President and Chief Strategy Officer at NGC Software, digitally transforming the retail supply chain.
This article was originally published on Forbes.
The coronavirus swept through the U.S. fashion and retail industry with brutal force, as witnessed by record numbers of retail bankruptcies, store closings and mass layoffs. But while many of these retailers were already burdened by declining sales, weak merchandise and lack of omnichannel capabilities, there was another contributing factor: a rigid, unresponsive supply chain.
In a recent survey from Retail Systems Research conducted after the onset of the coronavirus, nearly 1 out of every 2 retailers said their supply chains were “too focused on efficiency at the expense of flexibility.” This proved to be fatal for many retailers during Covid-19; it simply meant they quickly and efficiently produced merchandise that was headed straight to markdown or liquidation due to an almost immediate drop in demand. Their supply chains couldn’t pivot fast enough, accelerating their demise.
Many retail supply chains are broken, but they can be fixed. The most important supply chain attributes in the post-Covid-19 world are agility, resilience and speed. Supply chains must be flexible enough to continually respond to changes in demand, as well as unexpected, far-reaching supply chain shocks.
That’s why digital supply chains are such an important topic for fashion executives. A digital supply chain platform connects enterprise systems, applications, processes and information, bringing them together into a single digital platform. Unlike spreadsheets, disconnected systems and siloed processes, a digital supply chain provides a single version of the truth in real time, eliminating the barriers that stand in the way of a high-performing supply chain.
How can a digital supply chain platform improve agility, resilience and speed? Here are just a few ways.
Supply Chain Visibility And Transparency
This is one of the first requirements for a flexible supply chain. After all, if you don’t have full visibility, it’s impossible to react. A digital supply chain platform can provide the insight that retailers require in order to quickly respond to a widespread supply chain disaster such as the coronavirus. They can access up-to-the-minute information on the status of open production and inbound shipments to quickly adjust.
Demand signals change constantly. In response to these fluctuations, digital supply chains can help retailers take advantage of a technique known as postponement, which allows them to delay decisions on which items to manufacture or cancel, helping ensure that orders align with demand. Retailers that were able to cancel orders, redeploy raw materials or quickly adjust production quantities fared much better during Covid-19.
By delaying production decisions as long as possible, retailers can also decide to redirect manufacturing capacity altogether. For example, many apparel companies shifted part of their production capacity to producing face masks when Covid-19 hit. This is a prime example of supply chain resilience and agility.
Demand Sensing And Response
Retailers have always sought to achieve a near-perfect balance of supply and demand. It’s an elusive goal, but digital supply chains can vastly improve supply demand alignment. This is where AI plays an increasingly important role.
Retail supply chains generate massive amounts of data that is constantly changing. As a result, retailers’ traditional planning cycles, which are set months in advance, are a thing of the past. AI and machine learning can automate many routine tasks and decisions, to speed execution and responsiveness, helping retailers more accurately respond to demand. AI-enabled supply chains will increasingly be key to retailers’ future success.
Retail Supply Chains Can Be Fixed
These are just a few examples of how a digital supply chain platform can provide the resilience, agility and responsiveness that fashion retailers need to survive and thrive. Covid-19 exposed the underlying weaknesses of many companies, but digitalization can provide a remedy.
Currently, most fashion companies are managing their supply chains with siloed, outdated or manual systems and processes. The comprehensive and all-encompassing nature of an end-to-end digital supply chain platform makes it unrealistic to roll out the full scope in a single phase. Modern digital supply chain platforms are extensible, meaning that they utilize data created in other legacy systems such as ERP. The most successful digital transformations are phased over two to three years and prioritize the business areas providing the biggest benefit during the initial phases of implementation. Also, as business processes become more streamlined, organizational realignment will take advantage of increased efficiency and throughput. Hence, change management is a significant aspect of digital transformation.
Covid-19 was an unprecedented shock to retail brands everywhere, but unfortunately, it will not be the last one. Digital supply chains can help retailers prepare now for future industrywide disruptions.
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