Managing Margins and Inventory Amidst Supply Chain Challenges – WWD

A recent Accenture survey of 120 retail executives in the US found that most (99%) said they had done something different to keep supplies stocked, while more than half (52%) said they have taken special steps to do so. .

Just as businesses are hoping to recover from the damage caused by pandemic-related closures since 2020, another study found that 88% of C-suite executives believe the outcome is expected. from the disruption of the import supply chain will continue to increase prices, causing consumers to reduce spending. Furthermore, a third (33 percent) of executives believe a supply chain crisis could last up to three years.

What does this mean for retailers?

Retailers are experiencing delays in receiving import orders due to a combination of factory delays and slow restarts following pandemic shutdowns and increased shipping times from Asia. significantly, along with labor shortages in the trucking and distribution sectors. Last but not least, the sudden increase in consumer demand caused a significant amount of retail sales. These factors have made forecasting demand much more complicated for retailers and have resulted in a drop in sales, especially for high-velocity items where sellers Retail depends most on on-time delivery.

Rising shipping costs and other inflationary pressures imposed by product suppliers (due to their own rising input costs) have resulted in a negligible increase in retailers’ product costs. (negative impact on product margins), much of which cannot be delivered to consumers due to increased competition and transparency in pricing.

With increased complexity, operational costs and other investments required during this critical time of transformation, these supply chain challenges could not have come at a worse time for retailers. .

But not all hope is lost.

Four recommended actions for retailers to take in the near term

Based on our experience working with many retailers in this uncertain business and consumer landscape, we recommend taking several key actions to minimize the impact on your business. Retailer sales and profits:

• Solve urgent out-of-stock problems. Start by identifying the root cause of each out-of-stock issue. Is it due to supply constraints or is there another reason? Then, take quick action to prioritize out-of-stock items by relative speed and relative supplier importance. Finally, initiate joint business planning strategies and action plans with key suppliers. Report weekly to reduce impact and, if necessary, develop a contingency plan.
• Increased terminal visibility. Develop cross-functional accountability and visibility across the extended value chain – and across supply chain, commodity and inventory managers – to ensure all functional areas are relevant to the company as a whole, instead of each region focusing on optimizing its own region. Then, set the right performance metrics to track the company’s performance.
• Enhanced demand forecasting. Implement effective organizational, tool, and process roles throughout the product lifecycle, both for year-round and seasonal products, to better understand and respond to peaks and valleys of demand consumers. Retailers can use advanced, predictive analytics to better forecast demand, taking into account changing customer behavior and market dynamics down to the local store and market levels. One step change is to proactively use analytics in a predictive way to identify and solve problems before they become problems.
• Switch to local omnichannel execution and consider supply chain migration. It is increasingly difficult to accurately forecast consumer demand after a few months, let alone a year in advance – that’s the typical delivery time needed to secure factory space and ship from abroad. The way forward requires flexibility and scalability at the local level. More and more retailers are considering manufacturing locally and moving key items to closer, lower-cost locations to reduce risk and demand too far ahead.

Look forward

More than ever, retailers are faced with new complexities that make knowing where to put products and how best to get them into the hands of customers. Future winners will be those who act decisively now to reduce risk with the right strategy, data, and capabilities to effectively manage inventory availability and margins. warehouse – even at a time of significant and ongoing supply chain disruptions.

Antony Karabus and Farla Efros, managing director, HRC Retail Advisor, a division of Accenture. HRC Retail Advisory was acquired by Accenture in September 2021 and is now part of Accenture’s North American Retail Strategy Group.