It’s very likely that we’ll look back at 2020 as the year when online shopping really took off in Australia. For many retailers, unfortunately, it was also the year when they realised their supply chains were not quite ready for a digital-first future. From supermarkets temporarily shutting down online ordering while they addressed stock shortages, to eCommerce businesses warning customers about severe shipping delays, retailers were hamstrung by bottlenecks and breakdowns in the supply chain just when they needed it most to survive.
Optimising supply chains has been a top priority in retail over the past few months because — while COVID-19 may be on the way out — increased levels of online shopping are here to stay. And you never know when another unexpected event will put networks under pressure again.
What should a supply chain look like in 2021 and beyond?
A recent brief by Bain & Co argues that rather than trying to reduce cost or increase efficiency, retail executives need to focus on building agility and resilience into supply chains. That means moving towards a distributed, rather than concentrated, set of suppliers and operations, with alternative partners, manufacturing sites and assembly nodes waiting in the wings in case they are needed.
“Redundancy often seems expendable — until it isn’t,” the report states.
Speed is another imperative for supply chains going forward. According to Accenture, 66% of Australian consumers say same-day shipping is valuable to them, and 42% are more likely to shop if same-day delivery is available. To meet consumer demand for fast delivery, retailers need to rethink the traditional warehouse model and tap into local inventory to support a range of fulfilment options — from home delivery to click & collect.
To improve the agility, resilience and speed of their supply chains in 2021 and beyond, retailers should focus on these three areas.
In the past, online fulfilment tended to occur in large, centralised facilities, where orders were picked and packed and collected by couriers for delivery nationwide. But delivery bottlenecks as a result of the increase in online shopping during COVID-19 demonstrated the need for a range of different fulfilment options.
Many retailers have already started turning their store networks into mini-fulfilment hubs and opening ‘dark stores’ in city centres to facilitate faster delivery to local customers. And Bain & Co found that nearly 60% of retailers and consumer goods companies are planning to increase their investment in multiple facilities that can respond to online orders.
At the same time, customers increasingly want the option to collect online orders from stores, rather than wait for them to be delivered to their doorstep. McKinsey found that “buy online, pick up in-store” grew by almost 50% in the US during COVID.
One of the challenges of a distributed fulfilment model is the need for inventory accuracy and a good understanding of what inventory should be held where. Without this, retailers won’t be able to deliver on the promise of same-day shipping or rapid click & collect.
Another challenge is the accumulation of higher total inventory levels in the network, which could lead to unsold stock and costly markdowns. That is where predictive planning and demand forecasting come in.
Predictive planning and demand forecasting
Retailers increasingly require advanced analytics to allocate inventory across stores and fulfilment centres. And while, in the past, they might have just looked at online and offline sales data from prior years, now they need to take into account external data, such as sporting events or weather, which could impact demand for certain product categories in particular locations.
Bain & Co found that 56% of retail and consumer goods companies plan to increase investments in predictive planning and demand forecasting. But this doesn’t need to be a big and costly exercise. According to McKinsey, there’s a new breed of plug-and-play analytics solutions that can be quickly deployed alongside many retailers’ existing systems.
Flexible, on-demand delivery
One of the most promising supply chain trends to emerge from COVID is the collaboration between retailers and ridesharing platforms like Uber and meal delivery platforms like DoorDash. In the US, for instance, Walmart partnered with DoorDash among other companies to get items to customers quickly, while in Australia, Petbarn partnered with Uber to enable same-day delivery in metropolitan areas.
According to Bain & Co, 53% of retailers and consumer goods companies are planning to increase investments in flexible operation. These partnerships not only offer retailers a clever workaround in case of delivery bottlenecks, but they also provide fulfilment platforms with an alternative revenue stream. A win-win.