Digital Investment Key to ‘Supply Chain of Tomorrow’

Updated: Oct 5, 2021

By Sourcing Journal

This article was published in Sourcing Journal September 3, 2021.


While retail sales began to regain traction in 2021 following a year of pent-up consumer demand, the consumer goods supply chain has not returned to business as usual. In what should have been a year devoted to recovery, brands’ efforts to satisfy shoppers have been stymied by product shortages and shipping delays.


That’s according to a recent supply chain technology study from RIS, which asserted that while any recovery plan would have likely floundered under the pressures of “factory closings, bottlenecks in ports, containers in wrong places, labor shortages, and lack of warehouse space,” certain steps could have been taken to reduce the impact of these headwinds. Namely, the industry should have been focused more on improving operations by promoting supply chain automation and optimizing fulfillment before the pandemic struck.


Working with digital experience firm Tech Mahindra, which serves 1,058 global customers across the fashion, food and drug, retail, specialty and e-commerce sectors, RIS surveyed executives and supply chain managers about their experiences over the course of the month of July. When asked about the obstacles they’re currently focused on to combat supply chain issues, 50 percent of retailers chose fixing the lack of real-time visibility into their inventory as their top concern. Meanwhile, 46 percent cited overcoming the labor shortage with better hiring practices and HR as their most daunting hurdle, while 41 percent said they needed to work to combat their inability to respond to fluctuations in consumer demand.


Topping the list of objectives for this year is optimizing fulfillment to improve margins (62 percent). Looking to 2022, 39 percent of the vote went to leveraging shopper data to make digital transformations to their supply chains and better predict demand.


Emerging Technologies

In order to prepare for future disruptions, retailers said they’re allocating 30 percent of their technology budgets to improving supply chain capabilities, up 1 percent from the year prior.


The most immediate tech improvements brands are looking to make are in fulfillment (48 percent) and warehouse and distribution center management (46 percent). Throughout the course of the pandemic, retailers have not only faced issues obtaining product from suppliers overseas, but in efficiently allocating items regionally and dispatching orders to consumers amid rampant shipping delays.


“Retailers know it is not logical to continue to use the same solutions in the future that got you into trouble today,” RIS wrote, “so it’s interesting to see how they plan to use emerging technologies.”


When it comes to fulfilling orders, 32 percent of those surveyed said partnering with home delivery services topped their list of objectives, while engaging micro-fulfillment centers took 27 percent of the vote. Twenty percent of retailers are also looking to invest in robotic automation for picking and packing, while 16 percent wish to automate delivery with drones or self-driving cars. An equal number said robots and computer vision for shelf stock monitoring would be an area of investment going forward, while dark stores—traditional retail locations that have been converted to online fulfillment centers—are also on brands’ list of appealing emerging technology (16 percent).


Once they work through these issues and head into 2022, 43 percent of retailers said they would turn their attention to investing in technology for stock replenishment, while 41 percent said they would look at their sourcing mix.


Inventory and Fulfillment

Study respondents asked to describe today’s retail supply chain most commonly characterized it as a “mess,” “disjointed,” “scrambled,” “poor,” and “strained.” According to RIS, these answers brought to light the inventory management challenges that brands continue to face more than a year into the pandemic.


Seventy-two percent of retailers highlighted out of stocks for fast-moving products as their biggest issue, while 60 percent referred specifically to stock-outs in stores. Another near-equally cited issue was the lack of real-time data to facilitate quick reorders, which was fingered by 58 percent as the biggest issue in inventory management.


To combat these challenges and improve operations, retailers pointed to three objectives as heavy focuses for the coming months. Automating wherever possible, including creating high-tech sourcing processes, was a primary goal. Improving speed from distribution centers to stores, and from DCs to consumers, came in second, while the third most recommended strategy was to facilitate better predictability of demand using customer data.


Labor and Employees

Labor issues have been “elevated to a sense of high urgency” for retailers over the past year as the Covid crisis has swept the globe, stalling supply chains. In the U.S. alone, the Labor Department reported that employers have struggled to hire workers to keep up with consumer demand, with 10.1 million jobs available as of June.


When asked to rank social, political and environmental headwinds facing the consumer goods supply chain, all of the top five concerns cited by retailers related to their workforces, which they undoubtedly wish to preserve amid the record—and rising—job vacancies.


Topping the list of concerns regarding labor was the health and safety of workers, chosen by 76 percent of retailers. Employee retention was a close second at 71 percent, while 60 percent chose education and training. “All of the concerns on this list were identified as being of ‘very high’ importance by a majority of retailers,” RIS wrote, and “in most cases, by a big majority.”

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