What other sectors can learn from retail supply chains
By Laura Heywood | Supply Management
The retail industry’s leading e-commerce players epitomise supply chain excellence. Laura Heywood asks experts what other sectors can learn from them.
Today’s retail supply chains are unrecognisable compared with the simple networks of a decade ago. Back then, the main job was to move goods from suppliers through distribution centres to stores in bulk, in the most efficient way possible. Fast forward 10 years and leading retailers boast supply chains which are among the most agile, responsive and synchronised in the world.
This has been driven by relentless consumer demand for products to be bought and delivered in the most convenient way possible online, through mobile devices, in bricks and mortar stores, click-and-collect, local pick-up services or home delivery.
The rise of ‘omnichannel’ retailing – where customers can move seamlessly between integrated channels and interact with the retailer at any stage of the buying process from placing the order to returning it has also transformed retail supply chains.
Retailers’ continuous interaction with the customer regarding the purchase and delivery of products and services means their supply chains are constantly responsive to customer behaviour. Offering customer-driven, personalised service is a lucrative strategy other industries could imitate.
[blockquote style=”4″]”Retail is closest to achieving the holy grail of supply chain management,” says professor Alan Braithwaite, executive chairman at LCP Consulting. “It is learning fast how to maintain multiple channels in parallel something other sectors struggle with.[/blockquote]
UK department store John Lewis is considered the omnichannel champion. According to Phil Streatfield, a partner at LCP Consulting, it achieved this “by using technology in both the customer interface and back office supply chain operations”.
In the past five years, John Lewis has upped investment in its IT and data infrastructure by 400 per cent to ensure it provides a seamless order management and customer experience. A major improvement has been using real time data to re-engineer its supply chain and analysing operational and customer insight to guide investment in core areas such as delivery, returns and fulfilment innovations.
Having complete stock visibility in real time – as John Lewis does – is a core component of a first-class retail supply chain, believes Craig Sears-Black, UK managing director at supply chain solutions provider Manhattan Associates. “You will have the ability to fulfil orders from wherever the stock is in the most time-efficient and cost-effective way,” he says.
In fact, data usage in the retail sector is arguably the best developed of any sector, with stock managers and logisticians making extensive use of data for demand planning, capacity management, availability enhancement and efficiency across the entire supply chain. As Mike Bernon, senior lecturer in supply chain management at Cranfield School of Management, says: “A first-class retail supply chain will have high on-shelf availability, high inventory turns, fast cash-to-cash cycle time, lowest total landed cost and high responsiveness.”
And increasingly the importance of best practice is being recognised. David Noble, group CEO, CIPS, says qualified practioners are essential. “Retail boardrooms are starting to wake up to the need for professionally qualified supply chain managers because of the added value that best practice, ethical sourcing can add to their bottom line and the role they play in safeguarding their business’ reputation.”
Chilled grocery retailers can teach other sectors about the importance of lean operations. The best and leanest retail supply chain – measured by product range, productivity, efficiency, availability, waste – is the short-life grocery chain, says David Emerson, group sales and marketing director at logistics service provider SEKO Logistics. “Facilities are geared to precise retailer orders, based on forecast demand using sophisticated algorithms to maximise availability and minimise waste.”
Within hours, suppliers can deliver to pick-by-line stockless warehouses that are 40 per cent more productive than their ambient, stocked counterparts. Products are then picked into store cages and driven to supermarkets using load maximising transport routing software. This highly integrated and co-ordinated supply chain replenishes shelves within 24 to 48 hours – highlighting speed as a key attribute of a first-class supply chain.
International supermarket chain Tesco boasts one of the most sophisticated ordering systems in the grocery sector globally, Emerson claims. This enables “an extraordinarily granular degree of functionality for category merchandising, stock management and retail teams,” he says.
In comparison, German supermarket Aldi has narrower ranges, can simplify the supply chain and compete in the discounting space – with fellow discounters and supermarkets.
[blockquote style=”4″]The beauty of simplicity and leveraging volume efficiently is a place [for other sectors] to learn from, Streatfield says.[/blockquote]
Seasonality is another vital part of the retailer’s supply chain, giving them the flexibility and capability to regularly reinvent ranges. Spanish clothing and accessories retailer Zara is a prime example of a fashion chain with frequent short seasons and a highly integrated upstream supply chain that can measure design-to-shelf time in a matter of days or weeks. Bernon describes its stocking structure as “sell one, replace one, in a continuous replenishment system”.
Last year was a landmark for the online sector, with sales growing 14 per cent and smashing through the £100 billion mark. Such explosive growth has resulted in retail supply chains becoming more customer-centric than ever.
Amazon epitomises this. Providing fast, cheap shipping and returns on the products it offers through its extensive supplier network, it has redefined consumers’ expectations. The US-headquartered e-commerce giant’s supply chain boasts an impressive marriage of IT systems, warehouse automation, labour productivity and an almost infinite product range with complete synchronisation.
Streatfield applauds it for its unrelenting focus on its operating model. “It has specialised in the technology platforms to understand customer buying behaviour and drive their range.”
While Amazon has won the e-commerce war for the past decade, other ‘pure-plays’ [companies with only one line of business] are taking note.
[blockquote style=”4″]Consumers have thrown down the gauntlet to supply chain professionals to re-invent the supply chain,” says Jason Shorrock, retail strategy director at supply chain software firm JDA. “The journey will require complex operations, supported by robust planning and intelligent fulfilment execution those that make this happen will be the winners.[/blockquote]