Data can help reduce supply-chain friction in retail

By Schalk Burger | 24 April 2020 | Published by Engineering News

Retail and fast-moving consumer goods companies can reduce friction points in their supply chains in response to the current Covid-19 outbreak by analysing data flows and reshaping their supply chains to meet new needs, says information technology logistics solutions company MACmobile commercial director Andrew Dawson.

Supply-chain friction refers to untested or immature models, as well as handling costs and intermediary parties. Having data to identify portions and processes of value chains that can potentially be consolidated or realigned in response to changes in demands and supplies can help companies to shorten their supply chains and reduce friction, he says.

Live-streaming of sales data and gathering insight into the costs at stores across regions are important to not only see what stock is on hand and what products are overstocked but also project sales and the recommended days of cover. This information will also enable companies to manage delays and disruptions in the supply chain and switch suppliers proactively.”

More than 60% of factories are experiencing delays in receiving orders, especially from China. This suggests that many businesses are facing a supply crisis and a shortage of resources and strategies that could assist with supply and demand.

Supply chain companies should, therefore, have as clear a view as possible of critical elements to manage supply chain disruptions and changes in demand and buying patterns, he advises.

Companies’ responses to the current disruptions can also help them to manage their supply chains differently in future, including improving their abilities to proactively control or change their supply lines.

The core focus in current circumstances should be on data – what the market and the sector are telling companies, and what is happening daily in their operations – and using this in the war rooms to manage merchandise and products across different regions, advises Dawson.

“There is a significant impact as a result of the restrictions on the movement of people; in the retail and fast-moving consumer goods environment, we are deeply reliant on our labour force and the physical aspects needed to complete last-mile distribution. Restrictions on available resources will slow down supply chains and delivery, all of which have significant implications for profitability.”

Retailers face a congested market – the combination of bulk-buying patterns and stockpiling, and the changes in the concentration of people buying in certain retail and residential areas – leading to some retailers depleting their stock and others not realising normal sales, he explains.

“Given that there is finite consumption per capita, there is not expected to be any significant impact on total consumption over a year. It is important for retailers to focus on keeping appropriate stock on shelves, while accounting for potential stockpiling by consumers and businesses.”

While retailers and companies with online stores and established distribution lines may be able to meet new demands, they must analyse sales data – at the most granular level available, such as down to items in a basket – to manage stock and inventory, and forecast stock-outs and dead stock.

However, certain retailers, especially those in central and typically high-density areas, may not know which areas their clients are from and may not be able to serve them, even if they can identify suitable distribution avenues, explains Dawson.

Further, consumers will buy alternative brands if their preferred brands are out of stock and brands run the risk of losing customers over the long term. In this regard, supply-chain data is important to inform mitigation measures.

Over the past few years, many retail chains have established home delivery services and have built up some customer profiles. Companies can use this data and information from their supply chain partners to determine how much they can scale up and meet some demand in the shorter term using available resources, while reducing congestion in some stores.

“We are in unchartered waters, and it is important to settle the panic and [establish] daily routines for consumers and supply chain processes. Buying patterns will settle down as buying channels, times and regulations become better understood.”

Establishing transparency and sharing data are key to enabling all supply-chain stakeholders – retailers, manufacturers and suppliers – to stay ahead of replenishment and stock-outs, while carefully controlling costs by monitoring granular sales data and using presales analytics.

“I suggest that companies be brutally honest with their partners and clients in the current environment about any delays, mitigation measures and maintaining operations. This will support the achievement of the best possible outcomes by helping all stakeholders to identify and then fill the gaps left by the disruption of supply chains.”

The Covid-19 crisis may reinforce the symbiotic relationships between manufacturers and retailers and thereby help to position the sector for eventual recovery and growth after the crisis, Dawson says.

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