Most global retailers are only at an early stage of digital supply chain adoption, according to a new report from Blue Yonder and WMG, University of Warwick. The Retail Supply Chain Digital Readiness report benchmarked the digital supply chain readiness of 104 global retailers, revealing that only 15% currently have prescriptive or autonomous supply chains (Level 3 and Level 4 on a scale of 1-4). However, the report also reveals that retailers harbour digital transformation ambitions, with more than half (61%) of retailers saying they want to achieve a prescriptive or autonomous supply chain by 2025.
“The COVID-19 pandemic has been a catalyst for transformation amongst retailers, particularly the need for flexibility in service delivery and investment in forecasting, visibility and automation to increase agility. Within the Middle East, we are therefore proud to begin offering retailers the opportunity to conduct a customized one-on-one report that compares their own business readiness against other global retailers to gain insight on core vectors and technologies for digital acceleration,” says André N Verdier, Managing Director at Blue Yonder Middle East.
Manual demand and replenishment planning processes slowing retailers down
The report shows retailers are not able to react to changes in demand in real-time, with only 8% refreshing demand planning processes on a real-time basis. More than one fifth (22%) of retailers currently use spreadsheets for this process, but almost three quarters (74%) want to switch to prescriptive or autonomous technology in the next five years.
At present, more than half (61%) of retailers manage omni-channel inventory as separate channels. However, three quarters (75%) wish to achieve full omni-channel capability in the next five years, with 41% aiming to use AI to evaluate optimum inventory locations for each customer transaction. One quarter (25%) currently still use spreadsheets to manage replenishment analytics, but retailers know they need a more intelligent approach, with nearly half (46%) planning a fully autonomous approach in five years’ time.
Pricing strategies are too static
The report reveals that when it comes to pricing, the majority of retailers work from a static promotional calendar, with only 13% continually optimising prices dynamically. At present, just 11% of retailers assess multiple factors, such as inventory, margin, and waste, for promotions, but nearly half (46%) expect to be doing this in five years’ time. Currently just a small number use AI (11%) for markdown and promotion; however, in five years’ time they say this will have increased to 43%.
Financial planning and strategy need to become more cross functional and real-time
Retailers know they need to include key metrics such as stock and margin for financial planning and strategy: only 11% currently do this, but 40% want to be doing so by 2025. Retailers also want to move financial planning and strategy away from a static to real-time approach. Today, only 7% have this capability, but 36% have set themselves this ambitious objective for the next five years.
Jan Godsell, Professor of Operations and Supply Chain Strategy at WMG, University of Warwick, 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. At the moment, however, an over-reliance on manual processes means too many retailers are taking time to adapt in line with this unique set of challenges.
“As the research reveals, retailers know they need to get their supply chains digital-ready. This will enable them to evolve and make adjustments, both in line with internal factors, such as changing organisational goals, and external ones, such as changing customer desires.”
Wayne Snyder, vice president of retail strategy EMEA at Blue Yonder, added: “Retailers recognise now is the time to significantly step up their supply chains, as many of the tools and processes currently used are no longer fit for purpose. They need to jump the digital gap, recognising that managing their supply chains ineffectively is costing them and not meeting their customers’ needs. By introducing greater analytics and automation capabilities, retailers will be able to connect across their organization to create optimized processes and be able to more accurately sense, predict and plan than ever before.”