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Digital Transformation of the Retail Supply Chain Is Vital

KEY TAKEAWAYS

  • Many retail companies are at a very early stage of digital transformation

  • The slow pace of digitization, especially of the supply chain, puts retail businesses at risk of not being able to satisfy the modern consumer who demands exceptional levels of customer service that can quickly get them the items they want, when and more importantly where they want it

  • This makes it essential for retailers to digitally transform their supply chain, and studies have shown that by doing so they can expect many business benefits including enhanced service levels, revenue growth and improved margins


While many retailers are looking at digital transformation as a way of ramping up their performance, progress has been slow. Only 3% of retail companies have completed digital transformation projects across their business, according to a market research survey released earlier this year. The vast majority of retailers investing in digital transformation have only just begun the process, with 22% in the planning stage, and 55% running pilot schemes.

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The slow pace of digitization in the retail industry should be a cause for concern. It suggests that retailers are not fully geared up to satisfy the demands of the contemporary, connected consumer, who due to the rise of easily accessible new technologies and the always-on nature of the modern world expects increasing levels of service. Consumer preferences now change quickly, and they demand retailers to provide them with what they want, when they want. Any delay in satisfying consumer preferences will result in lost sales opportunities and undermine customer loyalty. This puts pressure on retailers to compress their lead times and business cycles in order to get the products that consumers want into the right locations as quickly as possible.

The Business Need to Digitize the Supply Chain

Attempting to do this without a robust digital infrastructure in place is a virtually impossible task. Recently, a major US retailer faced escalating complaints from customers who could not find the items they wanted because they were frequently out of stock. This was because the retailer’s supply chain was not reliable enough to keep pace with what customers wanted. In response, the management team decided to invest in the digital transformation of their supply chain, in order to shorten replenishment times, optimize deliveries and ultimately be able to match supply with demand. Shortly after doing so, they were able to reduce retail cycle times by 20%, leading to increased sales. As time goes by, they expect even better results, and the ability to achieve a 60% total reduction in retail cycle time.

This is just one example of how digital transformation, particularly of the supply chain, can help retailers meet the challenging demands of today’s consumer, generating business growth and success. The findings of major research institutes also support this fact. Bain & Company found that retailers which integrate digital technologies into their supply chain rapidly improve service levels while cutting costs by up to 30%. McKinsey discovered that companies which strongly digitize their supply chain can expect to boost annual growth of earnings before interest and taxes by 3.2% -the largest increase from digitizing any business area- and annual revenue growth by 2.3%.

Click here to learn about how Gravity can help you digitize your retail supply chain.

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Transformational Capabilities

The business case for retailers to digitally transform their supply chain is beyond any doubt. The reason a digital supply chain is able to generate such impressive business results is because it provides retailers with the following game-changing capabilities:

  • Real-time visibility across the supply network, allowing retailers to view the live status of products no matter where they are along the critical path e.g. in production, in transit, in inventory. This allows data-driven decision making with certainty to ensure the timely delivery of products

  • Automation of time consuming manual data entry, such as keying in data on bookings, purchase orders or sailing schedules. Automated operations streamline the workflow of supply chain managers, saving them hours of time, which allows them to focus on more value-added tasks, such as negotiating better vendor prices or implementing growth strategies

  • Enhanced collaboration with all relevant stakeholders, from logistics providers to factories to global teams and departments, all on one platform, from which information can be shared quickly and easily, rather than spread out across multiple sources such as spreadsheets or emails. This enables better business planning and reduces confusion and fragmentation of business processes

All of the above features accelerate retail supply chains to lightning speeds, increasing efficiency and speed to market, allowing retail companies to delight their consumers with timely deliveries.

The Importance of Culture

A caveat to the discussion so far is that the digital transformation of the supply chain is by itself not enough to improve supply chain performance and take it to the next level. Retail companies must also create a workplace culture that encourages employees across the supply chain and buying floor to collaborate more, share data and not operate in silos, in order to take full advantage of the benefits that a digital supply chain will provide. Both sets of employees exist to deliver the product to the consumer, and should be aligned and collaborating in tandem.

Don’t Get Left Behind

According to the IDC, there is a gap is developing in the retail sector between retailers who are starting to embark on the journey of digital transformation of their supply chain with a defined strategy in place, and others who are lagging behind with no clear goals on how to incorporate digital technology. The IDC warns that retail companies on the lower end of the spectrum are putting their competitiveness at risk. This is why it’s critical to not get left behind.

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A Phased Approach

Trying to digitize an entire supply chain all at once can be a daunting and overwhelming prospect. The best way to start is by identifying and fixing the immediate weaknesses in the supply chain (e.g. time to market), with a long term goal to evolve entirely. Once people in the organization start to see the benefits from digitally transforming those parts of the supply chain that need it the most, the process of digitizing the rest of the supply chain to achieve even greater benefits will organically take place. Evolution comes from robust and proactive decision making, vision and openness to change, essentially trusting the data and the source of the data. Having real time visibility begins to install the trust element; the rest will follow naturally.

Schedule a demo with Gravity today to learn how we can help you digitize your retail supply chain and take your business to new heights. 


And learn about our joint round table with Microsoft in October which will look at these issues in more depth in a lively discussion.

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