As consumer-focused supply chains become popular, retailers must offer their customers pleasant shopping experiences. This means giving customers multiple delivery options, being transparent about stock levels and inventory, ensuring orders arrive on time, and making returns easy.
However, fulfilling these customer demands might come across as complex, especially with hundreds, even thousands of daily orders. Moreover, it leaves many retailers struggling to keep up with the blurred lines between online and offline purchases within consumer-driven supply chains.
But to achieve competitive advantage and profitable growth, they must think strategically about enhancing their supply chain models, or else they might become obsolete. In this article, we will highlight how retailers can maintain their supply chain quality while meeting these increasing customer expectations.
Challenges for retailers in managing supply chain
First, let’s start by exploring the challenges retailers face in their supply chain.
Most customers don’t think about how retailers provide the items. They simply expect their buying experience to include free and fast deliveries with multiple shipping options. Retailers that can meet this demand will be favoured by shoppers, which will increase their profits in the long run.
Of course, fulfilling free, fast, and diverse deliveries is not easy, and it certainly has its own issues. When nothing is entirely free, and the shipping process has its own hurdles, retailers must be smart in managing their budget and monitoring the movement of their goods to be as effective as possible.
When businesses control the whole goods movement, they are less likely to waste unnecessary budget and time. Providing such diverse delivery options requires retailers to work with multiple reliable 3PLs that will handle their goods to reach customers.
According to a survey by Deloitte, 70% of customers are more satisfied with online shopping than in-store shopping. In fact, in-store shopping only accounts for 55% of customers feeling happy. Lower prices than offline purchase, transactional ease, assortment breadth, delivery modality, and delivery assurance are reasons behind this. As customers increasingly opt for online shopping, here are some of the issues that retailers need to overcome:
Increased fulfilment costs
The elevated customer expectation of free, fast, and varied deliveries forces retailers to prioritise increased fulfilment costs. The reasons for this particular issue are the unavoidable rising prices of mid-mile, last-mile, and warehousing.
Mid-mile deliveries, which involve transporting items from distribution centres to fulfilment centres where customers can make in-store or online purchases, are becoming more expensive. The causes for this are rising spot and contract rates, as well as a labour shortage.
Unfortunately, the number of transportation demands will always most likely outweigh the capacity. Therefore, it results in capacity constraints due to which the carriers increase both their spot and contract rates to keep pace with the quick order fulfilment that customers expect.
Last-mile deliveries involve shipping goods from fulfilment facilities directly to customers’ homes. Retailers can ship their customers’ ordered items from physical stores or warehouses. The most important thing to keep in mind is they must be able to ensure stock availability using integrated technology.
However, the problem is that last-mile deliveries are prone to miscommunication. The more frequent miscommunication occurs, the higher the price for retailers to cover. For instance, customers may not be at home when the delivery drivers reach their homes. As a result, retailers must re-ship, which increases costs as they re-deliver the items.
Several factors in warehousing contribute to the increased retail supply chain costs. Labour shortages mean that vacancy levels have dropped to an all-time low, forcing warehouses to pay higher wages to their employees while also charging retailers higher fees.
Mckinsey’s research suggested that warehouses are competing with one another to attract more warehouse workers by offering higher pay. It is shown in the spiked average hourly wages from $17.59 in 2020 to $18.68 in 2021.
Complex inventory challenges
Since customers expect to purchase items whenever and wherever they want, retailers must ensure their stock is available for both online and offline purchases. Ensuring stock availability requires retailers to do robust inventory management.
Inventory management issues mainly revolve around the difficulty of detecting cyclical sales cycles, determining the best and worst products, identifying outdated items, and managing inventory turnover. Unfortunately, retailers frequently struggle with several issues in this aspect.
Detecting cyclical sales cycles
Cyclical sales cycles are dependent on how the economy performs. In times of prosperity, the number of sales may do well. However, in tough times, when people prefer to save their money and avoid buying items they can live without, these sales cycles may suffer.
Retailers selling cyclical products may be perplexed about how many items to produce. Therefore, they must keep up with the economic conditions and make a sound business plan regarding inventory management.
Determining the best and worst products
Market demand determines which products are the best and which are the worst. Typically, the best products have high sales compared to stock levels. On the other hand, the worst products sell slowly compared to the stock levels.
In terms of inventory management, retailers would (and should) prefer to stock their best products. Doing so will increase their revenue, but at the same time, they can’t get rid of the worst products’ stock either.
Although it may be challenging to eliminate the worst products, retailers can still take action. For instance, they might want to cancel upcoming orders for similar products or offer discounts to increase sales. That way, they can devote more inventory space to products that sell well.
Identifying outdated items
Outdated items are a continuation of the worst products that are not immediately sold by retailers. Since they are outdated, they will most likely lose all of their value and become dead inventories.
Having a high number of outdated items may poorly impact the business cash flow. Therefore, retailers should carefully monitor the number of outdated items in their inventory as a part of their supply chain strategies.
The amount of obsolete inventory a retailer has indicates whether or not they have optimised their purchasing and inventory management. If the results are unfavourable, they may need to reevaluate their purchasing and inventory management decisions.
Managing inventory turnover
Inventory turnover evaluates how quickly retailers can replace sold inventory. Slow turnover indicates either a lack of sales or an excess of inventory. On the other hand, fast turnover can mean either high sales or insufficient inventory.
Information from inventory turnover can be used as a benchmark related to inventory management. Retailers, for instance, can provide more high-turnover items and reduce the stock of items with slow turnovers.
Fulfilling customer demand for varying types of items requires retailers to have sufficient stock stored in their warehouses. However, it may become challenging as market demands often fluctuate.
For example, we can see how retailers maintain their stock availability during spike seasons. They typically need to have a high number of items prepared in their warehouses to anticipate the rising demand.
Yet, storing the seasonal items beforehand may require them to lock a certain capacity storage contract to store unused off-season items. On the other hand, providing seasonal items as the peak season approaches may necessitate workers working extra hours and fully utilising their resources to meet the increased demand.
As a retailer, you wouldn’t want to pass up an opportunity to increase your revenue by fulfilling specific items during peak season. However, you also do not want to risk paying extra warehouse rent for unused items or forcing your internal resources to cover busy days during peak season.
For that reason, you must have access to short-term capacity planning. This way, you can fully utilise the available space to sell certain items during peak season without permanently adding warehouse space or forcing your internal resources.
Benefits of Supply Chain for Retail
Now that we’ve discussed the difficulties retailers face in managing their supply chains, let’s talk about how they can scale up their operations and develop a robust supply chain to fulfil customer demand.
Supply chain management for the retail industry entails proper warehouse space utilisation and timely inventory restocking. It is critical to do so because retailers must focus on increasing revenue and maintaining their reputation by providing the right items that customers request.
When it comes to inventory optimisation, supply chain management assists retailers in determining inventory turnover. They can then decide which items are selling slow and fast to maximise their warehouse space use by accessing the data. Retailers will be able to review their inventory levels in real-time to ensure that they balance their needs.
Improve Supplier Relations and Purchasing Terms
Retailers would benefit from maintaining good relations with their suppliers. They can work with suppliers on demand planning and forecasting with specialised supply chain management for retail industries, allowing them to stock up on the right items and stop purchasing outdated products.
Supply chain management for retail businesses also enables retailers to communicate with their suppliers. As a result, both sides can monitor the processes and effectively resolve any conflicts that may arise in the future.
Improve Distribution Planning and Logistics
Customers expect to receive their goods as quickly and cheaply as possible in this age of instant gratification. That’s why, retailers must look for ways to eliminate inefficiencies in the distribution and logistics processes using supply chain management dedicated to retail industries.
This way, they can cut unnecessary costs that can raise delivery prices and hinder the shipping time, which benefits them both in terms of revenue and customer satisfaction.
Improve Customer Satisfaction
Customer satisfaction depends on retailers providing favourable services, including on-time delivery of ordered products.
Retailers can gain control of their logistics processes through supply chain management. They can identify problems quickly and make sound decisions to resolve them. From showing the correct inventory to reducing shipping times and fees, customers will have a positive shopping experience, allowing retailers to improve customer satisfaction and retention.
Omnichannel Operating Model
All of the benefits that supply chain management brings to retail industries are ways to help retailers abide by the omnichannel operating model.
What is an omnichannel operating model?
The omnichannel approach entails integrating multiple shopping methods from which customers can select. Customers can typically shop at retailers via eCommerce, physical stores, or by calling them directly when retailers offer an omnichannel ecosystem.
The omnichannel ecosystem came to existence due to the spiking customer expectations to get the products they want in the blink of an eye. The omnichannel ecosystem also blurs the lines between online and offline purchases. Even though customers purchase the products online, they will want to receive the goods right away as if they purchase them from physical stores.
Benefits of building an omnichannel ecosystem
Providing an omnichannel shopping experience may require retailers to equip themselves with multiple resources, including innovative supply chain technology. Omnichannel approaches also tend to cost higher as retailers must have a sufficient workforce.
Although providing an omnichannel shopping experience comes with its challenges, retailers that are capable of doing this may reap the benefits in the long run, such as:
Greater market reach
Retailers who attract customers using the omnichannel approach will automatically increase their overall market reach. This is because their customers can choose to purchase goods through one method that links to another. For instance, someone wants to purchase a jacket from the retailer’s eCommerce website. They can then go to the nearest physical store to pick up the item and try it on to ensure it’s a proper fit.
Boost sales and revenues
The omnichannel shopping experience pampers customers with ease of use. It is almost as if there is no gap between online and offline purchases. As a result, they will not hesitate to shop again, enabling retailers to boost their sales and revenues.
Build customer retention
A pleasant shopping experience influences customers to become loyal customers of retailers. Retailers who use the right omnichannel strategy will give customers a convenient shopping experience, resulting in customers who trust the retailer and will buy from them again in the future.
Are Omnichannel Operations Necessary for Your Business?
Short answer: yes!
Long answer: Yes, a robust omnichannel strategy can effectively increase your visibility to a wider audience, allowing them to purchase from you through any channel they choose.
However, to successfully implement omnichannel operations, you as a retailer may want to arm your supply chain with cutting-edge technology that covers a wide range of capabilities.
The capabilities will then facilitate retailers in terms of supply chain management. They can store the right items and deliver them to customers on time.
Navigating the retail supply chain and being successful
Navigating supply chains for retail industries may be complex. However, it does not mean that no solution can scale up the supply chain operations. Here’s how technology-equipped supply chain management can help you scale your retail supply chain:
Digitising supply chain network
The vast majority of retailers are still tracking and governing the retail supply chains through multiple data systems. Often, these data systems become disconnected from one another, and different teams handle them.
But omnichannel market offerings require digitising and creating a holistic supply chain network. Hence, supply chain leaders are adapting digital supply networks, which will streamline the whole process–from upstreaming commodities to retail shelf placement.
Furthermore, adopting a digital supply network will meet the increased levels of expectation. A digital supply network or DSN ought to be a platform that centrally links information and decisions from other nodes and flows in the network, suppliers, partners, and customers.
Traditional retail supply chains have an inflexible and sequential nature, which a technology-enabled retail supply chain eliminates. The nature of the traditional retail supply chain results in data fragmentation, leading to challenging data analytics.
Fortunately, many supply chain leaders now realise the importance of providing the convenience of an omnichannel shopping experience to customers. But this requires them to place each piece of information related to the retail supply chain into a single digitised supply network.
This kind of information integration will improve supply chain visibility. It also enables retailers to make informed decisions using data-driven analytics, helps them forecast demand using predictive insights, and ensures they take proactive supply chain actions.
Last-mile operations are the most difficult and expensive. Besides, last-mile operations deal with customers directly. Customers will be happier if the process is more satisfying. On the other hand, poor last-mile operations will disappoint customers and create a negative business reputation.
When you improve the efficiency of your last-mile operations, your whole supply chain process will be successful. For that reason, you may want to adopt the innovative digital supply chain network and boost your last-mile optimisation.
Smart warehousing entails implementing the Internet of Things or IoT. By using this one system, retailers get the ease of streamlining their whole warehouse operations, which is an essential part of supply chains.
Additionally, smart warehousing eliminates the need for manual documentation, which can be time-consuming and prone to human errors. The IoT embedded devices also grant warehouse managers visibility and make them easier to control goods movement, inventories, and workforce, resulting in faster order fulfilment.
So, how can retailers get started on improving their supply chain management?
The supply chain for the retail industry is meant to help businesses in fulfilling the elevated demands of customers to purchase goods whenever and wherever they wish. The growing popularity of the omnichannel ecosystem also pushes retailers to develop their capabilities and stay ahead of the competition.
While it may appear complex and time-consuming to streamline your supply chain and integrate the omnichannel ecosystem, it will be smoother than expected when you implement the right technology into your retail supply chain.
If you need some help implementing this technology into your supply chain, we’d love to help out. Yojee’s software is built to help retailers build and optimise their supply chain systems. Feel free to book a demo so we can show you Yojee’s capabilities in action.
Helping businesses overcome their complex supply chain challenges has always been Yojee’s core value. We connect land freight players through our proprietary platform, providing supply chain visibility and enabling seamless communication between shippers and their customers.
Since our founding in 2016, we have worked alongside the world’s largest 3PLs, global freight forwarders, transportation companies, and brand owners to develop logistics solutions that meet their first-mile and last-mile delivery needs.
How Yojee stands out from other logistics providers is our multi-carrier management feature, which allows collaboration between land freight players to meet demands. Coupled with our last mile delivery app for drivers, logistics providers can now efficiently move freight from point A to point B with optimal resource usage. We do all this with one goal in mind: fewer carbon emissions and sustainability.