The current disruption in the retail industry due to COVID-19 has forced retailers to revamp their existing supply chain. We have to agree that most of the retailers were caught ill-prepared for this scenario. All the industries are settling into new normal, and the retailers are the first responders to this change. During a recent shopping experience, you must have noticed changes in shopping behavior such as people spending more on essential products and bulk buying. The sale of dispensable products has declined. Consumers now prefer home delivery over visiting stores, leading to smaller value basket sizes.
The altered customer behavior is pressurizing the retailers into creating a highly resilient, automated, transparent and flexible supply chain to absorb the impact of the dynamic behavior with ease delivering outstanding customer experience in the process.
Key characteristics of supply chain in the next normal
- Highly responsive service channel
Traditionally, a supply chain is an internal support function, which operates independently of the other departments. Such departmental silos lead to inflexibility, which means retailers cannot meet any dynamic demands. The current retail climate is dynamic owing to unprecedented demand fluctuations recently.
With social distancing becoming the norm with COVID-19, we are looking at enhancing online customer experience for customers where they are informed about their product at all touchpoints. And this experience needs to be consistent across all touchpoints. Recently, a cosmetic brand was forced to close its stores which led to a fall in demand by over 90%. The in-store beauty advisors were redeployed as online influencers, which saw an increase of 120% in sales during February compared to last year. This is an excellent example of how supply chains that are quick to respond to challenges, help the business thrive in adversity.
2. Improved predictability of demand
A digital supply chain is powered by tons of data, both historical and real-time, which allows for better stock management and faster deliveries. Based on the consumption pattern of their users, retailers can order the requisite stock and place it strategically across its warehouses for speedy delivery.
In other words, a digital supply chain bases your operations on the projected needs of your target customers. It also gives you precise information to scale your capabilities and allocate resources accordingly, to meet the future demand generated by upselling. Some retailers have successfully reallocated their resources towards fulfilling the current increased demand for essentials. Nike facing store closures is offering its users home-workouts on its mobile training platform. The number of people engaging in light workouts has increased. And this saw an increase of 35% in online orders for Nike.
3. End-to-end visibility and transparency
A traditional supply chain stores data in fragmented systems – making it extremely difficult to use this data for business decisions. However, a digital supply chain overcomes this issue through an end-to-end integration that leads to complete procedural transparency while also making it possible to collect data throughout the supply chain. Retailers should go ahead and invest in a customized analytics model for accurately forecasting demand volumes on any given day, to increase product availability and streamline the delivery process. For example, retailers are now using auto-replenishment, altering the customer decision-making process. Many small food brands have leveraged data to carve a niche consumer group and focusing on serving that group. This has created high lifetime value loyal customers for the brands.
Smart technologies reinforcing the digital supply chain
The technological revolution brought about by Enterprise 4.0 is also forcing companies to re-evaluate and redesign their supply chains for greater transparency, efficiency, and profits. Customer expectations are changing rapidly, and fulfilling the same is not possible with a traditional supply chain anymore. On the other hand, a digital supply chain strings together every process to create a single, highly transparent system wherein data collection and customization becomes much more straightforward. So, what are the key technologies powering the digital supply chain?
Artificial Intelligence: AI solutions can be implemented to automate various supply chain processes, such as demand forecasting, production planning, or predictive maintenance. For example, engine maker Rolls-Royce employs AI-enabled nanobots for predictive maintenance and inspection, ensuring better service delivery. The company also uses INSPECT robots or a network of ‘periscopes’ that are permanently embedded within the engine for self-inspection so that the company is automatically informed of any issues or maintenance requirements.
Advanced Analytics: Advanced analytics may be used for processing real-time data and implementing a high level of customization as well as dynamic pricing and stock replenishment. As the supply chain is no longer operating in silos, the data can be integrated with information from other processes to understand future demand better and make practical suggestions.
Augmented Reality: A digital supply chain is not just limited to forecasting demand or balancing supply; it also expedites quality testing and inventory checks through the use of autonomous robots or drones. One commonly cited example is that of DHL, which uses AR to hasten the picking process and reduce human error. By ‘arming’ its employees with smart glasses, it makes it possible for them to see where an item would fit on the cart while they are picking up the orders.
Virtual Reality: The smart lens also updates the employees on the fastest route through the warehouse with respect to their picking list – making the process quicker and more efficient. The retailers need to leverage VR to save costs and improve customer experience. For example, encode all their packages with scannable images so that drivers and unloaders exactly know the weight, contents, and handling instructions for every package even before they touch it, ensuring proper handling and delivery of fragile and expensive items.
How should you plan the transition of your supply chain to digital?
To upgrade to a digital supply chain, you need to lay down your digital vision and how you wish to redefine your customer experience first. Next, you need to evaluate your supply chain, vis-à-vis your business goals, to identify the processes that must be made more streamlined or efficient. For example, is your last-mile delivery bringing down your customer experience, or is it your inventory management? As we mentioned above, several technology solutions can be implemented to streamline various parts of your supply chain. It is also possible to redesign the entire process for speed, efficiency, transparency, and improved customer experience.