Research by Advanced Supply Chain Group (ASCG) shows the impacts of COVID-19 and Brexit are accelerating growth in retail sales channels.
Nine in ten retailers planning to grow their channel footprint and supply chains are doing so in response to the pandemic and Britain’s departure from the EU. They are looking for more routes to market to boost sales amidst increasing uncertainty and to capitalise on growing eCommerce demand.
To expand channels, it can seem logical to concentrate on the revenue end of retail operations. By reviewing existing channels, retailers can determine gaps, consider consumer trends, and identify new ways for reaching customers.
While this approach can add the right sales channels, it risks retailers obsessing about higher product volumes when it comes to adapting supply chains to cope with additional points of sale and return. There’s much more to successfully evolving supply chain management for multichannel strategies.
A growing web of channels and challenges
Findings from the ASCG ‘Spider retailers’ research show that around two-thirds of retailers (65%) are now selling through more channels than 5 years ago, with 71% expecting the number to increase further in the next 5 years.
In response to growing channels, retailers have enhanced the capacity of their supply chains. 47% of retailers have recruited more staff to manage stock, whilst 45% have expanded warehouse and fulfilment space, and four in ten (42%) have increased the number of suppliers they source goods from.
Although scaling up supply chains may go some way to addressing growing channels and sales volumes, it’s not a long-term solution for efficiently and effectively servicing different routes to market. This is why selling through more channels causes stock inventory management challenges for 53% of retailers, with a quarter (26%) reporting this negatively impacts customer satisfaction
When expanding channel footprints, retailers report that stock inventory management and customer service is compromised by issues including managing stock levels (38%) forecasting stock requirements (37%), overselling problems and out of stock situations (35%).
To address these challenges, retailers must ensure they consider the changing nature of the channel mix, as well as an increasing volume of products.
Every channel needs to be integrated into the supply chain management strategy as a stand-alone outlet. It’s not enough to simply make a distinction between online and offline platforms, as each of the digital channels and physical shops has sub-levels of functionality. Online marketplaces, for example, involve another vendor layer compared to an owned website store, whereas bricks and mortar may have a blend of traditional in-store sales and click & collect functionality.
Each of these sub-levels means it’s increasingly important for supply chains to have a ‘control tower’ view of the stock. This central coordination requires real-time communication across all channels to ensure that every time a product is sold, stock availability is immediately updated. As well as helping to avoid overselling, it means there’s a reliable stream of accurate data, which enables retailers to respond quickly to demand trends.
This level of accuracy and control sits at the core of ASCG’s web-based supply chain management tool, Vector. By constantly collating data from different channels, it enables retailers to optimise the flow of stock. This may involve moving products to different locations to reduce delivery lead times and enhance customer service or forecasting stock levels to satisfy peaks and minimise costly excessive stock.
A control tower view can also prove extremely valuable in times of disruption. In recent months, for example, many retailers have had to contend with global shipping bottlenecks. Delays in the movement of goods have pushed up shipping prices, quickly eating into margins. This has deterred some retailers from placing orders when they should be gearing up now for the peak Black Friday and Christmas periods. Drawing on constantly updating supply chain data, other options can be quickly pinpointed to address rising transportation costs.
For clothing retailers, this may involve switching from hanging to flat-packed garments to increase the number of items that can be shipped per container. Or it may involve identifying quieter ports, which have lower shipping rates. Accurate and readily available data is key to making these time-sensitive decisions.
The effectiveness of the supply chain control tower is further improved with vendor management tools. This enables Vector to seamlessly integrate third-party channels such as marketplaces and social media shops. It means that cross-channel communication is maintained, and shoppers aren’t kept waiting at checkout as stock availability is checked or delivery times verified. It helps solve issues of abandoned baskets.
Prioritising an appreciation of the different sales channels and an understanding that each is unique, is critical to the success of creating a modular supply chain management strategy. Although this can prove a different approach to the often-favoured ‘channel agnostic’ thinking, it can ensure that supply chains are agile enough to cope with both changing and growing routes to market.
Caroline Ellis, Commercial Director at Advanced Supply Chain Group.
About the research; ASCG worked with Sapio Research to understand the experiences and opinions of 200 senior retail professionals. Online surveys were completed in February 2021.
For more information about the research, visit https://www.advancedsupplychain.com/latest/spider-retailers-the-growing-web-of-sales-channels-and-supply-chain-challenges/