Why your retail success rides on your supply chain
June 24, 2021
June 24, 2021
I used to have very different conversations with retail supply chain and operations leaders than I do today. Our discussions were all about cost and service, and that perfect balance they needed to strike between these levers. Now we’re still talking about balancing capital costs, operating expenses and meeting service levels—but resilience and responsibility have emerged as two additional levers.
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Retailers now understand the supply chain is more than a cost center and are doubling down on it as a revenue driver. While this statistic isn’t retail specific, it underscores my point. Just about half (48%) of executives say that the chief supply chain officer is a driver and enabler of topline growth.
The shock of the pandemic raised the profile of the retail supply chain even further, accelerating ongoing changes and revealing troubling vulnerabilities. The retail supply chain is no longer in the background. In fact, these trends make it more of a potential competitive asset for retailers than ever before:
Retail is exploding with points of interaction. So much so that only being able to buy a product in a store is unimaginable to young consumers. The integrated marketplace is a complex web of touchpoints where consumers and brands interact. In a world where people can place grocery orders from their refrigerators, and washing machines can order detergent, there’s essentially no limit on retail touchpoints.
And as business models evolve, retailers aren’t just selling products. They’re selling services too. This adds yet another layer of complexity. The supply chain isn’t the end-all-be-all to managing this complexity. Many aspects of the retail business are involved. But the reality is that satisfying consumer expectations today is extremely supply chain intensive. I expect it will only become more so.
The retail supply chain is no longer this invisible process that magically gets a product to the store or a consumer’s front door. Consumers are informed, and they’re watching. They want speed, service and transparency. Even before the ecommerce surge of the pandemic year, 97% of consumers expected to be able to track their package at every phase of the delivery process. Now, I’m certain that all consumers demand the same.
This expectation makes fulfillment a highly-visible brand experience that retailers can’t afford to get wrong. Savvy retail leaders understand this well. Who can forget when Rent the Runway CEO Jennifer Hyman emailed shoppers apologizing and taking ownership for major snafus involving delayed or cancelled rentals? Not only was $2.7 million on the line, so were customer relationships.
The retail supply chain mission now includes cost, service, resilience and responsibility from sourcing straight through to store operations. Resilience became mission-critical during the pandemic. Many retailers assumed that balancing cost and service would give them resilience. Until a black swan event occurred, and it didn’t. And managing the supply chain with an environmental, social and corporate governance focus is central to responsible retail and driving revenue.
While these concepts aren’t new, the imperative for action is quite different. It’s coming from the top down and cascading across all retail verticals fueled by consumer demand. Take sustainability. Forty-five percent of consumers consider sustainability benefits when choosing a brand to buy.* And 7 out of 10 believe that brands should do more to make it easier to buy or consume sustainably.* From a CEO or board lens, this is a clear signal that a more sustainable supply chain can translate into more revenue.
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Retailers need to reset their supply chain strategy to think about flexibility and scalability at a local level, and not just at a country or regional level—this is local omnichannel fulfillment.
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With all eyes on the retail supply chain, the leaders I talk to are focused on new and improved capabilities to deliver on their mission. We discuss using predictive analytics to determine demand at a local level, reconfigured and integrated supply chain and store networks, inventory placement within these networks, last-mile delivery, and the increased value of partnerships, including with fellow retailers.
The more we talk, the clearer it becomes that retailers need to reset their supply chain strategy to think about flexibility and scalability at a local level, and not just at a country or regional level. We call this local omnichannel fulfillment.
Local omnichannel fulfillment gets granular about what’s happening in specific regions, markets and neighborhoods. It also starts with examining customer and product segmentation. After all, it takes precise insight for retailers to develop and execute a retail supply chain network and capabilities that balance costs, service levels, resilience and responsibility to win at a local level. And drive revenue impact for the business.
Local omnichannel fulfillment isn’t simply a passing trend, or temporary reaction to the scars of pandemic-era retail. Thinking local and acting local is the future of retail fulfillment.
Learn more about how local omnichannel fulfillment can help retailers improve competitiveness.
See more Supply Chain & Operations posts.
* Accenture Consumer Pulse Research, March 2021
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