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Retail Industry Updates Supply Chain Industry Updates

A ‘Cost Center’ No More

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iStock/Drazen Zigic

Among all the changes of 2020, one of the most striking is how companies are now reevaluating their supply chains in response to the pandemic’s impact. That might be nowhere more evident than in the retail/consumer goods sector, where consumers are helping to engineer widespread change from the comfort of their own homes.

“When COVID-19 paralyzed global supply chains, it also triggered a massive surge in online sales — a double shock that few retailers and consumer goods companies were prepared to handle,” said Mikey Vu, a partner in Bain & Company’s Retail practice. “Companies with supply networks designed for maximum cost efficiency were unable to respond quickly to these sudden supply shocks and demand spikes. The prize of efficiency came at the cost of resilience.”

Or, as a summary of the new report released jointly by Bain and Microsoft put it: “Many who once viewed their supply chain as a cost center now see it as a strategic capability.” Indeed, Bain and Microsoft found an astounding 90% of organizations in the retail/consumer goods sector planned to make changes to their supply chain networks. More than 40% expected to increase their investments in this area, suggesting they would agree with the title of the two firms’ new report, “It’s Time to Build Resilience into Retail and Consumer Goods Supply Chains.”

Companies are approaching this task in three ways:

  • They are reconsidering their long-established priorities, with many more now regarding supply chain agility as a priority. Cost efficiency, on the other hand, appears to have become a somewhat less-urgent goal.
  • They are including their supply chain leaders in company decision-making.
  • They are investing in omnichannel fulfillment, predictive planning and demand forecasting, and in making their supply chain operations more flexible.

“We are seeing a significant shift in supply chain strategies as our customers adapt to meet the demands caused by COVID-19,” noted Shelley Bransten, Microsoft corporate vice president of consumer goods and retail industries. “While cost reduction and efficiency remain a critical priority, we are seeing supply chain agility rise to the top of the list for executives.”

You can learn more here.

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