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Retail supply chain trends in 2013

10 January 2013 |
Posted in: Supply chain

Joe FoggIn 2013, we can expect to see retailers’ stock management and supply chain strategies embrace the need for holding and effectively managing a single stock, in response to continued cost pressures and raised customer expectations.

Growth in multi-channel retailing – such as online and in stores – is forcing supply chains to be much more ‘joined-up’. It’s now far more common for brands to sell across multiple channels – such as eBay or Amazon Marketplace – in addition to their own online stores and this brings specific challenges. The last thing an e-commerce brand wants is to lose sales due to a customer being told a product is sold out on one platform when they could have purchased it from another, or to unexpectedly run out of stock altogether because people are buying simultaneously through different channels.

As retailers continue to embrace new and

more diverse online platforms in 2013, including the increased implementation of social media campaigns and mobile coupons, these new pressures will drive demand for a single physical stock combined with an integrated end-to-end view of inventory across all sales channels.

It’s an approach that offers additional strategic benefits. For example, supply partners are able to offer systems that allow brands to strategically select which channels they sell through – including allocating exactly how much stock is made available for

certain platforms.

The natural evolution of this move to centralised stock is a growth in ‘drop-shipping’, where a supply partner holds a central stock. When an order is received, it gets picked, packed and shipped directly from the warehouse to the consumer, removing the need for retailers to physically hold any stock themselves. For brands, drop-shipping allows greater penetration into marketplace and for retailers – as well as removing the need to invest significant sums in stock and warehousing – it enables greater flexibility and faster delivery times.

As the high street continues to consolidate and more customers buy online, the appeal of drop-shipping is set to grow. So too will the appeal of warehouse outsourcing as an option for smaller e-commerce brands. The fact is, supply chain partners are often better equipped to manage peaks and troughs in the sales cycle, by flexibly allocating warehouse space and resources by working with clients whose products have different peak seasons. For a small retailer with limited resources, investing in warehousing that may be half-full outside of peak periods is a huge drain on both capital and cash flow. As a result we can expect to see more outsourcing providers developing solutions for these niche players in 2013.

Joe Fogg is business development director, supply chain solutions at arvato UK & Ireland

2 Responses to “Retail supply chain trends in 2013”

  1. Dear Joe

    For South African market,its a funtacy.
    This innovation sound good on paper, not too sure if it can work in real world as it puts more responsibility on the seller(upstream) than the buyer (downstream).

    If we look at cost savings,the idear is more focused un the buyers needs than a sellers risk.

    The following steps will have to be considered before implementation:
    -Relationship(buyer and suplier)-is it a long term or once off
    -buy-in from the supplier-(are they willing to go back to mass production?)
    -Systems intergration.
    -Ecomonic & political conditions-
    -Costs-who will absorb the costs to centralise these DC’s?
    -Risk-transfare of ownership

  2. Hi Ntutu,

    Thanks for the feedback on market conditions in South Africa – not one I have any expertise in.

    This is the evolving model in the mature European markets (although South Africa is a relatively mature market itself with many top Supply Chain personnel plying their trade).
    This won’t be the model for all scenarios (I’ve not found a ‘one solution fits all’ model yet – I’ll keep looking).
    In answer to a few of your specific comments. There is no need for greater mass production. Stock holding should be less – i.e. demand pull based (rather than buffer stock holding in regions) with market/buyer customisation occurring late in the chain.

    The relationship is driven by so many other influences, the greatest usually being ‘Supplier power v buyer power’ (from Porter’s 5 forces). This model does require collaboration to ensure accurate demand data is used.

    Technology is increasingly the key enabler to facilitate the smooth flow of commercial transactions. Investment by the seller is often expected by the major buyers. Hence a growth in outsourcing, as small/medium sized players either cannot or will not invest the capital (strategic decision making).

    Hope it’s a great day in South Africa – the sun has finally arrived here.

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