Let’s face it, these are complex times for retail. Without a clear economic outlook, brands are sailing blind, scalded by disruptions in supply chains whose impact on operations they have too often underestimated. They are no longer innovating – or hardly at all – and are postponing their projects. In fact, for the past 2 years, the prevailing trend has been one of non-decision. A few signs point to an improvement in the first half of the year. But in the absence of visibility, CIOs are asking themselves the question: how can they launch projects, continue to innovate, remain attractive to young talent or meet business requirements with limited budgets?
Innovation: between stagnation and minimal investment.
Gartner recently pointed the finger at the fact that 81% of boards of directors have not made progress or achieved their objectives in terms of digital transformation. Forced to justify past technological investments and pressured by new expectations (around AI in particular), CIOs remain under pressure. They are even losing the upper hand in terms of investment, when price once again becomes the primary criterion.
The CFO is becoming a key negotiating partner when it comes to assessing the viability of a project. On the whole, brands are becoming much more protectionist, moving away from a ‘sell more and sell better’ approach to a far more rational strategy, in which they will favour immobility, or a simple ‘upgrade’ if it is sufficient, over the acquisition of a new software solution.
How can we align the objectives of IT and supply chain managers?
The various disruptions to supply chains have exposed the vulnerabilities of the system. The announced introduction of export taxes in the USA could reshape international trade. Learning from past mistakes, retailers are now seeking to strike the right balance between scarcity and excess, while favouring, where possible, new sourcing strategies based on regional chains to reduce dependence on Asia.
Until now, to avoid investing in new solutions, retailers have relied on their existing ERP systems – whose role it is not – to manage stocks and orders as effectively as possible, at the risk of lacking agility and flexibility in business terms, increasing technical debt and reducing net income and sales in financial terms.
While we wait for better times to come, there are 3 possible ways of adding value to the business and sustaining the brand’s activity.
Path 1: better use of stocks to improve profitability
Supply chain managers study numerous indicators and focus on the most important. Some issues, which they may consider to be less of a priority, such as those relating to WHO, remain in the hands of the IT department.
Alongside the business units, the IT Departments will establish, model and prioritise the critical scenarios to be resolved. It is then up to the IT Department to provide a rapid response, without getting involved in often lengthy tunnel projects.
Implementing an OMS project is therefore less risky – and quicker – than an e-commerce project. Of course, a data-driven approach will be essential to maximise the company’s strategy. But OMS does not need all the content of a PIM (Product Information Management Solution) and a CMS (Content Management System) that feeds an e-commerce platform (visuals, product information, etc.). As a result, it will be possible in the space of a few weeks, or even a few months – and at a lower cost – to roll out high added-value projects. These projects could, for example, make it possible to reduce surplus stock so as to avoid mobilising capital and having to increase warehousing costs; or to improve stock visibility so as to reduce errors, stock-outs or overstocking.
Path 2: refining the use of data
A mine of information that is still under-exploited, data is proving to be indispensable in facilitating targeting and improving the effectiveness of campaigns.
For example, a retailer can use real-time sales data combined with weather forecasts to adjust stock levels. In this way, it can anticipate a cold snap and therefore greater demand for warm coats and accessories, enabling it to avoid stock-outs and maximise sales.
In addition to internal data, there is also external data from suppliers or partners. Let’s take the case of marketplaces such as Farfetch: a ready-to-wear brand can analyse browsing and purchase data from a marketplace to identify the most frequently viewed products and those left in the shopping baskets without completing the purchase.
Retailers can use this information to launch a targeted advertising campaign with specific offers on these items, thereby increasing the conversion rate.
By connecting with a marketplace, OMS shares real-time information on stock availability: by exploiting this existing data, it will be able to formulate a reliable customer promise, and thus increase the conversion rate. It will also make it possible to detect which products are the most successful in different regions, to understand which items are the most popular, or which have the highest return rates.
The IT Department must demonstrate its ability to integrate, manage, process and analyse this data, which is all too often still divided into silos, in order to offer unified information that can be used to improve all the company’s processes… starting with the supply chain.
Path 3: Defining more sustainable, forward-looking models
Faced with major global challenges and changes, the supply chain needs to reinvent itself. New models – in particular those that are leaner and more sustainable – must support the ambitions of companies determined to move towards flows and processes that meet today’s challenges. Whether it’s a question of producing and transporting better, storing less, designing collaborative ecosystems or creating circular models for recycling, the IT Department must play its part in designing a new Supply Chain.
The aim will be to move towards a digitalised supply chain that is even more resilient and agile, and capable of anticipating needs and risks. A Gartner study predicts that by 2025, 50% of companies will be using AI to improve their logistics management.
Finally, environmental concerns and consumer expectations will drive companies to adopt more sustainable practices, as part of an ESG (environmental, social and governance) programme. This will include optimising transport to reduce fuel consumption.
- Digital Supply Chain