Ensure the success of your retail business with robust supply chain management and a well-thought-out strategy keeping customers in mind.
From customers’ changing buying patterns to their demands from retailers and newer technology platforms to changing business dynamics, today’s retailers face many challenges. These factors have forced each player to relook at their strategy, keeping technology, customers, and their profitability front and center. In short, progressive organizations have already adapted to those changes by ensuring a robust supply chain process at the core of their operations.
The following is an excerpt of a panel discussion held by Acuver Consulting, an IBM Gold Partner and a leader in offering supply chain management and eCommerce marketplace integration solution to some globally prominent retail brands.
Question 1: It is believed that the supply chain fulfillment strategy must deliver on an organization's financial health and its customers' expectations. What kind of initiatives have you taken at your organizations to achieve both?
Praveen Shrikhande: The model of retail, especially fashion retail, has gone from offline to online during the last few years due to covid. It’s quite a disruptive event. In that context, the whole story of serving customers while running a profitable business has completely changed. In the offline model, a very well-defined model ran for decades. We knew what to do. But this online model changed all that.
Typical online players who started native online had a specific model for the fulfillment, primarily around their warehouses and taking it closer to customers over time. However, as offline retailers, we started with a network of stores, and our challenge was enabling those stores for eCommerce delivery. During covid, we saw a significant change – we moved from around ten stores that were earlier deployed for eCommerce fulfillment to almost 1000 stores in a short time. This led to an immense pressure on the supply chain as maintaining inventory accuracy at those stores became highly critical. In our industry, where the typical depth of merchandise or a particular SKU is very small in a specific location or store, the whole supply chain gets disrupted if that product is not updated in the system and exposed online.
Now, let’s talk about ensuring accurate inventory while selling online. In our organization, a lot of focus went into streamlining that. We have come a long since when we started. Today, our ability to fulfill from our store network for online orders is almost 50%. For our own brand.com and multiple marketplaces, we have enabled our stores as fulfillment locations to deliver on the customer expectations. Here, delivery costs are lower as you deliver from a shorter distance. And then, the customer is happy as the delivery timeline is now significantly reduced.
Today, we are looking at models to ensure same-day or next-day delivery. And for this, we are working on our own and with some of our marketplace partners. However, it will be possible by streamlining the entire process with high precision- from taking the order to fulfillment. And for this, we are working on our own and with some of our marketplace partners.
As we advance, we are looking at implementing RFID at the store level to ensure accurate inventory visibility to fulfill orders on time and efficiently.
Bhavin Kothari: Strategy changes for every business based on category and price point. For example, look at our MAX, where the price point falls between Rs 300-Rs 350. To stay profitable at this price point, we have to ensure that back-orders and cancellations are in control.
Planning is essential for online retail. Profitability lies in reducing order to shipment ratio to 1:1.2. This can happen with more robust and efficient planning around inventory and product assortment across regions. Our focus remains on a higher basket size for a shipment, not on order. Having clarity and ensuring the right inventory in your area or your warehouse will help you achieve your financial KPIs and customer serviceability.
Satish Panchapakesan: I completely agree with what Praveen and Bhavin had already said. In fashion, there is a lot of seasonality and freshness attached to the products we sell. It defines how profitable you are in a particular season, category, or even a set of products in a specific store. Here are a few things that we did in the past to stay profitable while meeting customer expectations.
- Enabling stores to become warehouses/fulfillment centers to increase the coverage of serviceability.
- In a limited way, we tried an extreme level of hyper localization where we attached a set of pin codes to a particular store. This was done to create a hyperlocalized online presence of the store. It also involved the creation of a location-based microsite of a store to target customers around that area. We are now basically taking out store customers’ living rooms.
- Our focus is on the demand side – We don’t know how the demand comes. Ability to predict demand has become very fragile. We keep our supply chain agile by capturing the demand and converting the same to optimize the selling opportunity.
Question 2: According to Gartner, through 2025, 25% of supply chain decisions will be made across intelligent edge ecosystems. In this context, how will AI and analytics aid human decision-making capabilities in the future?
Manoj Kansal: An efficient supply chain management decides the success of your business. It is also the most imp factor when it comes to customer experience. Via the online model, your business gets amplified – with a more extensive set of customers across geographies. To succeed, you need to remove “subjectivity” from the supply chain as it leads to errors. With “subjectivity,” you can’t provide your customers with a specific experience at the cost you want. Instead, you need to remain “objective” to achieve the same; for this, you need technology.
To create an efficient supply chain, you need technology to gain insights to understand many complex things. You need technology-powered data-backed decision-making capabilities in route/network optimization and workforce deployment for specific roles based on orders to be delivered on a particular day. For example, a quality check process with an AI-powered tool is a must to ensure that you dispatch the correct order and that it is in good condition to your customer. Otherwise, you will see returns and refunds, which will cost your business. I think the importance of technology will go well beyond 25%, as stated in the survey.
Sunny Nandwani: From a supply chain standpoint, everything is covered. I will talk more about the engineering aspect. IT/Tech is pretty good at building large and complex systems. But there has been a new trend in at least the last two years – toward building comprehensive and massive systems to process large amounts of data where the core business value of the system is about analyzing the data rather than just the software part.
With more than USD 60 billion, investment in data infrastructure touched a record high in 2020. I am sure that we will see a much higher figure when 2021 and 2022 data get published. Data infrastructure helps organizations solve two significant purposes –
- They gain insights and are better placed to make data-backed decisions
- They get to use data intelligence in consumer-facing application
So, one aspect of it is the Business Intelligence (BI) part, where we talk about rich dashboards allowing them to view and access critical reports about their enterprise. The other part is more toward intelligent promising. For example, can a business show the promising date before the customer checks out?
Now, when we talk about BI, it is driven by the data warehouse that stores structured data. But when we look at the operational analytics part, it is all about the data lake, which stores raw data and is even cost-effective. A few years back, there was a talk around the convergence of data warehouse and data lake, which is no longer happening now, I believe. We have seen the emergence of a new term – data lakehouse that gives businesses the benefits of both. Data lakehouse is the upcoming trend from the data engineering and infrastructure standpoint. But the question here is – is it applicable to all the segments? Well, it depends on their unique business model. They need to look at their requirements and prepare the blueprint for the data infrastructure that could be imperative for their business model.
But the winner will be the ones who can nail this data game.
Question 3: Pandemics, wars, and natural disasters - all impact the supply chain. How do organizations deal with such challenges?
Praveen Shrikhande: All these events are disrupting the supply chain, and we all see it. We will first look at the global level and then come to our segment to scrutinize further.
Global level: Over the last 50 years, the focus has been on shrinking the supply chain as much as possible, and nobody thought this would change due to some adverse events. Then there is cost minimization via – getting everything consolidated, manufacturing at scale, and having a few large producers to supply the world. But then, these things have led to colossal lead time. For example, we have seen the supplier’s 6–8-month lead time while buying something as basic as LAN switches for our offices. It has happened as either the item is not manufactured locally, or the manufacturer cannot supply the same as it is in geography dealing with some disturbances.
This is where significant changes are happening. Organizations are now taking things closer to the market with a robust distribution network to close the gap while avoiding the impact of any unfavorable conditions. I think the trade-off between “higher cost” and “more reliability” will happen. It will ultimately help organizations source essential components to ensure uninterrupted production.
We also have spotted this trend regarding sustainability, which has led to a shorter supply chain. Because, with oil prices going up, you will spend more on the same if you have a longer supply chain in place. When today, the push is toward creating a sustainable environment by reducing the usage of fossil fuel, local production/manufacturing, and a shorter supply chain can add value.
Our segment: In our company, things are not so bad as around 85% of our product is made in India, and we sell in India. So, it is already very localized. Plus, our supply chain is extended to our neighboring countries – China, Vietnam, and Bangladesh. And yes, our segment has the advantage of having long lead times when it comes to manufacturing new products. But things can improve further if we can shrink the supply chain and cut down on imports.
Sathish Panchapakesan: These events make you relook at the efficiency of your existing supply chain. Not only this, but every decade in the past has also triggered something that has led organizations to relook at their supply chain. In the 90s, it was more on standardization, and in the 2000s, it was more on personalization and customization. And now, we are talking about hyper-personalization and its scale in the fashion world.
Now the question is, if ensuring a hyper-personalized, scalable, and adaptable supply chain is the key to success from 2022 onward, how do you do it? This is where the data infrastructure with AI and ML will play a significant role. For example, Facebook Prophet processes a lot of non-linear data and then creates clusters of insightful data to help with a reliable forecast, leading to planning and goal setting. Organizations need to be mindful of these changes and the impact of technology to be successful in the future.
Question 4: How have the customer behavior/expectations changed post-pandemic?
Satish Panchapakesan: Today’s customers are “Here and Now.” So, if you are not “Here and Now,” you will lose them.
Manoj Kansal: Customers are demanding and are in no mood to compromise. It is all about what they want is what they want. Business needs to understand them. In this context, organizations need to be cautious while dealing with customers. For example, how they interact with them – both digitally and physically – via your delivery agent is also essential. This is critical today, as the customer has become self-centric post-pandemic.
Bhavin Kothari: Key to survival – keep pampering your customer. The depth of the customer base has increased. For example, in India, from Tier 1 and 2 to it has gone to Tier 3 and 4. Then the age profile of the customer, both online and offline, has increased. Due to these changes, I can see enormous opportunities for every retailer. In offline mode, we know every retailer is gearing up to open new stores and outlets to cater to the growing customer base. Our retailers, who were opening a maximum of 30-40 stores in a year pre-pandemic, are planning to take it up to even 100 or more in year post-pandemic, which is unprecedented. But then, don’t forget to pamper your customers.
Praveen Shrikhande: Pandemic made a lot of people experience online. A definite and concrete picture is yet to emerge, indicating how shoppers in India are going about buying stuff. Will it be online or offline? I believe, in India, it will be a mix of both.
Sharada: Thanks, everyone, for your insights on this topic. We are in an exciting time where the only key to success is delivering in customer promise. Even though there are confusing trends, I think supply chain, powered by the right technology set, will be an exciting area of this whole game where innovation is happening.