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Five Essential Ideas to Improve the Retail Supply Chain for Non-Essential Products

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Story Highlights

  • It’s been a tough year for many retailers of “discretionary” products.
  • But you already knew that. The question is, how can you adjust your supply chain operations to compete in 2020/2021?
  • Here are five best practices from McKinsey to help you “win in the next normal.”

Let’s say that, back in 2019, you had a vision of opening a store specializing in providing goods you figured people might need in the highly unlikely event that life started to resemble an episode of “Black Mirror.” You planned to stock it with a wide selection of bathroom tissues, medical-grade facemasks and (depending on your state) cannabis products.

Against the better advice of your spouse, business associates and yoga instructor, you opened your first store early this year. You named it “Essentials” because that sounded kind of cool.

Things were a little slow at first and you worried the naysayers might have been right. But then March rolled around and suddenly your business went through the roof.

Congratulations! Your days are now spent distributing toilet paper curbside to your grateful customers, making plans to franchise and doing the occasional podcast about your entrepreneurial genius, when you can find the time.

However … it is far more likely that you listened to your better half and stuck to selling what are politely (and sometimes subjectively) known as “discretionary” goods. In other words, it’s been a tough year.

If it’s any consolation, you are not alone. “For discretionary retailers, the headwinds are especially strong given considerable uncertainty driven by competitive dynamics, concerns over consumer confidence and heightened demand for last-mile delivery,” McKinsey & Co. notes in a new article. “It’s increasingly clear the pandemic has materially changed U.S. consumer behavior, perhaps permanently, with many retailers looking to alter their supply chains to compete in the next normal.”

“Five strategic moves led by the supply chain organization might prove to be the most critical factors to win in the next normal.”

Fortunately, McKinsey (being McKinsey) offers five best practices to help you adjust your supply chain operation to compete in our new highly e-commerced world. “As retailers look to the future, they will need to contend with consumers’ expectation for seamless omnichannel fulfillment, as well as retailers’ own increasing productivity pressures,” observe the article’s authors, all partners or consultants with the firm.

Their advice is to:

  • Challenge each node in your supply chain, including brick-and-mortar stores, distribution centers, deconsolidation centers, returns-processing centers, pop-up shops and urban lockers. What changes can you make to improve supply chain performance? For instance, McKinsey notes that “a few retailers have considered repurposing stores to serve as fulfillment nodes for fast-moving products.” (Such as Best Buy.)
  • Embrace collaboration, even with your competitors. Is it time to outsource your logistics?
  • Build resilience into your supply chain.
  • Focus on rapidly deployable customized data analytics. You’re not still relying on previous years’ sales statistics, are you?
  • Prioritize end-to-end visibility. “Retailers can quickly [and inexpensively] deploy a supply-chain control tower to orchestrate actions across different functions and improve end-to-end visibility in responding quickly to emerging trends,” McKinsey says.

“A supply chain strategy focuses on the sustainable creation of value for the retailer, the customer and the broader community,” McKinsey concludes. “[These] five strategic moves led by the supply chain organization might prove to be the most critical factors to win in the next normal.”

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