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Agility is the answer to consumer driven demand – but how can we achieve it?

25 July 2018

By Craig Moore, Head of Supply Chain, DP World London Gateway

As featured in the British Retail Consortium's summer edition of 'The Retailer'

Who would have thought it? A prolonged period of sunny weather normally synonymous with the Mediterranean coast … except this isn’t the sun-soaked shores of Spain. This is the UK!

This sort of weather should be predictable, it is summer after all. But that’s the problem – it seems nowadays the only thing we can be sure of, is we can’t be sure of anything! And there’s no better reflection of that than the UK weather; which in turn serves only to proliferate the uncertain marketplace retailers are currently facing.

Today, retail is under pressure from disruptive online brands in an ongoing, often painful period of evolution. Meeting consumer demands quickly, whether driven by weather or even national footballing success (and who would’ve predicted that?), is central to success.  

Brands that fail to recognise this new reality run the risk of losing their place on the high street. We need only look to recent House of Fraser news to see that the ability to adapt in both the short and long term is absolutely vital.

And this is where a flexible, well-positioned supply chain can add value and increase sales. Supply chains are often monstrous – formed of a huge number of component parts, from ports to warehouses, trucks to trains, customs to customers.

But collaboration and innovation in supply chains can help bring about greater agility and adaptability, ensuring that shop-shelves are stocked in line with demand, whatever the weather!

Maximising every opportunity is key

Success now depends on maximising every opportunity to secure competitive advantage. This used to mean optimizing business models to capitalise on regular peaks like Christmas and the January sales. However, as online has become more important, traditional retail business calendars have become less reliable.

This trend has seen the emergence of new shopping peaks like Black Friday, while also driving unique and often unpredictable opportunities. In May, for example, the Office for National Statistics reported sales up 3.9 percent on May 2017 – a 13 month high that the latest British Retail Consortium survey attributed to both the Royal Wedding and unseasonably warm weather.

Respond to consumer driven demand

These new peaks are consumer driven and, in most cases, legacy back office infrastructure retailers have in place is not setup to cope. Longstanding supply chain operations are often rigid and inefficient, making it difficult to adapt to change. Reacting to real-time events is particularly difficult.

Let’s take the first bout of good weather we had this year, the hottest May Bank Holiday weekend since records began. Thousands of last-minute sun-seekers flocked to UK seaside resorts. Retailers that benefitted most were those that responded quickest to ensure they had sufficient stock of products that beach-goers typically demand – despite it being early in the summer season. It’s easier for independent traders, of course. But facets of the supply chain, such as inventory management and fulfilment can help bigger retailers stock up at short notice too.

Place more importance on effective inventory management

This ability to dial up and dial down fulfilment doesn’t just help increase sales of items associated with summer fun, it can be applied to many different product lines. But doing so consistently and quickly enough to respond to consumer trends requires retailers to drive more effective management of inventory across the supply chain.

One approach to this is considering the use of shared-user warehousing facilities, allowing storage capacity to scale up and down, as and when it’s needed. The logistics sector is beginning to recognise that modern warehousing solutions need to handle a range of products, from fresh perishable goods requiring refrigeration to clothing hanging on rails. This then requires the ability to cater different brands simultaneously, serving product demand often delivered via multiple business platforms.

This isn’t to say direct competitors, like Tesco and Sainsbury’s, would end up sharing one building. But there is scope for retailers and their respective logistics providers to pool resources. For instance, just last year Tesco and Dixons Carphone agreed a concessions deal whereby Currys PC World outlets would feature in some of the supermarket’s larger stores. 

Take an Airbnb approach?

This innovative new warehousing model can be thought of as an Airbnb equivalent for the sector. Brands requiring overflow for seasonal or unexpected inventory requirements can purchase space from warehouse operators on a pay-as-you-go short-term basis. And by using facilities near to the main ports where retail imports arrive, there’s a great opportunity to reduce unnecessary miles that products travel between unloading, sorting and eventually, to customers.

With lorry driver numbers in decline, finding ways to reduce road mileage will be essential in coming years. More importantly, it will be central to minimising supply chain turnaround time – crucial if brands are to respond to unpredictable demand peaks driven by consumer demand. It can also reduce other overheads and a brand’s carbon footprint.

Collaborate more closely

As omnichannel commerce becomes more common, it increasingly results in non-linear customer fulfilment challenges that traditional retailers have tended to struggle with. With store and staff numbers in decline, reinventing the backend to provide greater agility will be key. It requires closer collaboration between the retail and logistics sectors, with more flexible ways of working.

Weather and other events, like sporting successes, are sometimes hard to predict, which is why agile supply chains can help retailers capitalise on consumer demand

Sometimes it requires closer intra-departmental working too. Breaking down silos and planning longer term has potential to unlock significant savings while enhancing an organisation’s ability to react to unforeseen events.

So that’s a little food for thought as you settle into your sunbed this summer.

Working and innovating with supply chain partners can facilitate far greater agility and adaptability, to meet demand for products – whatever the weather.

Find out more: www.londongateway.com or contact Craig directly: craig.moore@dpworld.com