Retail Gazette and HSO bring together retail leaders to discuss the long-tail supply chain challenges the industry is facing now and how to deal with them in 2024.
Establishing tighter inventory control, introducing better technology, and pushing for greater efficiency are all key targets for retailers regarding their supply chain plans for 2024.
That was a key takeaway from a roundtable hosted by Retail Gazette and technology company HSO on 2 November at the Charlotte Street Hotel in London, which was attended by representatives from the food and beverage (F&B), fashion, and grocery sectors.
Senior leaders from Costa Coffee, Fullers, Marks & Spencer, Monsoon-Accessorize, River Island, and Sainsbury’s joined the debate which aimed to document the key challenges retail supply chains face going into 2024 as well as ways to solve them.
Below, we’ve highlighted four key talking points, while observing the event’s Chatham House Rules policy.
1. Supply chain transformation is ongoing
It was discussed that “the low hanging fruit of digital transformation in supply chains has been picked – there’s none left”, meaning leaders from all retail departments have to come together to work out the best ways of modernising their warehousing, distribution, and supplier relationships, as strategic decisions become more complex.
“Any problems with supply chains are now a business-as-usual problem because the supply chain impacts everything,” explained one food retailer.
One contemporary case study of major supply chain transformation is online fashion house Asos, which has made some significant changes to its supplier partnerships and back-end operations over the last two years as sales growth has stuttered.
The key aim for the business is to make each order more profitable and reduce inventory levels considerably. In a June 2023 trading statement, CEO José Antonio Ramos Calamonte outlined how the retailer was buying more of the expected best-sellers and reducing intake on the long tail to streamline its supplier base.
He said it was cutting times in own brand goods from around 20 to two weeks and “better-leveraging relationships with our best suppliers to remove unnecessary administrative processes, which can increase speed and lower cost”.
This came after Asos revealed “unprofitable, non-strategic brands” had been removed from some or all of the territories in which it operates.
The need to get better organised with suppliers was highlighted at the roundtable, too, with one fashion retailer describing the whole supply chain as “a minefield” with late payments from suppliers and partners “a big concern” in the current challenging economy.
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2. New leadership strategies required
The c-suite-led transformation at Asos is an example of the type of new leadership strategy many are adopting in retail to cope with ongoing supply chain disruption.
One F&B retailer told the roundtable delegates: “To transform your supply chain at the moment, you need strong leadership and cash.
“The supply chain boss needs a seat at the boardroom table – they need to threaten to leave if they’re told there isn’t enough money around to transform the organisational structure.”
They added: “A positive move if you want organisational change to happen is to bring in a transformation team and ringfence them from the rest of the business. Let them get on with things.”
Another guest said: “There’s a perception the economy is getting better so therefore less investment in the supply chain is needed, but CEOs and CFOs need to be aware that although there are green shoots in terms of lower shipping costs, for example, overall supply chain expenses are rising and geopolitical events are causing ongoing disruption.”
3. The supply chain visibility dichotomy
A dichotomy emerged from the discussions.
As one fashion retailer said, “the supply chain is more visible than it has ever been before” partly due to the fact customers are ordering goods based on how quickly they can be delivered and are more aware of the journey their orders take to reach their doorsteps.
But, as a F&B retailer commented, other due diligence work being undertaken in the long tail supply chain “to meet increasing legislation” is making businesses realise just how difficult it is to know exactly who all their suppliers are and how they operate.
One solution for both of these challenges, as the table discussed, is better use and sharing of data to ensure retailers operate with a clearer picture. This means they will stand a better chance of serving their customers better and navigating a tightening regulatory environment, the table agreed.
4. Tech investment pays off in long run
Although retailers acknowledge it is difficult to find funds for tech transformation when margins are squeezed, they know emerging capabilities in automation, artificial intelligence, machine learning, and analytics can future-proof them and bring long-term cost savings.
During the roundtable, one retailer said tech was being used to better link its stores to the business’s online network. It is all part of a wider fulfilment evolution in retail, where stores are increasingly being used as mini distribution hubs to support rapid delivery, they explained.
One food retailer said: “I’m new to retail and I’m surprised how many systems exist in our business.
“As we look to untangle that and streamline our tech, we need to grade each one quickly to help us prioritise – and that is all based on having the correct data in the right place.”
When it comes to the introduction of new technology in the supply chain, one food retailer said: ”Trust in new systems is slow to arrive.
“Key to successfully bringing in new technology to help solve old challenges is winning hearts and minds, bringing the workforce along on the journey, so they start to trust the data that comes as a result of the upgrades. It’s as much a mindset thing with new technology as it is the capability of the tech per se.”
“There is a danger that retailers see transformation as one-off event, but they need to adopt a mindset of continuous transformation to succeed in the industry today,” another roundtable guest added.
Hector Hickmott, sales director at HSO, said: “The current chaotic supply chain after so many disruptive events in the last few years has woken up the retail industry.
“Retailers came out of the pandemic – which exposed so many of them for having out-of-date and inflexible legacy tech – and said ‘we have to do something about systems’. Many of them currently don’t trust their data, and know they need to improve that situation if they are to confidently embark on growth strategies over the next decade.”
He added: “The good news is modern software allows them to deliver change faster. Tech is becoming more nimble and it means retailers can fix their most pressing issues more quickly than before – but, first and foremost, supply chain change needs to be on the board’s agenda.”
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