Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research's weekly analysis on emerging issues facing retailers, presented here for discussion.
Retailers need a new definition for "supply chain visibility." They have long been telling us that they desperately need more supply chain visibility and yet inexplicably seem unable to make any progress towards achieving that goal.
Whenever we dug into the "amount" of visibility that retailers had achieved, it was always pretty miserable — inbound to the DC, and maybe inbound to stores. As much as supply chain leaders expressed frustration over a lack of visibility, merchandising is the boss — the dog that wags the tail. And the merchandising team is typically not incented in a way that makes them care about inventory accuracy.
My new theory is that retailers are defining supply chain visibility in a way that fundamentally differs from how I, as an observer, might define it. In reality, what retailers mean is better visibility into orders and demand, not inventory — visibility into the things that help merchandising plan better, rather than visibility to help the enterprise better allocate and fulfill inventory.
When supply chains only went in one direction — from supplier to store — that view could make sense. But when every point in the supply chain becomes a potential fulfillment hub, that philosophy gets completely upended.
Consumers want their products fast and they want them delivered to their doorsteps for free. At this moment, there is a margin-to-weight ratio for retail goods. On one side of the ratio, it is economical for products to be shipped or delivered (big ticket items, fashion, etc.), and on the other side of the ratio, it is not at all economical (CPG, grocery, etc.).
But in order to most effectively meet consumer demand in that kind of world, where the threshold for "economical to ship" reaches something close to $0, the whole retail ecosystem is going to need to know where every single piece of inventory is within the supply chain. They're all going to have to have the ability to grab one piece of product from anywhere within that supply chain and get it to a specific point of demand.
So, as has been urged by RSR and others, supply chain collaboration — including with merchandise vendors, distributors and logistics providers — is going to have to happen, not for planning purposes, but in order to make the whole supply chain as lean and yet flexible as possible. But that just is not going to happen until retailers value inventory visibility, in order to meet consumer demand no matter how it may get expressed. No one is going to be able to do that alone.