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Transforming Retail Supply Chains post COVID-19
Deepak Kumar Gupta Sales Director, TTL & Supply Chain, HCL Technologies | June 4, 2020
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We are witnessing unprecedented times, and among the several industries impacted by the COVID-19 contagion, retailers are facing significant market challenges.According to IDC, growth estimates for global retail in 2020 will be half of the pre-COVID-19 forecasts. The categories most affected range from fashion and furniture to electronics. In the US, there has been a record 8.7% plunge in retail sales in March, and similar drops in retail operations have been seen across the globe. There are many factors affecting this sharp fall in revenue, including social distancing, lockdown, and even legacy technologies.

According to IDC, growth estimates for global retail in 2020 will be half of the pre-COVID-19 forecasts. In the US, there has been a record 8.7% plunge in retail sales in March, and similar drops in retail operations have been seen across the globe.

The formidable challenge at hand

One of the most impacted functional areas across retail companies has been the global supply chain. Referred to as the backbone of the industry, global supply chains that functioned smoothly over the years for retail companies have now been vastly disrupted.  Take for instance, large fashion retailers in the US and the UK who have traditionally been sourcing from countries in Asia, such as China, Bangladesh, and Vietnam. With lockdowns now extended to most countries, and manufacturing facilities experiencing unprecedented shutdowns, order fulfillment is becoming increasingly challenging. On the other hand, drug retailers are seeing a remarkable surge in demand for drugs and hygiene products. Such unusual spikes in demand interrupt supply chains, leading to shortages and customer dissatisfaction.

The disruption roadblocks have led to a high level of non-moving inventory with an exponential increase in the carrying costs, cutting into the retailers’ bottom lines. Those challenges have been compounded with order backlogs from suppliers due to changing demand patterns and their inability to ship the products on time as a result of disruptions in logistics services and labor shortage.

Digital transformation has been a lead topic of discussion across boardrooms, and the COVID-19 pandemic is sure to encourage executives to accelerate their digitalization efforts and bring their future-ready IT roadmaps to fruition.

Preparing for the ‘new normal’

Retail companies across the globe are prioritizing the health and safety of their workforce and enabling a remote working environment wherever possible. It is critical for retail leadership to now prioritize supply chain resilience and prepare for the post-COVID-19 world. Retail companies will have to shift their focus toward adopting some key tenets to enhance supply chain resilience:

  1. Building a connected and self-orchestrated supply chain ecosystem
  2. Enabling dynamic supply chain segmentation to enhance customer centricity and continuously manage service level, cost, and margins
  3. Recalibrating their operating model for managing profitability, increasing volume flexibility, and enhancing visibility and traceability     

While the tenets address both tactical and strategic priorities, retailers can actualize a prudent technology roadmap by making significant investments across three core areas:

  • Customer-centric engagement: Retailers must enable personalized last-mile shipments and empower the customer by providing real-time visibility into shipment notifications, allowing them to decide what to order, when, and how. They must also quickly deploy dynamic and reliable order management, and smart transport planning systems to ensure superior order fulfillment. Moreover, retailers need to invest in responsive mobile applications that will play an integral role in helping engage customers with immersive experiences and deliver products on time, personalized to their schedule. 
  • Retail operational systems: Those retailers who have been relying on physical stores entirely or have outdated e-commerce platforms will have to build robust digital sales channels in an accelerated manner. By partnering with an experienced, retail-focused technology provider, a B2C channel can be built on a leading-edge platform such as SAP in as little as six weeks. Furthermore, emphasis must be placed on application modernization, which is critical to streamlining retail operations. With the proliferation of API technology, microservices, and the internet of things (IoT), retailers must integrate cutting-edge technology tools with their existing IT landscape to create operational efficiencies, boost employee and customer experience, and reduce expense factors. Complex processes such as pay-to-procure will especially benefit with the application of intelligent technologies such as robotic process automation (RPA), making the retail supply chain more resilient. Lastly, with the rise in cybercrime and cybersecurity threats, implementing watertight cybersecurity solutions must become a priority for all retailers.
  • Ecosystem relationship management: Post COVID-19, retailers will have to augment their demand forecasting and supply planning solutions, encompassing the end-to-end supply chain with suppliers, logistics providers, and customers, to improve execution and operational efficiency. It will be increasingly important for retailers to implement intelligent supply chain control towers to enable centralized, real-time visibility into the movement of goods from the manufacturing unit to warehouses to the final point of sale. Furthermore, leveraging machine learning and AI algorithms will boost transparency, optimize supply planning, and streamline logistics flow.

Retail CEOs are increasingly looking at gaps they will have to address to alleviate pertinent challenges brought to light with the spread of the contagion. Digital transformation has been a leading topic of discussion across boardrooms, and the COVID-19 pandemic is sure to encourage executives to accelerate their digitalization efforts and bring their future-ready IT roadmaps to fruition.  

To learn how you can transform your supply chain to manage business disruptions better, write to us.