A savvy and demanding consumer is driving retailers to rethink their supply chain. While some companies struggle to adapt in response to fast-evolving consumer demands and service expectations, others thrive by delivering a superior customer experience; a recent joint report by KPMG and HSBC has found.
In the first collaborative publication by the two firms, The Future of Retail Supply Chains focuses on the key findings of executives from the large retail multi-nationals operating in Asia. It discusses the ways companies must adapt their supply chains to maintain both the satisfaction of their customer base and their profitability. It is a delicate balance to strike.
Broadly, a responsive and demand-driven supply chain (DDSC) has emerged as the key to engaging and retaining retail consumers.
It isn’t difficult to distinguish those that are moving towards an agile consumption model across the retail industry; as adapting to one heralds benefits as much for their business as it does for their clientele. A demand-driven supply chain could deliver up to 4 percent improvements in sales, 10 percent reduction in operating expenses and 30 percent reduction in inventory over a traditional supply chain model.
Modern consumers are not satisfied with an ‘adequate’ buyer experience. They are increasingly inclined to embrace innovative companies and products which disrupt the traditional business environment. Companies that display hesitance to optimise their supply chains in this fashion risk being left out in the cold as competitors embrace change.
By 2020, companies that have transformed their supply chains will access big data to facilitate a more collaborative approach to respond to changing consumer demands. Data analysis that enhances predictability of supply variability will allow retailers to collaborate better with trading partners and be more responsive to shifts in the market.
Environmental benefits are another favourable product of this new supply model. As better technology is able to more accurately predict consumer demand, retailers can reduce their carbon footprint as they decrease the number of product returns. Additionally, the forward thinking nature of companies that adopt DDSC’s will be leaders in reviewing the ethics of their supply chains, assessing and improving not just their carbon footprint but their energy consumption and product recyclability as well.
There will be challenges for companies transforming to a DDSC. To be effective, companies must equip themselves with the capability to analyse real-time fluctuations in demand and supply, and react to them. Their adoption will shift traditional thinking about sourcing, replenishment and distribution; but any restructuring and additional complexity in operations will be profitable in the long term.
Where some companies have excelled in their transition to a DDSC already, inconsistencies plague those who have not. At a time where disruptions to distribution efficiency can greatly impact on customer satisfaction this is unsustainable.
Moving towards 2020, companies whose supply chains that have not adapted to be demand-driven will be left behind.