trends and updates to forecasts.

Forecast future Demand with AI

These new tools can ingest vast volumes of data very quickly, resulting in quicker responses to changing sales
patterns, hence improving stock levels for both the customers and businesses. An enterprise view of stock
requirements, transportation lead times, and production lead times supported by AI & ML will enable a tailored
rather than blanket approach to stock levels.

Customers demand convenience, which is why you need visibility throughout your supply chain and distributed
order management. This maximises order fulfilment and meets customer expectations at the lowest possible cost. Gain control with one version of the truth for inventory levels at all locations: on the move awaiting delivery, what is in stock in warehouse X, what is in stock in stores or in production with expiration date Y, all aligned with customer expected and ordered demand.

Get your stuff to the customer

Your customer wants a quality product, at the lowest price, delivered as quickly as possible. Are you the expert in logistics and warehouse management or should you use a third-party logistics (3PL) company? Does full control of logistics and warehousing give you a competitive advantage? Often 3PL does give more resilience to your supply chain. Logistics is their core business; therefore, they have cross-border knowledge, the latest technology and a scalable fleet and staff. COVID-19 highlighted these issues, particularly for international and cross border logistics. If you choose 3PL, your systems need to be connected so that you remain in control.

Returns: reversing logistics management

About 25% of all products ordered online are returned, and the reverse supply chain is costly and inefficient.
The end of free online returns looms as Zara follows Next with a £1.95 charge while firms also count the cost
of serial refunders. Visibility showing why goods are being returned and where the returns are coming from
is critical to reduce returns. Again, insight is needed: Are they the wrong size? Are they damaged? Is it because of incorrect information on websites? Or do you suffer from wardrobing: (wearing them once and returning them).

Visibility is key

Returns are a major cost, so you need to have a strategy like Zara and Next. Then you have the returns themselves, which are often damaged. You can repackage them and offer them cheaper. If the fault lies with a supplier, you need to address it and claim credit. You want to know how much returns cost and which policy gives you the most efficiency. You can do that with systems that provide visibility of volumes, customer reason/return type, identified costs to manage level of customer returns, and supplier analysis by return type.

Building resilience into your supply chain will enable you to better absorb shocks and respond to changing
customer needs. The customer is king and being able to respond with agility is paramount to success. In this
moment, we stand between the mass disruption of the last few years and the sea of change brought by the
migration to online and hybrid shopping. This brings more challenges, but also opportunities. Creating a resilient supply chain allows you to manage and embrace these changes and offer the service your customer demands.