As is the case with other industries, large sector-wide challenges are best solved when industry members work together, sharing knowledge, data and insights. Collaboration between organizations has a great impact on increasing efficiency, streamlining processes, accelerating innovation and solving industry challenges, such as low margins or sustainability. In many organizations, business units often contain data that is siloed off from one another, resulting in a lack of visibility across business departments. It can be even more difficult for data to be shared externally amongst partners. As John Fernie and Leigh Sparks suggest in Retail Logistics: Changes and Challenges, perhaps the most critical element in retail supply chain transformation has been the ability to collect, disseminate and use data throughout the supply chain and supply chain partners. Suppliers and retailers began sharing data in the 1990s, allowing retailers to sell data on store sales or market share with suppliers to improve the efficacy of sales forces, promotions and pricing.
In the 2000s, industry collaboration focused on supply chains and in particular replenishment strategies, resulting in the beginning of vendor managed managed inventory (VMI) used by some of the biggest consumer packaged goods (CPG) suppliers in the world, including Coca-Cola, Danone, Nestlé, Unilever, Henkel and Heineken. These brands are now responsible for the retailer’s warehouse stock levels as well as levels of service downstream. Most retailers now use VMI for replenishment and they share stock and store order data with suppliers.
In the 2010s, a new way of collaboration appeared called pooling. Here, suppliers and retailers began sharing logistics assets, such as warehouses and vehicles, to be more efficient and have better reactivity as well as lower inventory levels by enabling more frequent deliveries at lower volumes. It also reduced working capital needed and helped to reduce overall CO2 emissions thanks to improved vehicle utilization.
In the past couple of years, a trend of improved traceability of agriculture products began to emerge, driven by changing consumer preferences. Europe’s largest retailer Carrefour SA adopted blockchain ledger technology to track and trace chicken, eggs and tomatoes as they travel from farms to stores. Implementation of this system required chain-wide collaboration with partners.
It allows consumers to know exactly where certain products on shelves originated from and the company plans to deploy this solution across all of its fresh product lines in the coming years. In the future, traceability will likely extend to the whole supply chain, to include information on how goods are transported and proof that temperature controls are maintained throughout transportation for chilled or frozen products for example.
Food traceability is just one example of how the steady increase of consumer buying power is encouraging retailers to provide new innovative services to differentiate their products in an increasingly democratized selling landscape. The explosion of e-commerce over the past decade is a key cause of this, as consumer buying preferences shift thanks to the increasingly connected and globally-minded world we live in.
E-commerce has its own benefits and drawbacks. Although retailers benefit from a reduction in costs associated with store space, cash registers, and all physical elements of an in-store experience, the downside is that more space is needed in warehouses or distribution centers to store inventory for example. This has prompted more collaborations with third-party logistics providers and warehouse pick-and-pack distributors, helping to lower cost. For customers, this means brands are chosen and in-store experience less and less, with delivery experience taking its place, where retailers must offer increasingly short delivery timeframes in order to remain competitive; for example same- day delivery.
This larger focus on customer satisfaction in supply chain design has led to retailers implementing omnichannel operations. Customers now expect faster, cheaper and better service, and organizations must overcome the complex challenge of optimizing the balance between inventory, transportation and labour costs. At the same time, customers no longer perceive a difference between retail channels and expect to be able to interact with them all in the same way. Demand is growing for seamless shopping experiences regardless of which channel a customer chooses. For example a customer may want to research products on their mobile, purchase on their laptop, receive the goods at their home, then have the ability to return them at a physical store if required.
This omnichannel approach can create significant supply chain complexity. Localized distribution centers containing a wide range of goods can speed up shipping times and reduce transportation costs. Alternatively, drop-ship relationships between retailers and suppliers are increasing, allowing retailers to have suppliers send goods directly to end-customers, without ever needing to hold the stock. Some retailers employ both of these strategies, increasing supply chain complexity further still. With so many parties potentially involved, robust collaborative systems, processes and operational visibility are critical for ensuring e-commerce supply chains cope with the strain of online purchase growth, especially during high pressure buying seasons such as Christmas, Black Friday/Cyber Monday and new events like ‘Singles Day’ in China.
More visibility throughout retail supply chains has been made possible thanks to both technological innovations and improved industry collaboration. With RTTV platforms, further opportunities for CPG suppliers and retailers to collaborate are fast being discovered and imagined.
Most retailers now have solutions in place to track their downstream deliveries. Improved visibility has allowed suppliers and retailers to produce more accurate forecasts based on shared data and insights, which have led to an increase in overall service rates.
The natural progression of this could be to add visibility of upstream flows and to organize warehouses more efficiently while guaranteeing stock levels. New ways of operating and orchestrating ecosystems will become possible, as collaborative efforts expand to nontraditional partners. This will in turn enable enhancements to be made to customer offerings and a greater ability to deliver on targeted business outcomes, be it efficiency, sustainability or innovation.
You can discover the benefits of real-time transportation visibility for retail organizations in our white paper 'Data-driven retail supply chains: Why real-time transportation visibility is a cornerstone technology'. To find out more about how to leverage real-time transportation visibility within your supply chain, reach out to one of our experts.
Complex supply chains resulting from retailers’ efforts to better meet customer expectations. Real-time transportation visibility help to address these challenges.
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