Blue Yonder and WMG take the pulse of global executives amid a pandemic and find most still rely on spreadsheets and legacy processes.
For global retailers hanging on in this COVID-era of massive disruption, time is of the essence, as acting fast now to prepare supply chains for a digital future can be a key to survival, according to a new report.
This spring, IDC noted that as the coronavirus spread around the world, there were significant impacts to consumer behavior, product demand, and retail store, factory, and logistics services availability. "Growth estimates for global retail in 2020 will be halved from pre-COVID-19 forecasts, overall, but impacts are uneven," IDC said.
SEE: The new normal: What work will look like post-pandemic (TechRepublic Premium)
By some accounts, retailers in the US are staring down a retail apocalypse. Just this week, Brooks Brothers filed for bankruptcy, citing the pandemic. CBS News reported that "Brooks Brothers joins a long list of big-name retailers that have filed for bankruptcy protection recently, including J.C. Penney, J. Crew and Neiman Marcus. The pandemic has decimated clothing store sales nationwide as customers have been forced to stay home in recent months."
What's more, this week the National Retail Federation reported that imports at major U.S. retail container ports are expected to remain significantly below last year's levels into this fall as the impact of the COVID-19 pandemic continues.
NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a press release, "Economic indicators show that the recession brought on by the pandemic may be easing, but retailers are being conservative with the amount of merchandise they import this year."
Against that backdrop, Blue Yonder, which provides a machine learning-driven digital fulfillment platform, recently asked WMG, the University of Warwick, to find out from global executives how far into digital transformations their retail companies were. It turns out, the company said this week, most are in the early days of adoption.
Research for the report, "The Retail Supply Chain Digital Readiness," was conducted by WMG between March and April 2020, and included 104 respondents from Asia (China and Turkey), Europe (France and UK), Latin America (Argentina, Brazil, Colombia, Suriname, and Uruguay), North America (Bahamas and USA), and Oceania (Australia, Tuvalu).
According to a news release, only 15% of retailers currently have "prescriptive or autonomous supply chains" (Level 3 and Level 4 on a scale of 1-4). However, the report also revealed that retailers hold digital transformation ambitions, with 61% saying they want to achieve a prescriptive or autonomous supply chain by 2025.
In the release, Jan Godsell, professor of operations and supply chain strategy at WMG, said: "The retail industry never stands still for long, and the impact of COVID-19 means it is currently going through a particularly disruptive period."
"At this time, it's crucial for retailers to be able to manage multiple factors and complications across their supply chain in real time," Godsell added. "At the moment, however, an overreliance on manual processes means too many retailers are taking time to adapt in line with this unique set of challenges."
Indeed, according to the report, retailers are not able to react swiftly to changes in demand, with only 8% refreshing demand planning processes in real time. More than a fifth (22%) of retailers use spreadsheets for this process, the report found, but almost three-quarters (74%) want to switch to prescriptive or autonomous technology in the next five years.
More than half (61%) of retailers manage omnichannel inventory as separate channels, the report found. However, three-quarters (75%) wish to achieve full omnichannel capability in the next five years, with 41% aiming to use artificial intelligence to evaluate optimum inventory locations for each transaction.
And a quarter (25%) still use spreadsheets to manage replenishment analytics, but nearly half (46%) plan a fully autonomous approach in five years, according to the report.
When it comes to pricing, the majority of retailers said they worked from a static promotional calendar, with only 13% optimizing prices dynamically. Just 11% of retailers assess multiple factors, such as inventory, margin, and waste, for promotions, but nearly half (46%) said they expect to be doing this in five years. And, just a small number reported using AI (11%) for markdown and promotion; however, in five years, they say this will have increased to 43%.
How to ramp up
In this landscape, what should retailers do to ramp up digital supply chain operations? In an email exchange, Jim Hull, senior director for industry strategy, retail, at Blue Yonder, said, "In discussions with retailers, there are really a couple main drivers that can help them navigate this massive disruption while also attempting to prepare their supply chain for the digital future." He offered a three-pronged approach:
"Properly sequence their roadmap to ensure most rapid time to value. This calls for working with providers that have a breadth of experience and can show not only the value of a particular approach, but also the time to achieve that value at scale. An example here is that a company may realize they need to modernize their Warehouse Management System while also needing to get onto the latest and greatest workforce management capabilities. The WMS implementation may actually have higher long-term improvement, but going to an (artificial intelligence) AI-enabled workforce management tool can give actual value in a very short amount of time. Moving quickly on a rapid time-to-value approach can help put money in the bank this year, and potentially even free up benefit that can be applied to the next phase of the roadmap
Selecting a highly experienced partner. This is somewhat in parallel with the above bullet–in times like these you can't afford to stop and start over. Working with a partner that has 'been there, done that' reduced the risk of restarts and again can get a company to net value as quick as possible
And finally, although I may be biased as an associate at Blue Yonder, going to the modern platform/SaaS model can allow customers in a tight pinch to ramp the most critical portion of their business to maximize the efficiency of their supply chain without having to bite off a huge project. Scalable, modular improvements can again put money back in the bank quickly without having to outlay a massive investment, and more importantly avoiding having to scale up and mobilize a massive IT effort."