The global supply chain has experienced plenty of challenges stemming from the global pandemic that began in early 2020. This year, there have been reports of container challenges, floods, and port closures due to COVID-19 outbreaks. These reports led to companies making bigger orders due to a fear of supply shortages. Over-ordering eventually led to even more complicated scenarios.
The effects of such occurrences in global retail supply chains tend to be felt after several weeks. Ports are already reporting longer turnaround times. This will lead to unfulfilled and delayed orders. It could also lead to price increases due to shortages of items. Those companies that made huge orders will also suffer distorted forecasts of supply needs in 2022.
Big Retailers Are Feeling It
Notable retail companies have felt the effects of the global supply chain crisis. Ikea, the biggest furniture retailer in the world, expects the stock shortages to last one more year. The company saw a spike in demand for furniture as people traveled less in 2020 and spent more time working from home. The effects of that spike in demand and disruptions in global shipping are being felt till now.
Dunelm Group, a large UK homeware retailer, has reported facing inflationary pressures due to supply shortages and driver shortages too. In preparation for the festive season, the company has had to increase its buffer stock levels as part of supply chain risk management. Domino’s Pizza has also publicized that it’s facing supply chain problems.
Opportunities from the Crisis
Despite the challenges the global retail supply chain is currently facing, there is a chance to improve resilience. There are chances to apply things that might ease the crisis.
Improving Supply Chain Visibility
The global retail crisis has highlighted the need to improve the visibility of supply chains. Instead of relying on different applications without any relationship, retailers must use tools to give end-to-end visibility. Reactionary responses to global disruptions tend to only kick the can down the road. Manufacturers must adopt a more predictive method of supply chain management.
One way of doing so is to adopt real-time data monitoring. With real-time data, manufacturers will always know the status of their orders and shipments. There should also be greater collaboration between manufacturers and their suppliers so that they can share information or even technology that’s mutually beneficial. For instance, a company that builds an AI model that is a good predictor for its demand might need to share information with critical suppliers so that those suppliers can equally plan for changes in expected demand from the manufacturer.
Rethinking Business Models
Retailers might also have to rethink their business models in light of supply chain challenges. One suggestion would be a direct-to-consumer approach whereby retailers source products close to consumers. Retailers can start thinking of their stores as fulfillment centers. This means going closer to customers to make it more convenient for them. Some stores have already begun doing this by setting up curbside pick-up stations for their customers.
More stores might also need to improve their last-mile delivery services. This means investing in route optimization technology to keep costs at reasonable levels while giving value to customers. Customers today expect real-time information on the status and location of their orders.
Attaining a Predictive and Adaptive View of the Customer
Retail supply chains must be keen to find out what the customer wants and have it at the right place and time. This means using available tools to keep up with customer sentiments. Today, natural language processing helps companies sift through large quantities of unstructured data and come up with conclusions regarding customer sentiments. This data can be gotten from social media, chatbots, comment sections on websites, and call center recordings.
Incentivizing Data Sharing
Players in virtually all industries should look for ways to encourage their trading partners to be more transparent. This will reduce uncertainties but also create more value opportunities. For instance, parties can enter into smart contracts using blockchain technology. These contracts are immutable and can help both parties. Suppliers can get more competitive manufacturing financing while buyers can get more competitive prices.
Data sharing will also improve the accuracy of predictive models currently used to forecast demand.
Preparing Appropriately for More Possible Disruptions
There is a feeling that another disruption in global retail supply chains might be on the way. Perhaps new lockdowns are due to new disease variants being reported. Supply chain executive leaders must prepare themselves appropriately. One way of doing so is by acquiring the right technology to collect and make use of big data. This will aid decision-making and preparedness for disruptions.
Companies must also involve themselves in the strategic sourcing of products. This is rigorous processing of considering as much relevant data as possible before settling on a particular supplier. Strategic sourcing also involves looking at the total cost of ownership as opposed to price. Retailers have to consider warehousing, packaging, and delivery. This is important as retailers do more last-mile deliveries than before.
Procurement Software for Added Visibility
Retailers have complicated supply chains and achieving the desired visibility can prove a challenge. Therefore, it’s important that they rely on highly customizable and powerful procurement management software. Besides offering powerful analytics capability, it should make it easy to track and manage contracts with suppliers. Keeping proper records of communication with suppliers is also crucial.
If your business is seeking an e-procurement software solution, check out ProcurePort’s Purchase Order Management Software. We are the world’s leading e-procurement solutions provider.