As published in Retail Week & DWF Supply Chain: Trends and Innovations in Retail 2014-15 report
In our recent research with Retail Week we asked Supply Chain Directors at some of the UK’s top retailers ‘What are your top three supply chain challenges?’
Demand forecasting and planning may have reached unprecedented levels of accuracy but there will always be the “unknown”, says the distribution director of a cosmetics retailer. “Being able to react in an agile way to things that we have not been able to control is vital.”
Agility is also closely allied to efficiency, he continues. “Agility is very important because it has to do with being able to react to the market in an efficient way.”
Driving not cutting costs
With regard to driving efficiency in supply chain, a further difference from last year’s responses and those conducted for this report is that none of the respondents cited the need to cut costs as being among the top three challenges facing their supply chain teams, versus 44% of last year’s sample.
Whether or not this reflects the better times that the retail sector is now enjoying is hard to judge. For the distribution director of a fashion retailer, expansion and gaining market share depends on increasing storage and processing capacity. “All retailers are trying to win market share and one of the ways they increase market share is by broadening their ranges,” he says. “So an increase in SKUs drives changes in storage methods and the need for more physical storage.”
“The pressure to improve service and be more agile and innovative is relentless and I’m quite sure that all costs will go up as a result of that. But the pressure to reduce costs never gets any less,” the distribution director for a fashion retailer says.
Greater collaboration and integration of the supply chain team with other functions in retail, discussed in greater depth in Chapter 6 of this report, is discerned as an important trend in supply chain by all the respondents. Interfunction collaboration has improved, says the logistics director of a fashion retailer, “and it is critical that it has. There is no way, these days that I can design a supply chain strategy without collaborating with my colleagues in ecommerce, in digital in merchandising and design. That is just not possible anymore.”
Greater collaboration is certainly bringing benefits in areas such as customer service but also in reducing costs, says the distribution director of a cosmetics retailer, one of the many companies where internal collaboration between supply chain and other departments has increased during the past year. “Sharing information at the right moment with the right functions reduces the cost and issues at the end of the chain,” he says.
Notwithstanding the economic growth now being seen, for many the precise pattern of the retail market recovery has been hard to predict, and that continuing volatility puts a further onus on supply chain agility.
“We seem to have been in a period of crisis for a long time; dips, double dips, triple dips,” says the distribution director of a cosmetics chain. “And we believe the market will stay volatile and that it will become the normal way so we have to organise our infrastructure and supply chain to cope with that volatility. And that is our greatest challenge.”
Watch out for our next blog post which will look at what supply chain professionals thought of their peers and who they think are "leading the way".
If you have any questions or would like more information, please contact Hilary Ross Partner & Head of Retail, Food & Hospitality sector.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.