Understanding the Challenges in Retail Supply Chain Management

Challenges in Retail Supply Chain Management

Understanding the Challenges in Retail Supply Chain Management

Retail operators faced a tough year in 2020 as the world was turned upside down due to the pandemic. Operators were forced to readdress the way they did business, and consequently the way they structured their supply chain.

Indeed, supply chains bore the brunt of many of the changes caused by the pandemic and are now being pushed to the absolute limit to accommodate new spending and social habits.

Like Atlas holding the world on his shoulders, the resilient supply chains are valiantly holding the fort.

In our blog last week, we spoke about the complexity and uniqueness of supply chains and the management systems designed to operate them. This week, we are going to use our in-house knowledge to create a 2021 guide for all the challenges facing supply chain management, and some potential answers to meet these challenges.

Challenge #1: Increased complexity and developing a Supply Chain that spans the extended partners

Think about one product – perhaps a toothbrush.

Now think about all the different colours and variations of that toothbrush. Now also think about all the places you might be able to buy this product: brand website, third-party website, brand store, third-party retail, retail partners, etc. The list goes on.

The company that made the initial toothbrush may have some control over the distribution channels it sells the toothbrush in. However, most sales will be done by third parties – where the brand has minimal control.

Despite this, brands need to see these third-party stores, whether virtual or physical, as important environments in which their brand identity will come face-to-face with the consumer. These moments are another chance to leave an impression.

The rise of new supply chain concepts such as omnichannel sales and marketing, the connected supply chain, and the end-to-end supply chain are all answers to this increasing complexity. Of particular significance is the need to have a wider horizon when designing and operating an organisation’s supply chain, including all the partners that participate in it.

When we can expand our thinking from a typical Department view to an Enterprise view to a much more collaborative view that includes all Suppliers, Channel partners and Customers and even to a level beyond this, we become much more adept at deciphering the complexity and responding appropriately to it.

Challenge #2: The increasingly demanding consumer and the importance of a well thought out digital response

Consumers are now more demanding than ever and there are various reasons for this. Amazon is the most recognisable brand that ushered in this change though there are many others that have been at the forefront of leading by disrupting their industries.

Nowadays, consumers want to buy their products online, pay in instalments, get free shipping, and free returns whilst also expecting swift and responsive customer service. Not only this, but they also expect the products to have greater variety in colours and sizes, be cheaper and be socially responsible.

Digitally native companies – those born in the digital era – are used to this and are usually agile enough to respond. However, larger, older organisations may struggle if they do not attempt to reimagine the new world and how their largely physical nature of presence can be supplemented by digital capabilities to increase relevance and market share.

Challenge #3: Shifting international relations and the need to perform risk analysis and stress test the Supply Chain

2020 was a dramatic, tumultuous year with lots of change, uncertainty and occasional bouts of panic and chaos. There was the divisive presidential election in the US, the ongoing Brexit saga, as well as tensions between the US and China – the world’s two biggest economic powerhouses.

2021 has continued in similar fashion. UK-EU relations have been fractious although this is likely to subside, as each economy begins to focus on the more substantive issues on hand and their people’s well-being. China-US relations, however, are still frosty.

Corporations are going to have to tread carefully in this new world and learn the new rules of the game in this changing and volatile landscape.

One lasting lesson that most organisations will remember is to think more strategically about where they locate their supply chain assets and perform a recurring risk analysis so that they are better prepared to answer the questions their board and shareholders will ask when the next era of volatility hits. All CSCO’s will want to show that they are ahead of the curve and have learnt the lessons from the fateful events of 2020.

Challenge #4: Rapidly evolving compliance framework and how it can be a source of competitive advantage

The changing international landscape poses a significant challenge to supply chains

Another challenge faced by supply chains is the increasingly complex regulatory landscape. To use Northern Ireland as an example, the UK-EU’s Northern Ireland Protocol is likely to lead to ongoing disputes between governments and corporations as there remains several differences of opinion and legal grey areas regarding trade in the region.

Add to this the increasing demands for environmental, labour and quality compliance and corporations have a real challenge on their hands. These regulations should not be brushed under the carpet as they can be costly a few years down the line. Not only do these aspects pose legal and regulatory challenges, but also reputational challenges. Whether the response is to reconfigure the in-house supply chain, or to outsource it, or somewhere in between – it is a challenge that will need proactively scanning the eco-system and being ready before your competition and using this atypical element as a source of competitive advantage.

Conclusion: The danger of becoming irrelevant

The challenges above, when taken together, can result in a lot of organisations falling behind the curve and others leap-frogging against recent expectations. In all, a rather volatile and unpredictable environment in which the only thing that is certain is that the perpetually alert and responsive organisations will thrive and survive.

Despite this difficult landscape to operate in, there are brands and companies out there that are performing above and beyond expectations and are reshaping their supply chains to stay ahead.

In this industry, you either figure it out or get left behind.

Sink or swim…

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