The Supply Side: Retail supply chain digitization lags

by Kim Souza ([email protected]) 809 views 

A majority of retailers (85%) have not yet completed the digitization processes needed to give them full control and transparency of their supply chain, according to a recent survey of 500 retailers by tech company Gravity Supply Chain Solutions.

A digital supply chain is one that uses a cloud-based platform with real-time visibility and automation capabilities. Without a fully digital supply chain, retailers will struggle with speed to market, hampering their ability to fulfill customer orders on demand, the study noted.

While just 15% of retailers surveyed have digital systems in place, 60% said they believe digitization is critical to creating seamless omnichannel retail experiences. The industry has been relying largely on a manual supply chain management process that has run brick-and-mortar stores for decades. However, the emerging presence of online and blending the two into omnichannel raises the stakes and costs for retailers. The report said 29% of those surveyed cited an inability to justify costs as the reason for the delayed implementation.

“Clearly, the supply chain is the final frontier of retail digitization, and while retailers are anxious about the cost, not moving from manual spreadsheet-based supply chain management towards digitized processes could cost them a whole lot more,” noted Graham Parker, CEO of Gravity Supply Chain Solutions.

The report states 2019 will likely be a climactic year for supply chains as economic and political disruptions, along with growing consumer demand, create risks to the supply chain. The risks are likely to worsen as the year progresses, the report states.

Consumers are conditioned to expect instant gratification thanks in part to Amazon’s giant leap in that area over other retailers with respect to online assortment and speedy delivery. The report said other retailers like Nordstrom and Walmart have followed Amazon’s lead and are using technology to meet customers’ expectations.

Walmart’s growth in online grocery pickup is an omnichannel experience. While Walmart has its expansive grocery inventory digitized, it remains a separate system from the inventory of general merchandise and marketplaces. Walmart has spent billions of dollars in supply chain infrastructure to be able to deliver general merchandise in two days to 90% of the country. Walmart does it for free for a $25 minimum order.

That said, a shopper in Bentonville who orders groceries online to pick up at a local store has to use a separate app to order, for example, a new kayak. However, the shopper can pick up that kayak at the local store, maybe the same day or perhaps a few days later if that store doesn’t have it in stock. The shopper can also have the groceries as well as the kayak delivered, but they could be fulfilled from two different locations.

While Walmart does not yet have full product visibility throughout its supply chain for customers to see, it has made progress in that area, starting with groceries.

Parker said retailers are well aware of the challenges involved with digitizing the supply chain. He said most have been able to be proactive at the front end of the value chain with customer-facing technologies. That said, it is only when the entire end-to-end supply chain is fully considered and highlighted issues are addressed that customers’ needs can be fully met.

The report found only 16% of respondents indicated digitization was “very critical” to creating seamless omnichannel retail experiences versus 45% indicating “somewhat critical” and 23% “not very critical.”

The study did find significant benefits to digitization. Of those who have fully digitized their supply chains, 76% believe their organization has enough data and insight to make the right decisions about its supply chain.

Companies said the prime benefits include the ability to respond quickly to trends and shipment disruptions and lower costs due to efficiencies gained. More than 55% said order tracking across all touchpoints has improved the customer experience, while 53% said personalization of products has increased.

Referring to the report, RetailWire recently posed the question to the retail industry in a discussion about the importance of having end-to-end retail visibility of the supply chain and the costs associated with omnichannel execution. The consensus view from more than two dozen retail supply chain professionals noted digitized inventory systems that give complete end-to-end transparency are critical to the success of omnichannel.

Charles Dimov, vice president of marketing at OrderDynamics, said inventory visibility is a key part of the omnichannel equation. He said all shoppers do their research online, and if they don’t see a product on a retailer’s website and cannot locate the store that has the one item they want, they go to another retailer.

“We were equally shocked to find that in a like-to-like comparison of U.S. retailers across 2017 and 2018, there was a drop of 31.2% in basic inventory visibility,” according to Omni-2000 U.S. Research. “That means retailers have become worse at inventory visibility than they were in 2017. Alarming,” Dimov noted.

He said retailers, on the whole, have not invested enough to make real-time inventory visibility a reality, but he thinks that is going to change. During the recent holiday season, buy-online-pickup-in-store (BOPIS) sales saw a 46% uptick indicating consumers want omnichannel choices.

“Simply put, retailers who don’t get their act together on inventory visibility are going to suffer,” Dimov said.

Other industries have already proven end-to-end inventory visibility pays off, according to Gene Detroyer, director of global commerce education at Guizhou University in China.

“The computer manufacturer knows exactly where their smallest component is in the supply chain, what country, what boat, and when it will arrive. The auto market, the aircraft manufacturer — they all know. And they would not do it if there wasn’t a return on asset,” Detroyer said. “So what is holding back the progress in retail?”

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.