Ten Steps Retailers Can Take to Shock-proof their Supply Chain

Recent events have shown evident structural and strategic failures in supply chains. The severe spikes and drops in demand and supply wreaked havoc on worldwide supply chains. With events such as the Evergreen traffic obstruction on the Suez Canal having global repercussions, retailers needed to rethink their supply chain approaches.

There have been significant increases in costs of retailers' middle-mile operations, with first, spot, and contract rates surging into and staying at record-breaking highs. Carriers have even gone to break away from contracts due to the lack of specialized services such as reefers. 

The major causes of these disruptions can be chalked down to the following reasons:

• Disturbances in the flow of ocean freight and increases in costs
• Increased costs of land transport and labor 
• Lack of availability and a rise in the price of warehousing
• Growth in the cost of B2C logistics services
  

Labor shortages and high driver attrition rates have caused the Truck Driver Pressure Index for 2021 to increase compared to 2020. This has caused rates for truck transportation to increase, further affecting the costs incurred by retailers. There is additional pressure faced from the lack of availability of truck drivers. 

Accelerated demands in the business to the consumer sector, caused by higher demand of the Ecommerce sector, have caused a 14% increase in last-mile shipments, which has caused B2C logistics suppliers to revise their rates upwards. With costs going up in every part of the supply chain and the availability of services tightening, retailers have no choice but to create more innovative strategies. 

This article covers the steps retailers can take to shock-proof their supply chain.

1. End-to-end Visibility

Supply chain ecosystems often consist of various systems and technologies. There is usually a severe lack of visibility from segment to segment when this is the case. This causes a failure in effective collaboration, ultimately disrupting the supply chain flow.

The solution is to implement a control system that connects all the various systems and technologies and provides valuable analytics and reports right across the supply chain in real-time. This will result in much higher levels of transparency, quicker responses to requirements or changes, more easily identifiable trends, and improved forecasts.

2. Near-term Inventory Planning

Retailers have had to make significant changes in how inventory is managed. It is vital that marketing and promotional strategies align with inventory availability. The more important aspect is that retailers have to plan their inventory deployment strategies to prioritize their markets. This should help curb disruptions and strengthen the ability to manage inventory effectively.

3.Streamline Purchase Order Flows

How inventory is brought in is as significant as how it is deployed. Retailers should consider looking at the supply chain from a Total Cost of Ownership perspective; this will help them prioritize vital inventory.

For example, prioritize inventory for physical sales if a particular season sees more sales in physical stores. This requires having a more robust and precise trend-based forecasting. It may be beneficial to use a combination of transport modes to receive inventory. This would ensure minimal disruption and the priority purchases come in on time. 

Retailers seriously need to consider investing in systems and tech that will allow them access to more insightful analytics and reports, potentially allowing them to automate risk assessment processes.

4. Increase Your Supplier Base

While volume discounts have traditionally been a significant boon for retailers, it is imperative that they spread the risk. Focusing on one supplier may have some cost benefits. However, the chances of disruption are incredibly high. 28% of retailers faced severe shortages and out-of-stock issues due to the pandemic.

This strategy should remain the same for all aspects of the supply chain, from logistics providers to goods and service suppliers. Retailers should spread their focus to allow a broader base of suppliers, thereby increasing their ability to meet fluctuating demand.

5. Smarter Contracts

To help reduce shocks in the supply chain, retailers should seriously consider investing in long-term contracts, thereby benefiting from reduced price fluctuations. This also gives suppliers the comfort of long-term guaranteed business. Again, this goes for suppliers of services such as warehousing and products.

6.Improve Operational Performance

Optimizing performance at every level of the supply chain ecosystem is critical. Retailers should find the right balance between efficiency and cost to run lean operations while ensuring efficiency. This can be done by collecting and analyzing inventory management performance data and pinpointing areas that could be improved in terms of order accuracy.

7.Consider Fleet Ownership

Having complete control and much lower operating costs are two solid pillars of a fortified supply chain. This could be achieved by issuing long-term contracts or bringing existing providers into the fold. While this may not be practical for some retailers, large retailers that have standing agreements with logistics companies stand to benefit significantly from investing in their fleets.

A retail chain that uses a delivery service to transport goods from their warehouse to their online dispatch depots could benefit mainly from owning their vehicles, or they may even consider a partial investment in partnership with their existing logistics supplier. 

8.Revamping the Network from Scratch

With significant vulnerabilities being exposed in recent times, retailers would benefit from restructuring and re-strategizing their entire supply chain network. This means taking another look at where they source from and what kind of potential disruptors are prioritized.

This may include repurposing or increasing the functions of existing assets and infrastructure within a distribution network and ensuring that the network is truly integrated.

9.Increased Cross-functionality

Significant changes have to be made to planning and buying tactics. Finding sources that can deliver the required inventory more expediently is one area that has to be a top priority. Keeping costs low helps retailers improve their chances of achieving desired service levels.

Cash flow is a major priority and should remain so; analytics allows retailers to plan deployment without adversely affecting liquidity. For these functions to work more efficiently together, there has to be increased visibility, communication, and coordination between these functions.

The inventory allocated across an integrated network will allow retailers to choose the most cost-efficient way to get goods from the warehouse to the final destination. Advanced analytics also help make forward deployment more valuable without impacting cash flow. 

This ultimately means that new operating models have to be put in place to allow effortless cross-functionality across all supply chain segments.

10.Leveraging Tech

Again, recent events have made it clear that retailers have to rely more heavily on robust, reliable technology that improves overall transparency. This means putting severe consideration into investing in automation and analytics tech, such as artificial intelligence and complex machine learning algorithms.

Systems that can manage functions at every level are vital. The need to have a transparent system that provides precise analytical data to allow quicker and better decision-making is imperative.

Conclusion

Supply chain fragility and disruptions will inevitably continue for the foreseeable future. The solution lies squarely in the hands of retailers. It has to be said that leveraging tech is the single most significant barrier to achieving success in shock-proofing the supply chain. 

Take a look at the leading-edge, innovative solutions that Cogent InfoTech brings to the table. Their experience across industries and verticals makes them the go-to solution provider for retailers across the globe.