RSR Research: Supply Chain Transformation – SMB Retailers’ Unexpected Challenge
Through a special arrangement, presented here for discussion is a summary of an article from Retail Paradox, Retail Systems Research’s weekly analysis on emerging issues facing retailers.
In our March 2012 study entitled Retail Supply Chain 2012: Globalization, Localization, and Cross-Channel, RSR Research highlighted retailers’ #1 operational challenge: re-aligning supply chains to meet the challenges created by consumers’ omni-channel shopping behaviors and that past sales are no longer enough to predict future demand. But looking inside the numbers, we found that that concern is largely driven by retailers with annual top line revenues of more than $500M.
Retailers with top lines below $500M (Small to Mid-size Business or SMB retailers) are much more challenged by an internal issue: organizational friction between the merchants and supply chain operators. Given this friction, it’s perhaps not surprising that "too much inventory" and "lost sales from out-of-stocks" are also challenges for these retailers.
The reason that "organizational conflict" is such a big challenge for SMB retailers comes into better focus when we look at responses from a July 2012 RSR study, Executing on the Promise: Retail Fulfillment 2012. In that study, we noticed that by far the biggest inhibitor to addressing consumers’ cross-channel shopping behaviors was "our supply chain is not designed for omni-channel fulfillment." But unlike larger retailers, fully 50 percent of SMB retailers reported that "lack of active top level support for a cross-channel strategy" (compared to only 19 percent of larger retailers) is an obstacle to moving forward. In other words, many retailers are allowing the conflict between supply chain managers and merchants to fester.
Because the real challenge is to re-think the company’s operating model, the entire executive team needs to get engaged. The CEO needs to know that the supply chain supports the go-to-market strategy. The CFO needs to bring money-management expertise to the table to ensure that inventory, which is after all nothing more or less than money in another form, is being leveraged profitably and with minimum cost. The Chief Merchant needs to know that merchandise plans consider the true cost to land that merchandise. The Chief Marketing officer needs to work with the supply chain to ensure that demand-generating campaigns can be supported. The COO needs to make sure that all the selling staff at the point of interface with consumers has what it needs to satisfy customers. The CIO needs to know what service levels are required throughout the demand fulfillment chain and position information technology resources accordingly. All of these executives need to be at the "Supply Chain Roundtable."
Discussion Questions: Are small to mid-size retailers at a disadvantage versus larger stores in developing competitive omni-channel strategies? In what ways do you think smaller retailers can overcome the supply chain and organizational challenges mentioned in the article?