A survey conducted by Martec International, Atlanta, and commissioned by RELEX Solutions, also based in Atlanta, highlights the key challenges today’s European and North American retailers face.
The report, “State of the Retail Supply Chain 2016,” explores the state of supply chain planning and execution in retail covering all aspects from forecasting and replenishment challenges to supplier collaboration, omni-channel, supply chain visibility and more.
Marctec asked retailers to score the visibility of their supply chain out of 10, with 1 being low visibility and 10 being fully visible. The average score was 6.2 out of 10, which shows that retailers feel they have a way to go before maintain full supply chain visibility. Mass merchants and department store retailers experienced a slightly higher than average score at 6.4 out of 10, with large format specialty companies coming in at 6.3).
Other key findings include:
- Food and drug retailers rate the visibility of their supply chain as average, expressing the same issues with supply chain visibility as other categories.
- Retailers in this sector are more efficient than other retailers in terms of staff productivity.
- The average full-time equivalent employee forecasts and replenishes an average of $333 million of sales.
- Food and drug retailers spend slightly less time preparing reports than average, at 62 minutes for a standard report vs 79 minutes for the average. Preparing ad hoc reports is quicker for food and drug retailers at 105 minutes v 110 for the overall sector average.
- In terms of analysis and reporting, food and drug retailers are more likely to have systems that allow them to build supply chain plans based on store/SKU forecasts with alerts on future capacity challenges in distribution centers and stores than other retailers. 62% have current capability compared to 49% for all retailers. A smaller portion has systems that allow them to redistribute stock to outlets with higher sales, only 28% vs 42% for all retailers.
The biggest supply chain challenge for executives is increasing availability without increasing stock holding, highlighted by 62% of the retailers interviewed. The next most important issue is reducing stock holding without impacting sales, mentioned by 47% of retailers. This challenge focuses more on cost savings rather than improving availability. In joint third place are automating key processes and better collaboration with suppliers, both highlighted by 44% of retailers. In fact, the reason many retailers implement new systems is to allow their teams to spend more time decision making rather than number crunching and operating manual processes.
The research enabled Marctec to assemble a benchmark for retail supply chain and execution. This benchmark is designed to be used by retailers as a guide to understanding how their business compares with other retailers.
Level 1.0—Traditional. Retailers at this entry stage operate basic processes with little system support. Replenishment is usually store based with a number of different stock pools in the business, which means these retailers are usually overstocked with lower than average stock turns for their sector. Forecasting is generally a manual process. There is no formal supplier management, monitoring or collaboration. Reporting is poor and time consuming.
Level 2.0—Standard. Retailers at the standard level are beginning to automate, but there are still a number of basic, manual processes and systems in the business. There is variable visibility of the supply chain. Stock holding can be high and is not optimized across all sales channels.
Level 3.0—Advancing. More modern forecasting and replenishment processes and systems are in evidence at this stage with centralized, automated replenishment. Store and distribution center replenishment is becoming more integrated. There is a move toward a single stock pool across all sales channels. Supply chain team members spend more of their time making forecasting and replenishment decisions than data crunching.
Level 4.0—Agile. Availability and stock turns are higher than average for the sector. Integrated, omni-channel systems automate the forecasting and replenishment process. The supply chain is completely visible. Store and distribution center replenishment is completely integrated. There is a high and constructive level of supplier collaboration and management. Promotions are managed effectively in terms of stock and availability.
The results of this supply chain planning and execution research are based on 126 interviews across North America (Canada and United States), Germany, UK and Nordics (defined as Denmark, Finland, Norway and Sweden). All the respondents were at the director, controller or managerial level. The interviews were conducted from January to March 2016 among retailers with sales exceeding $110 million.
This research is based on interviews with 126 retailers, 32% of which are food and drug retailers, including supermarkets, cash and carry, convenience stores, chemists and drug stores.
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