Retailers and their partners today participate in a global supply chain to deliver relevant products to value-conscious consumers. But despite the physical length and complexity of global supply chains, the speed of the design-to-consumption cycle has increased remarkably as retailers seek to enable a more agile response to demand, and still reduce the amount of paid-for inventory in the pipeline. Because of the multi-national interdependency that exists between manufacturers, logistics providers, aggregators and retailers, participating companies today are under great pressure to eliminate disruptions that can affect the total supply chain.
At the same time, retailers’ inventory assortments have grown far more complex as retailers seek a differentiated offering to more discerning and careful consumers. Larger and more complex assortments delivered via a far-flung supply chain require that retailers and manufacturers both operate with a greater degree of precision and with greater responsiveness to real time conditions. RSR Research’s recent studies have shown that winning companies are turning their ability to manage greater complexity more effectively into a strategic differentiator. But those same studies also identify supply chain visibility as a top business challenge - for both retailers and suppliers.
Why? Simply put, because delays, shortages, quality and transportation issues can have a devastating effect on a retailer’s bottom line. Companies need to be able to respond more quickly both to supply chain “shocks,” as well to rapid changes in consumer demand.
Retail Winners (those companies that consistently outperform their competitors) tend to establish direct relationships with trading partners in the global supply chain, these companies show a heightened recognition of the difficulty in managing an extended global supply chain. Retail Winners take an activist role in framing their future prospects, while laggards tend to position themselves as victims of circumstances beyond their control. These companies understand that “visibility across the whole supply chain” has an impact on partner relationships. While under-performers may be content to see no farther beyond “the four walls” than inbound to their DC’s, Winners want to establish relationships with trading partners that enable them to see on-hand inventory and manufacturing schedules. The need to “see” is compounded by uncertainty – rough economic conditions, sudden disruptions, even political strife. “Visibility,” the way Winners envision it, cannot exist in a coercive relationship, rather it must be built on a foundation of mutually beneficial objectives, metrics and accountability, and standardized data.
While laggards complain that “it’s very hard to manage actual supply chain costs,” far fewer Winners hold that view. Over-performers recognize that they need to measure the costs associated with supply chain events, in order to gain an understanding of the priority issues that need to be managed. Measuring costs is not just about tracking expenses as they are incurred. It's as much about measuring the hidden costs of risks and understanding the trade-offs that must be managed. As retailers have learned, a global supply chain works well when transportation and commodity costs are cheap. But the volatility of costs in today’s far-flung supply chains dictate more proactive management, to ensure that the true landed cost of merchandise doesn’t erode profitability.
To read RILA & RSR's full report, click here: Retail Supply Chain Visibility 2009: The Drive for Strategic Transparency
To view RILA's latest supply chain-focused research & benchmarking studies, please visit our Supply Chain Resource Center