What Lies Ahead for Retail Supply Chains
We spoke with Gary Newbury, CCLP, about the pillars of retail supply chains and what lies ahead in the economic uncertainty of 2023 and beyond
In the retail space, nailing down an effective supply chain strategy while securing ready and capable suppliers, manufacturers, shipping companies, and brokers is never an easy task. On top of the bare logistics of it all, whether they’re dealing with fresh fruit, basketball sneakers, or winter tires, retail supply chain managers need to factor in consumer demand and the overall economic climate as it relates to inventory levels. Again, not an easy task.
To get the lay of the land, we recently sat down with Gary Newbury, freelance Strategic Advisor and Delivery executive, three-time RETHINK Retail “Top Influencers of the Year,” and Founder of RetailAID Inc., to hear his thoughts on supply chain optimization, seasonal trends, and what we can expect in the months ahead.
Gary Newbury, CCLP
Strategic Advisor & Founder
RetailAID Inc.
Critical factors affecting retail logistics
According to Gary, there are several critical factors to keep in mind when it comes to effective retail supply chain management. As mentioned above, the first of these is finding the appropriate balance between inventory and consumer demand. Next, the ability to accurately forecast (in the face of a perpetual news cycle of uncertainty), and finally, the ability for supply chain managers to leverage data to help make decisions on all the above.
1. Inventory levels & consumer behaviour
A relatively recent trend Gary pointed out was how much more complicated it has become when it comes to predicting inventory. Where in the past, retailers could count on back-to-school or Black Friday sales to pack the aisles, today’s economic climate of uncertainty, along with the rise of Amazon and Alibaba, seems to be throwing a bit of a wrench in the works.
Traditionally, we’d look at a holiday peak and say, ‘oh, that’s [consumer demand] going to go up by 5% or 10%, whatever it might be.’ But that doesn’t give us enough information to understand what the requirements will be on the logistics network. Then, alongside that, we’ve got various other factors playing a hand—the cost of living, for example. Retailers need to understand what impact that has on consumers’ discretionary spending patterns.
Then there’s Amazon. What are they doing? Will they be running a Prime Day or not? What’s Walmart doing? Is Alibaba going to take away demand? There’s a lot to consider when thinking about inventory, and what are our arrangements with suppliers on takebacks of unsold products?
2. Forecasting
Another critical aspect that makes things challenging for retailers and shippers when it comes to inventory is the unknown. By this, we mean all those factors in life that are completely unpredictable. As Gary pointed out, things like the recent wildfires, strikes, flooding, and the like have had a major impact on retail management’s ability to make plans, both in terms of how much stock to keep on hand and the space to hold it all.
“We recently had a port strike in BC, which really threw us a wrench on top of the wildfires going on,” Gary said.
“A year or so ago, we had floods, and the whole of BC was chopped off from the rest of the country. Retailers need to be thinking about inventory, but also to store the goods. ‘Have we got enough space in our warehousing network? Have we got enough equipment, manpower, and doors in our facilities?’ These are crucial questions that must be asked.”
3. The power of data
Thankfully, with the rise of big data, retailers everywhere now have a massive repository of transactional data they can use to make predictions as accurately as possible. By using consumer and market data to their advantage, companies can optimize their supply chains, buy what they need, and avoid sitting on containers full of unsold or unwanted goods. Gary explained:
“Retailers need to take advantage of the data they’ve got around them and their experiences to really help the business to make more informed decisions. They need to be able to say, 'let’s optimize stock as much as we can, ensuring we aren’t left with container loads of goods we either have to mark down severely or hold until the next season that becomes busy again.'”
Emerging trends
Deep discounts
Finally, Gary offered a few thoughts on where retailers’ heads may be at for the coming season and beyond. For starters, given the unpredictability mentioned above and the fact that we’re still in the tail end of the great post-covid stock sell-off, there may be some deep discounting ahead as retailers attempt to turn old stock into cash and free up costly rental space currently used for imbalances during 2022 between inbound inventory and consumer demand.
“As we head into the holidays, given back-to-school was way off expectations, there may be some generous promotions ahead. The holidays will be the time when retailers can sell anything if they deploy nimble pricing tactics.”
Micro-fulfilment & automation
Another area that may see some growth is in the area of micro-fulfilment. As brick-and-mortar retailers look for ways to fill online orders, coupled with the rise in warehouse automation, micro-fulfilment centres may start looking more attractive. Using Walmart as an example, Gary explained:
“I think we’re going to see some micro fulfillment centres in Walmart stores. I think that’s going to be unleashed, so they can pick their e-commerce orders very close to market.”
In the end, as with every trend in retail, time will tell what the upcoming season and the overall retail supply chain picture has in store, given the randomness of disruptions over the last 3.5 years. The message for retailers is simply “make hay while the sun shines” and, importantly, invest to remain nimble in your response to obstacles.