Some 2023 Perspicacity on the Retail Supply Chain
Written by: David Zingery, CSO, Real Time Intel
As we near the end of 2022, retail supply chain and logistics professionals sigh a well-deserved (however brief) breath of relief as +90% of the 300 billion gifts shipped this holiday season are projected to make it to their final destinations.
Now, having made a similar statement to a few friends in the space, they were quick to point out that means that 300 Million are not going to make it on time. In fact, it was probably because of intentional decision-making somewhere up the supply or command chain. So, tasked with the herculean challenge of navigating exceedingly low staffing shortages, increased shipping costs, and bloated inventory with limited cash flow – some 300 Million things may just have to wait.
To put it into perspective, disruptions caused by war, geopolitical factors, impending threats of a global recession, and many undiscovered risks await in the year ahead.
In addition, inflation, rising interest rates, and the strong US dollar will play a leading role in 2023 supply chain dynamics. Because of the volatility this year, next year will likely be the most challenging yet, for worldwide supply chains.
Here are a few examples where the answer to the question isn’t always so simple:
- Inventory pile-up is causing a retrocede to manual or triage process activities.Sprinkle in labor shortages, and you’re faced with some tough decisions.This, in part, is caused by prolonged and inconsistent lead times that are getting even longer.With factory closures, shipping delays, port backlogs and other supply-chain bottlenecks still reverberating from the COVID-19 pandemic, chains have been designing new products and placing orders with overseas factories further in advance. This is making it harder to match supply with demand, especially in holiday peak, and in many cases compiling complexities.
- Many retailers are now trying to reduce or completely eliminate air freight due to the cost.They’re either sitting on unsold stock, or the decision is made not to use air freight, losing out on sales revenue.Retail air freight volumes are down 90% with some customers, year on year, especially those with a fashion or garment focus. Vulnerable retailers are the high-end generalist brands lacking disposable income and consumer ability. Sitting on large, and in some cases huge volumes of inventory.
- Automated fulfillment centers are becoming a rapid strategy to reduce costs and shorten shipping distances, expand shipping capacity and mitigate freight costs while lowering expenses.The advantages include increased storage density, safer operations, and increased accuracy and efficiency. On the other hand, some disadvantages are high initial investments and inflexible tasks.
Navigating these challenges requires an unwavering focus on improving supply chain resilience. My perspective includes improving supply chain visibility capabilities and developing transparency needed to create stronger and more aligned relationships with suppliers, carriers, and other ecosystem trading partners.
Here are the resiliency areas of focus and opportunity for the 2023 supply chain:
(in no particular order)
- Strong Supply Chain Vision and Strategy
- Cost Optimization
- Customer Service
- Operating Model, Governance, Org Design
- Implementing Advanced Analytics
- Performance Management and Benchmarks
- People, Talent and Culture
- Stakeholder Relationships and Communication
- Supply Chain Technology
- Digital Disruption and Business Transformation
- Industry Trends and Research
- Compliance and Standardization
For these reasons and more, supply chain performance analytics have been a big focus of mine.
A great example is RFID source tagging mandates for apparel. As these requirements mature, we’ll continue to see impacted partners and distribution centers begin to lean in and leverage the inflow of data, as this is an opportunity to re-prioritize labor, cut costs and uncover new automation and optimization opportunities.
I’d like to see more Retailers go beyond visibility to automated actions. Leverage AI and machine learning to understand in-transit visibility advantages. Also, better understand partner performance and reduce costs like detention and demurrage fees while mitigating disruptions.
Maybe a little optimism, perhaps it’s a “we survived that, we can survive anything” post-pandemic mentality, but resilience scenario strategies and SC agility have become foundational principles for us all. And many are seemingly confident and committed that their teams are ready for whatever 2023 has in store.
Next year will continue to see supply-chain disruptions, albeit from different causes than in 2020 and 2021. The 2023 supply chain disruptions may be more subtle and geographically dispersed than the collapse caused by Covid-19. Therefore, the key will be to continue building flexibility into our supply-chain structures.