Increasing availability without holding more stock is biggest challenge for retailers

3 May 2016

Increasing availability and forecasting across the supply chain are the key issues for retailers, according to a report.

In a survey of supply chain managers by Martec International and Relex, increasing availability without increasing stockholding was the most important business issue cited by 62% of respondents.

The biggest challenge to forecasting was predicting effectively across the supply chain, cited by 69% of respondents, followed by forecasting effectively for promotions and promotional lift (64%) and forecasting heavily seasonal items (60%).

The research asked 126 retailers from the UK, North America, Germany and the Nordic countries, with annual sales exceeding €100m, about the most important issues affecting supply chain planning and execution.

The State of the Retail Supply Chain 2016 report also said that supply chain analysis and reporting remained a key global challenge, with the production of standard and ad hoc reports taking an average of 79 and 110 minutes respectively.

On supply chain planning and execution, after increasing availability without increasing stockholding, the next biggest issue cited by respondents globally was reducing stockholding without impacting sales (47%), while automating key processes and better collaboration with suppliers were both cited by 44%.

However, 52% of UK retailers said that automating key processes was their top issue, and that too much time spent data crunching was one of the main reasons for replacing systems.

For retailers in North America and Germany, better collaboration with suppliers was a higher priority than average. Nordic retailers listed handling promotions effectively as their second biggest issue, which was not as big a priority for retailers in other regions.

Regarding the main challenges of forecasting effectively across the supply chain, North American retailers were the most concerned about forecasting for new products, with 73% seeing this as an issue compared with 58% of retailers globally. The report noted that the US tended to be the country launching the most new products.

The biggest challenge for German retailers was coping with changes in the rate of sale (85%), followed by forecasting effectively across the supply chain (83%).

On average retailers rated their supply chain visibility as 6.2 out of 10, although UK retailers rated it the lowest, at 5.4 out of 10. North American, German and Nordic retailers rated their supply chain visibility roughly the same.

The report said the fact that 43% of all omni-channel retailers operated a single stock pool across all sales channels showed that the move to a single stock pool was slowly becoming the norm. Multi-channel UK and North American retailers were slightly less likely to operate a single stock pool than average, with German and Nordic retailers slightly more likely.

Looking at staff productivity, the study found that the global average full time equivalent employee (FTE) forecast and replenished an average of €172m of sales annually.

In North America, the figure was an average of €245m of sales, although the report said that this was likely to be due to the greater economies of scale of the retailers surveyed.

For retailers in the UK, Germany and the Nordic nations, staff productivity was €73m, €98m and €85m of sales respectively.

Only 48% of retailers’ systems have the capability for near real time replenishment and forecast calculation, while just over half are only able to see changes in demand and replenishment the next day, the report also noted.

Martec International deputy managing director Fran Riseley said that the research highlighted that processes and technology were not supporting effectively supply chains for many systems:

“This is reflected by a high proportion, 20%, of the retailers interviewed confirming that they have plans to replace or implement for the first time supply chain planning and execution systems.”

Mikko Kärkkäinen, group CEO, Relex Solutions, said: “The research makes clear that while there are some regional variations, overall, retailers globally share the same supply chain challenges. Updating systems and processes will prove key to addressing these issues in coming years.”

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