• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile

  • CORONAVIRUS
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • REGIONS
    • Asia Pacific
    • Canada
    • China
    • Europe
    • Latin America
    • Middle East/Africa
    • North America
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Is Supply Chain Technology Failing U.S. Retailers?

Is Supply Chain Technology Failing U.S. Retailers?

February 8, 2022
Tony Gray, SCB Contributor
Led by advances in information technology, retailers are laser-focused on operational and cost efficiencies. Highly evolved demand planning systems drive integrated sales and operations planning; control towers improve visibility; and digital twins, simulation and artificial intelligence optimize supply chains. Yet in the face of prolific investments in supply chain technology and resources, U.S. retailers have failed to achieve significant cost savings.

Retailers have made significant investments in supply chain I.T. over the past decade. From 2010 to 2020, SAP alone collected over $223 billion in revenue. But a review of overall U.S. retail finances during that time suggests that supply chain technology investments have failed to deliver significant improvements in operating performance.

From 2011 to 2020, the combined retail sales of Walmart, Target, Kroger, The Home Depot and Dollar General increased from $590 billion to $904 billion — an average annual growth of 3.6%. Over the same period, cost of goods sold (COGS) as a percentage of sales varied from 25.62% to 26.17%, a narrow range of 55 basis points, with COGS as a percentage of sales peaking in 2017 and 2018. The ability of these retailers to manage COGS reflects the effectiveness of supply chain I.T. investments in helping to manage vendor and sourcing costs. 

A look at selling, general and administrative (SG&A) costs paints a different picture. From 2011 to 2020, average SG&A as a percentage of sales increased 144 basis points, and was the primary factor in a 98-basis point decline in operating profit. In retail, payroll is the largest controllable expense. While detailed payroll information is not available for major retailers, some indication of the prevalent trends can be found in Bureau of Labor Statistics reporting. From 2011 to 2020, U.S. retail store operations staffing dropped by 17.5% (12.1% if 2020 is excluded due to COVID-19). During the same period, U.S. supply chain, warehouse and transportation staffing increased by 10.2%. The most pronounced increases were in management roles (16%). The wage differential between supply chain and store operations, with store operations offering lower wage rates, drives a net overall increase in retail payroll.

Supply chain I.T. will continue to be a critical retail enabler going forward. To ensure that retailers reap the cost benefits of I.T. investments, they should adopt the following best practices:

  • Understand organizational cost of ownership — including recruiting, payroll and retention costs of new skill sets required to support new technologies.
  • Make “total cost of ownership” more than a catch-phrase or a spreadsheet. Build and maintain robust TCO models that incorporate organizational costs and historical performance.
  • Build and maintain cost-benefit models and analyses.
  • Hold internal business partners and I.T. vendors accountable for committed benefits, costs and TCO. Consider value-share contractual agreements with I.T. vendors.
  • Focus I.T. investments on core competencies. Last-mile delivery is a core competency of Amazon; does every retailer need to invest in last-mile technology as a core competency, or would they be better served buying that competency?

Outlook:
In 2022 we can expect retailers to accelerate the pace of retail supply chain I.T. investment. While some technology investments are competitive table stakes, retailers would be wise to focus on investments that improve financial operating performance. Retailers need to leverage I.T. to improve future internal supply chain operations in the same way that I.T. has driven historical gains in sourcing and cost of goods sold.

Tony Gray is director, Supply Chain as a Service, at Tata Consultancy Services (TCS).

RELATED CONTENT

RELATED VIDEOS

Supply Chain Planning & Optimization Technology Global Supply Chain Management E-Commerce/Omni-Channel Retail
  • Related Articles

    Your Omnichannel Strategy Is Failing? Blame the Supply Chain.

    U.S. Retailers to Spend More on Supply Chain Management This Year, Report Says

Tony Gray, SCB Contributor

Predictability, Not Flexibility, Will Combat the ‘Big Quit’

More from this author

Wake up to live
“Supply Chains in Crisis”
updates and the latest Supply Chain News!

Subscribe to our Daily Newsletter

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • Warehouse worker

    Why Higher Wages Alone Won’t Solve the Supply Chain Labor Shortage

    Warehousing
  • Medical drone

    Amazon May Be Proof That Delivery Drones Aren’t Practical

    Last Mile Delivery
  • Adidas

    From Sneakers to Teslas, China Lockdowns Upend Global Supply Chains

    Coronavirus
  • ESG Guide

    Confronting the ESG Imperative in Supply Chains

  • SEC building seal

    Get Ready for the Next Phase of ESG: Mandatory Corporate Due Diligence

    Regulation & Compliance

Digital Edition

Scb may 2022 sm

2022 Supply Chain ESG Guide

VIEW THE LATEST ISSUE

Case Studies

  • 3PL Doubles Productivity With Robots to Fulfill Medical Supply Orders

  • E-Commerce Company Cuts Order Fulfillment Time by 40%

  • Fashion Retailer Halves Fulfillment Time With Omichannel Automation

  • Distributor Scales Business by Integrating Warehouse Automaton Software

  • Fast-Growing Fashion Brand Scales E-Commerce Fulfillment With Whiplash

Visit Our Sponsors

Yang Ming Alithya Barcoding
Blue Yonder BNSF Logistics Generix
GEP GIB USA GreyOrange
Here Honeywell Intelligrated Inmar
Keelvar Kinaxis Korber
Liberty SBF Locus Robotics Lucas Systems
Nvidia Old Dominion Parsyl
Redwood Logistics Saddle Creek Logistics Schneider Dedicated
Setlog Holding AG Ship4WD Shipwell
Tecsys TGW Systems Thomson Reuters
Tive Trailer Bridge Vecna Robotics
Whiplash    
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2022 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing