Predictive data set to shape 2017 supply chains

It cannot be denied that 2016 has been somewhat of a turbulent year for retailers and their suppliers. The vote in favour of Brexit has left many supply chains feeling uncertain and insecure – no matter how they voted.

As a result, the past year has been something of a wakeup call for many businesses to recognise that systems and processes need to be robust and streamlined in order for them to ride out any unpredicted economic wobbles.

As a direct result of the uncertain climate that retailers find themselves facing as 2017 approaches – which has only increased following the US election results – budgets will need to work harder than ever before in order to create positive customer experiences, which is crucial as shoppers may cut back, or become more cautious with their spending.

This cautious approach to spending by the consumer should be reflected in how the retailer operates. Stock levels need to be scrutinised in real time, transactions and delivery need to be slick and keep customer promises in terms of delivery timings, and technology investment must be weighed against return on investment. In light of this, retailers are looking for different ways to deliver on consumer promises promptly, and at a minimal cost. This, in turn, will reduce the amount of returns to the business, meaning that they can better forecast profits and avoid being hit with unexpected return rates.

I predict that investment in technology within the retail sector will, therefore, be focused on features that speed up the supply chain, minimise inventory and allow for a smooth delivery process. This will manifest itself in three specific areas:

Drop Shipping

I expect to see more retailers adopt a drop shipping approach as retailers enter into agreements with suppliers to deliver directly to the customer. The primary benefit of this is that retailers can maximise their offerings to customers and maintain service levels without the need to significantly increase warehouse, inventory and distribution costs.

This kind of strategy also reduces risk for the retailer ahead of peak trading periods, should there be a lack of demand, as they won’t have a warehouse full of stock that needs to be shifted at a lower rate, which could, in fact, lead to a loss for the business.

EDI adoption

Big data is not a new topic for retailers or businesses and therefore, many will already be aware of the importance of data accuracy and analysis for speed of performance and cost effective decision making. This is particularly true for the supply chain; and increasingly businesses are adopting a demand-driven approach which uses live data to determine stock levels and availability.

Many retailers have invested in technology to support this approach, including Electronic Data Interchange (EDI), which enables the quick, accurate and reliable exchange of data with suppliers – reducing lead times and the amount of safety stock required. This adoption is only set to rise as retailers look to further streamline their supply chains by extending their EDI initiatives to include all their suppliers and additional document types.

Requesting suppliers to send acknowledgments and advanced shipping notifications (ASNs) enables retailers to know in advance exactly what is going to be delivered, enabling them to take the necessary action to ensure that potential shortages do not impact their customers.

Predictive analytics

2016 has seen many businesses recognise the importance of real-time data analytics, which – although important – needs to be developed yet further. The New Year will bring with it the need to move towards predictive data which enables retailers to be proactive, rather than reactive to truly stay ahead of the competition.

To outperform competitors, retailers need to strive to accurately forecast what will happen in the immediate future. This is the most effective way to deliver on what their customers want, at the same time as running a lean supply chain operation, and protecting margins. By looking at what has happened historically, identifying trends, and working out averages, retailers can forecast demand and begin to scope out what inventory is needed for the coming weeks. This way of replenishing or changing stock enables a demand-driven approach to run smoothly and cost effectively. It will also allow retailers to accurately plan strategy as a direct result of what the analytics predict.

For example, using an accurate forecast then enables retailers to directly dispatch instead of holding stock, meaning they can order significant quantities of items without tying money up in stock. EDI enables retailers to send their suppliers short and long-term forecast information allowing suppliers to more accurately plan future resource requirements.

It is also worth bearing in mind that insights should be directly linked to retailers’ multichannel offerings, to manage consumer expectations. For instance, if an item is no longer in stock, retailers’ websites must update instantly to avoid consumers purchasing stock that does not actually exist.

For any retailer looking to embrace predictive analytics, accuracy really is the key. It is impossible to forecast future demand without detailed insights into what has happened previously. Equally, this information has to be available in real-time, so that forecasts can be updated as the current climate changes.

Although 2017 may bring with it a feeling of uncertainty, this has made businesses seriously consider their supply chain efficiencies and to critically analyse how their business strategy effects the end-user experience.

And in my opinion, this can only be a good thing, as it will make retailers future-proof their approach and become resilient and prepared for all economic peaks and troughs yet to come.

Robert Simpson, European Marketing Director at TrueCommerce

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