Economic Uncertainty Drives Next Phase in Supply Chain—Predictive Analytics

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Forbes.com

November 5, 2018

By Greg Petro

Modern retailers that build predictive analytics and automation into the supply chain can benefit from being able to predict future needs and facilitate necessary changes to their operations, staying ahead of the modern era while guarding against catastrophe before it happens.

We are living in uncertain times. Looming risks like wars, environmental and labor regulations, natural disasters and transportation challenges are placing many retail supply chains and retail profit centers at the mercy of the unforeseen. Factor in knowable challenges like the growth of fast fashion, and one unforeseen supply chain hit could quite literally mean the death of a retailer or brand.

The good news is that with every great challenge comes opportunity. President Trump’s ongoing trade war with China, which will almost certainly drive up costs, is only cementing the need for retailers to modernize their supply chains. And it could subsequently be the fire retailers and brands need to finally make their supply chains more efficient, streamlined and future-proof.

A recent Reuters story noted that many companies have engaged consultants to help clients assess potential replacements for Chinese and other non-U.S. suppliers. As Chicago-based Peter Guarraia, a partner at Bain & Co, recently noted, “A lot of our clients are asking, ‘How do we turn our supply chains from a necessary evil into a competitive weapon?’”

Exactly. It will take years for companies to move complex, decades-old supply chains outside of China, and even if they do, it likely won’t guard against the unknowns of the modern age. And who wins and loses in the supply chain battle will largely come down to automation and advanced analytics.

I came across an interesting piece published by Rutgers Business School which referenced a quote from 20 years ago by Boston Consulting Group’s Harold Sirkin warning that competition is no longer “company versus company but supply chain versus supply chain.” While the piece was focused on comparing Amazon and Walmart’s supply chain, the greater theme is relevant to every retailer. The modern-day battle now hinges on technology innovation and aptitude—of “supply chain analytics versus supply chain analytics.”

But most retailers aren’t going far enough.

Spencer Fung, CEO of Li & Fung, echoed these sentiments during the last NRF Big Show, predicting that the retail supply chain will become fully digitized, “eventually.” As he noted, retailers have focused their digitization dollars on the front end, leaving most of the supply chain as an analog operation. He went on to note that the future of supply chain will be driven by speed, digitization and a new approach to design and product development.

Real-time is no longer fast enough. Modern retailers that build predictive analytics and automation into the supply chain can benefit from being able to predict future needs and facilitate necessary changes to their operations, eliminating time-wasting steps and staying ahead of the modern era while guarding against catastrophe before it happens.

A few brands have already started implementing these strategies and can give us a glimpse of what the next phase in the supply chain will look like.

  • Marks & Spencer uses consumer-driven predictive analytics to make design, buying and pricing decisions on categories including apparel, lingerie, footwear, accessories, food, home and beauty. Gordon Mowat, Director of Supply Chain and Logistics at M&S, noted in a recent article, “[Predictive analytics] technology gives us invaluable feedback on new products during design and development, so we can buy more of what our customer likes and eliminate products that score less well.”
  • vineyard vines has also integrated predictive analytics using sentiment data and real-time product pricing analytics. This enables them to more quickly and accurately make design, buying and pricing decisions that improve sales, margins and inventory turnover both in stores and online.
  • rue21 is using predictive analytics and voice of consumer analytics to learn what specific product designs resonate with customers and at what price point. By getting their product assortments right earlier in the process, they are able to improve their speed-to-market. Karen Pinney, Chief Merchandising Officer for rue21, said “This capability enables us to drive speed to market with the right items, which is critical for a fast fashion retailer.”

Employing advanced analytics not only helps retailers and brands make decisions on bringing the right product to market at the right price the first time around, but can speed up time to market and eliminate inefficiencies across the entire supply chain. When the unforeseen hits, whether it be a weather event or changes to tariffs, retailers and brands that have implemented predictive analytics strategies throughout the entire supply chain are better equipped to face the challenge in ways that align with consumer expectations and minimize the financial hit.

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