Supply Chain Capacity Management

The changes in the retail market drives changes in the supply chain capacity management planning and forecasting as a result of the omni channel purchasing practices.  These purchasing practices are changing the way that inventory must be managed and perhaps more importantly consumers are now continuously changing the manner in which the inventory is consumed.  In addition to the consumption of inventory changes the distribution of this inventory across the geographic locations is also changing.  These are key factors that are challenging retailers in their supply chain capacity management to meet the discontinuous change in the retail market.  

Retailers must change their supply chain capacity management strategy to increase the flexibility and also expand the capabilities to meet the market demands for the ability of consumers to purchase any product at any time and then most importantly to deliver the product to meet the consumer needs in an efficient and timely manner.  This is a much more difficult challenge because it seems that the goal is continuously changing from a supply chain capacity perspective.  The changes to the retail market resulting from the consumer expanded omni channel demands have disrupted the retail market along with the extended supply chain supporting the retail market.  There is no question in my mind that one of the greatest struggles for retailers is to revise their capacity management strategy to meet the changing demands of the consumer.  

It used to be easy for the large national and regional retailers because they could simply expand their growth by expanding the number of stores.  This provided a relatively stable set of requirements for the supply chain capacity management where retailers would distribute product to the stores based on product mix and regional sales.  Now with the expansion of consumer omni channel shopping and purchasing the retailer's store model has been blown up.  You see this with the sales figures by channel along with the impact on the real estate market and malls that are seeing reduced foot traffic and sales.  Consumers have embraced the technology that allows them to shop and purchase on their own schedule and this has changed the retail supply chain requirements along with how capacity is managed across the chain.

Supply chain capacity management must be highly flexible and fluid in order to sense and respond to the consumer demands.  The market is much too volatile now for retailers to wait for the changes, they must change their capacity management strategy to allow inventory to quickly move across channels and delivery points to react to the demand volatility.  In addition to the increased flexibility of the consumption abilities retailers and the supply chain must also recognize and change their capacity demand planning and forecasting strategy and practices to help to flex capacity capabilities to meet the demands.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Changing The Way Supply Chains Work

As a result of the continuously changing demands on the supply chain from retail channels, consumers and suppliers the inventory management systems must also change to meet these demands.  These changes are bigger than simply improving the inventory control systems, software integration and procedures.  These demands require changes in methods, software and also the collaboration improvements across the entire supply chain.  Inventory availability, placement and ability to deliver to meet the consumer demands is a key driving force to changing the way that your supply chain works.  However it is not the only thing changing in how the supply chain works, there are just as must disruption driven by the changing relationship between consumer and retailer driving changes in the supply chain.

Consumer and market demands are changing the retail inventory management requirements in ways that have been difficult for retailers to recognize and adjust to in a timely and effective manner.  The reason for this difficulty is that retailers must take the time to first understand the changes and second to define a strategy to meet these changes and all this must be done while the retail brick and mortar channel is disrupted to the point of serious impact on the survival of many large legacy retailers.  These changes have been a long time coming and have been projected by consumers and retailers have either ignored them, or fought them.  In either case, the market and competition from online retail capabilities in addition to the explosion of technology have converged for consumers to finally implement the changes in purchasing and shopping without the support of the large retailers.    

These changes in both consumer demands and consumer capabilities have come together now to disrupt the retail marketplace and the extended retail supply chain to force a change in the way the supply chain works to support the marketplace.  The changing supply chain demands are now forcing changes in the inventory control systems, software integration and procedures supporting the marketplace to account for the disruption and survive in the future.  Retailers and the inventory control systems and procedures must view consumers as the center of the model and all channels are converging to support this new model.  Consumer demands are driving these changes and retailers must adapt their strategy and inventory control systems to support this model in order to survive.

Unfortunately for the large legacy retailers these changes in the way their supply chain must work comes at a time when they are adjusting to the disruption in the marketplace.  These changes though must be accounted for and addressed in their new strategy in order to support the marketplace.  The changing consumer shopping and purchasing practices are changing and as a result retailers must change their methods, software along with extend collaboration across the entire supply chain, including consumers, in order to meet the demands.  The changes to the way supply chains work are structural and permanent so they will not allow the retailer to simply apply a bandage, this requires major surgery to survive.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Convergence Of Demands

The demands of the retailer for product inventory supply and location are beginning to converge with the demands of the customers.  The challenge for the retail extended supply chain is the convergence of demands and expectations from these two distinct customers, retailer and consumer.  These changes require a dramatic increase in flexibility of the functionality along with increased collaboration across the extended supply chain network in order to meet the flexibility demands.  Retailers can no longer view their extended supply chain as a silo that is used simply to supply product as needed.  The extended supply chain can be a competitive advantage for retailers if they increase the collaboration across their supply chain extended partners, consumers and the retailer.

The replenishment demand cycles and requirements have been shifting now for quite some time and with the increase in the omni channel shopping and sales volumes these cycles have converged across the product supply and delivery for both the retail stores and direct to consumer deliveries.  The replenishment to stores and the consumer purchase fulfillment are now very similar and this is further converging to eliminate all differences. What this means is that much of the retail shipments, whether to the retail store or the consumer have the same properties and the same fulfillment cycles.  

These delivery and fulfillment cycles will drive retailer planning and forecasting functions to converge the demand planning for stores and direct to consumer sales and replenish to locations that most efficiently meet these demands.  The Amazon supply chain network provides a good example of these supply fulfillment demands as Amazon has built a network of distribution centers across the country to support the rigorous delivery demands to consumers across the country.  

Omni channel retailers now must get creative in their real estate network to meet these new rigorous fulfillment demands as they converge.  This means that retailers must re-evaluate the store layout and usage to be able to support direct to consumer fulfillment along with in person shopping and purchasing.  I envision this change to drive an expansion of inventory storage at the store and a contraction of show room shopping space.  I also envision an expansion of resources in the store to support the demands of inventory management and control along with consumer order fulfillment direct from the store.  The retail store provides a perfect location to support the converging demands of the retail omni channel marketplace and most importantly since the foot traffic in the stores is deminishing as the eCommerce sales increase this strategy provides a perfect opportunity to repurpose and utilize the real estate to efficiently meet the converging demands.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?