In 2018, the US retail industry has generated $3.6 trillion and e-commerce business has generated $0.51 trillion in US GDP. Twenty percent of the sales from retail, as well as e-commerce, takes place between Thanksgiving and Christmas. Nineteen retail and e-commerce companies out of the top twenty have reported an increase in inventory turnaround, depicting an increase in velocity of supply chains. This agility, along with the demand variation in this industry, brings a special set of challenges.
Below are some of the major challenges in this industry.
1. High Demand Variation: Weekly, monthly or yearly seasonality or seasonal patterns are very common in retail and e-commerce industry. Responding these changes becomes a challenge when retail supply chain is undergoing rapid disruptions and e-commerce is evolving in a rapid manner.
2. High Customer Expectations: Nowadays, customers expect to have a choice in what they want, when and where they want it. The requirement of instantaneous products at the doorstep, is a major challenge in front of the modern supply chain. This results in a strong demand of high speed and agile supply chain.
3. Short Product Life Cycle: Trends, fashions, and product innovations have changed rapidly in this decade and will continue to do so. This tends to increase inventory levels and operation costs throughout the network. This also impacts customer behavior, leading to multiple returns until they are satisfied.
4. Maintain Operational Efficiencies: The retail industry works on razor thin profit margins. To maintain profitability, it's very important to maintain high operational efficiencies. Auto-replenishment, automated warehouses, self-check out, the implementation of inventory accuracy systems, and investing heavily on analytics to improve operational efficiency are a few trends in the retail and e commerce industry.
5. Global Customer & Suppliers: Supply chains have become too complex, as suppliers and customers are now intercontinental. Meeting customer expectations, regarding quick deliveries, with complex product flows, is another important challenge to face.
Transformational solutions and concepts that have helped thrust these industries forward.
1. Agility, Flexibility and Responsiveness: To handle the seasonality and variation in demand it’s very important to invest in agility. It is estimated that 40% more throughput capacity is required at the distribution center to handle peak sales and product volumes during Thanksgiving and Christmas. CGN’s Demand Management methodology and solutions can help achieve maximum agility, flexibility, and responsiveness to customer demands.
2. Big Data Applications: CGN’s team of highly-credentialed analytics experts provides unique, powerful analytics solutions that can help retailers continually get the most from their big data and apply it to achieve long-term change.
3. Omni-Channel Supply Chains: Most of the supply chains have already moved from a single channel supply chain to multi-channel or cross-channel supply chain. In a multi-channel supply chain, customers have only single touch-points and all channels work in silos. In cross-channel, customers see multiple touch points, but retailers have only a single view of customers. Most companies are struggling to develop omni-channel supply chains. In omni-channel supply chains, retailers have a single view, but channels don’t work in silos. This is one of the efforts companies are making to create agile supply chains. CGN’s supply network transformation strategy can help companies that are struggling to develop omni-channel supply chains
4. End-to-End Visibility: The data we discussed earlier, offers a huge thrust in the creation of real-time and end-to-end visibility. It enables quick decision making, maintaining accurate and real time data, increases inventory accuracy and sustains efficiency in supply chain operations. CGN has included their end-to-end visibility methodologies to help companies achieve high speed e-commerce.
5. AI & Machine Learning: Is it enough to have visibility? Is it helpful to build the systems which can take decisions? AI enables automation, network design, vehicle routing, scheduling and most importantly forecasting. It is impossible to make manual decisions within supply chains, in which billions of parts are flowing through these networks. AI assists in selecting optimum choices, considering overall cost of the network. Trends reveal business is heading towards this as one of the mega-trends, not only in retail and e-commerce, but in all industries. CGN's understanding and insights into machine learning have helped multiple businesses re-think and expand their value chain practices to incorporate and ensure these trends are accounted for in the coming years.
What has come from these new solutions?
Greater Customer Experience: Retail and e-commerce have completed the journey from customer service to customer experience, empowering customers to use their time effectively and buy the products of their choice in the way they want.
Value for Money: It is important for companies to set up a right expectation with their customers. Amazon Prime two-day delivery is an excellent example of setting up the right expectation with the customer if they are ready to pay extra. Velocity in the supply chain comes with some cost. It is challenging to accurately estimate all the network costs and respond to customer expectations.