Executive Briefings

Retail Industry Renews Focus on Its Supply Chain Priorities for Balance of 2011

Analyst Insight: As retailers recover from the holiday season and prepare for 2011, it is important to keep the momentum flowing in 2011 by planning ahead. Topping this year's list of key priorities are a renewed focus on supply chain best practices, keeping inventories in check and reaching more online customers.

-Dan Avila, partner, Tompkins Associates

Retail Best Practices: Leading best practices in sourcing, transportation, inventory policies, and distribution can have a significant impact on a retailer's bottom line, provide significant value and increase competitive advantage.

Speed to Market: Competition, consumer taste and trends all increase the need for speed to market. To improve speed to market, retailers have to design effective and efficient supply chains, from planning through transportation to the destination.

Reduced Inventory Levels: Over the last two years, reduced inventory levels have become typical for retailers. Software tools are being developed to assist in reducing inventory at the store and distribution center. Understanding how to improve overall inventory position is essential.

E-Commerce: Consumer sophistication, ease of access and retailer incentives have boosted online sales. From network analysis, DC optimization and improved shipping practices, retailers are evaluating every angle while enhancing their direct-to-consumer service.

Uncertainty, Agility and Visibility: As the recession ended, a new norm has emerged: "Uncertainty is certain." It is best for retailers to accept this new norm, realize that they cannot control it, and implement agile processes that allow them to move forward.

China as a Market: The retail market for fast-moving consumer goods and luxury items is growing. Retailers who previously only sourced in China now want to enter the world's fastest-growing economy and sell in China. It is important for retailers to understand the market of Chinese consumers.

Transportation Spend Optimization: Often in retail, inbound and outbound transportation is managed by multiple organizations and systems. Integrated transportation planning and execution can increase utilization of private or dedicated assets, reduce errors and administration time in freight audit and pay, and reduce the number of carriers.

Workforce Management: For retailers, a workforce management solution can improve scheduling, automate transmission of hours to payroll, ensure compliance with labor rules, and track information about employee utilization.

Regulatory Issues: Retailers need to proactively understand and address legislation changes. For example, the Food & Safety Act change, in which food retailers are required to trace produce from the grower to the store shelf, will dramatically affect the supply chain. Disadvantage: added cost. Advantages: reduced shrink and increased sales.

Reducing Retail Shrinkage: As companies reduced staff and increased workloads, visibility decreased and best practices were ignored. Technology and better store surveillance equipment can be deployed to reduce internal theft, shoplifting, supplier fraud, accounting errors, warehouse errors, and falsified store returns.

Increased Consumer Intelligence: Instant access to product information is changing consumers' buying habits. As retailers adapt to the consumer, they need to address the changes to their supply chain. Organizational restructuring to eliminate silos, operational process reviews, improved forecasting tools and strategic planning will all be required.

Conclusion

These top priorities give retailers the ammunition needed to make 2011 a great year.  By including these key areas in continuous improvement strategies, retailers will experience positive changes for years to come.

Analyst Insight: As retailers recover from the holiday season and prepare for 2011, it is important to keep the momentum flowing in 2011 by planning ahead. Topping this year's list of key priorities are a renewed focus on supply chain best practices, keeping inventories in check and reaching more online customers.

-Dan Avila, partner, Tompkins Associates

Retail Best Practices: Leading best practices in sourcing, transportation, inventory policies, and distribution can have a significant impact on a retailer's bottom line, provide significant value and increase competitive advantage.

Speed to Market: Competition, consumer taste and trends all increase the need for speed to market. To improve speed to market, retailers have to design effective and efficient supply chains, from planning through transportation to the destination.

Reduced Inventory Levels: Over the last two years, reduced inventory levels have become typical for retailers. Software tools are being developed to assist in reducing inventory at the store and distribution center. Understanding how to improve overall inventory position is essential.

E-Commerce: Consumer sophistication, ease of access and retailer incentives have boosted online sales. From network analysis, DC optimization and improved shipping practices, retailers are evaluating every angle while enhancing their direct-to-consumer service.

Uncertainty, Agility and Visibility: As the recession ended, a new norm has emerged: "Uncertainty is certain." It is best for retailers to accept this new norm, realize that they cannot control it, and implement agile processes that allow them to move forward.

China as a Market: The retail market for fast-moving consumer goods and luxury items is growing. Retailers who previously only sourced in China now want to enter the world's fastest-growing economy and sell in China. It is important for retailers to understand the market of Chinese consumers.

Transportation Spend Optimization: Often in retail, inbound and outbound transportation is managed by multiple organizations and systems. Integrated transportation planning and execution can increase utilization of private or dedicated assets, reduce errors and administration time in freight audit and pay, and reduce the number of carriers.

Workforce Management: For retailers, a workforce management solution can improve scheduling, automate transmission of hours to payroll, ensure compliance with labor rules, and track information about employee utilization.

Regulatory Issues: Retailers need to proactively understand and address legislation changes. For example, the Food & Safety Act change, in which food retailers are required to trace produce from the grower to the store shelf, will dramatically affect the supply chain. Disadvantage: added cost. Advantages: reduced shrink and increased sales.

Reducing Retail Shrinkage: As companies reduced staff and increased workloads, visibility decreased and best practices were ignored. Technology and better store surveillance equipment can be deployed to reduce internal theft, shoplifting, supplier fraud, accounting errors, warehouse errors, and falsified store returns.

Increased Consumer Intelligence: Instant access to product information is changing consumers' buying habits. As retailers adapt to the consumer, they need to address the changes to their supply chain. Organizational restructuring to eliminate silos, operational process reviews, improved forecasting tools and strategic planning will all be required.

Conclusion

These top priorities give retailers the ammunition needed to make 2011 a great year.  By including these key areas in continuous improvement strategies, retailers will experience positive changes for years to come.