The need for stronger, more agile supply chains was made clear during the coronavirus pandemic, after the shortages that defined its early days as many manufacturers and retailers were forced to shut down operations. Coresight Research and Blue Yonder took a look at what building a better infrastructure will mean for supply chains going forward during theSupporting the Customer Journey: Localization for Speed to Market & Flexibility webinar, which examined the findings of a survey of both retailers and shoppers.
Consumers clearly care about the supply chain: the research found that 66% of shoppers said a retailer’s or brand’s environmental sustainability was a consideration when choosing where to shop for clothing and footwear. Another 60% felt the same way about a retailer’s or brand’s social impact. However, there is much more to revamping a supply chain strategy than increasing corporate responsibility, including:
- Benefiting from added transparency: Not every shopper cares about where or how items are made, but if finding this information for shoppers allows retailers to gain greater insight themselves, the process can provide its own benefit;
- Bringing the supply chain close to home: Nearshoring isn’t the right practice for every retailer or every product, but shortening the overall supply chain offers significant benefits when it comes to speed, communication and meeting demand; and
- Aligning customer needs with the supply chain: Building out the right supply chain also requires contributions from IT and customer loyalty, since retailers need a strong foundation of data to determine where and when each product should come from.
Supply Chain Transparency: More Than Just Good PR
Shoppers’ general interest in corporate responsibility is nothing new, but their professed concerns don’t always match their purchasing choices — particularly as the pandemic made certain items unavailable. The survey found that:
- 68% of retailers believe shoppers wanted items made in the U.S., but only 19% of shoppers sought out these products during COVID-19; and
- 50% of retailers believe shoppers wanted environmentally friendly items, but only 17% of shoppers sought out these products during COVID-19.
However, this doesn’t mean nearshoring supply chains or adopting environmentally friendly practices aren’t worthwhile goals for retailers, even in the short term. The pandemic proved that supply chains are extremely complex and delicate — and also that shared values between a retailer and its suppliers can keep all parties on the same page, and can help them find solutions to shortages and other challenges that can benefit all parties.
The unifying element is transparency. It doesn’t just provide a record to be passed on to shoppers; transparency also helps retailers keep better track their inventories. Corporate responsibility is a real advantage and should not be discounted, but transparency can play an important role in keeping shelves full under pressure, by giving retailers a better view into what is happening further up the supply chain.
“Pre-pandemic, there were some companies that were further on than others — especially in our sector, retail and apparel — but was [transparency] really integral to the way that they needed to operate for all the right reasons?” said Sarah Clarke, EVP of PVH Supply, North America at PVH during the webinar. “Or was it because sustainability and corporate responsibility are great to have, [and] we’re doing the right thing? I think that is an agenda that has completely shifted, and there’s an emphasis and need for it. I’m sure it’s coming to the top of most people’s priorities.”
Nearshoring Can Help Retailers Pivot and Differentiate When Trends Hit
Nearshoring in particular provides added benefits beyond the appeal of that “Made in the USA” label. According to the survey, retailers that worked with U.S. suppliers reaped multiple benefits due to their decision. The most common reasons for nearshoring were:
- Better quality control (34%);
- Shorter lead times (23%);
- Better inventory management: (22%); and
- Matching product to local demand (14%).
Additionally, even if only a small portion of shoppers are truly inspired by products made in the U.S., that can provide a critical differentiator when a category suddenly becomes hot. Having manufacturers close to home makes it easy to quickly stock up when the right time comes, and helps ensures that your product is the right quality for the price.
As an example, interest in fly fishing skyrocketed as a result of the pandemic, driven by shoppers eager to find a safe hobby to practice outside. Orvis’ use of domestic manufacturers helped it ride the wave to a double-digit increase in fly fishing-related sales.
“We’re seeing this massive, massive shift, so our fly fishing business is phenomenally strong,” said Dave Finnegan, Chief Experience Officer at Orvis during the webinar. “We have a local manufacturer for high-end fly rods — highly craftsman oriented, high quality rods and reels and things like that made here in the U.S. We saw a huge, huge uptick in people wanting to do that. We also saw a huge uptick in people who wanted to learn how to do it for the first time.”
Customer Data Can Refine Supply Chain Development Strategies
With the COVID-19 pandemic forcing many retailers to rethink their supply chain, it’s no surprise that 62% cited “assortment, inventory, logistics and warehousing” as one of their primary IT spending buckets for 2021, according to the survey. Retailers also are investing in adding warehouse space (26%), automation technology or autonomous vehicles (29%), and flexible last-mile options like buy online, pick up in-store (BOPIS), curbside pickup and contactless delivery (26%).
Of course, none of these investments are made in a vacuum. Getting supply chain right means building a basic idea of what shoppers will want, and in what quantities, for items that haven’t even entered production yet. Therefore, it’s no surprise that 47% of retailers cited customer data analytics/loyalty programs as another major IT investment for the coming year. Understanding how inventory will move lies at the heart of any supply chain strategy, from developing new partners to balancing nearshoring versus importing goods.
“How do we get items here with an initial set of products?” said Colin Yankee, EVP, Chief Supply Chain Officer at Tractor Supply during the webinar. “How much do we buy overseas? How do we develop domestic sources of supply, and how much do we order of that initial set from that domestic source? And how much of your replenishment is needed to keep that type of postponed allocation there, and be much more responsive? We really look at different tactics based on how the inventory would naturally behave based on customer demand.”