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Why More Retailers Need to Focus on Digitizing Their Supply Chains

Retailers aren’t doing enough to digitize their supply chains, preferring to focus instead on the customer experience even though an end-to-end overhaul could help them do a better job at giving consumers what they want.

So why aren’t retailers jumping on the digitization bandwagon?

According to Gravity Supply Chain Solutions, the company believes perceived cost is one factor blocking the change, noting that packaged solutions already available can provide easy integration and help retailers navigate some of the challenges they face. Another is a company’s internal “reluctance to change the culture within their businesses.”

The company recently completed a study on supply chain digitization, surveying 500 retail executives from the U.S. and the U.K. Of the respondents, 77 percent were from specialty retailers, 15 percent from supermarkets and 15 percent from the department store sector.

Graham Parker, Gravity Supply Chain’s chief executive officer, said existing management platforms were not designed to meet today’s challenges. About 85 percent of companies still have not digitized their supply chains, which means most are still managed through manual processes, such as spreadsheets, e-mails and telephone calls. A hybrid supply chain blends manual and digital processes, while a fully digitized platform is capable of pulling live data from various touch points across the supply chain. The latter allows for informed real time decision-making.

Retailers seem to understand the benefits of supply chain digitization, which in turn helps with industry challenges such as increasing speed to market and supporting omnichannel strategies. However, most of the proactive steps taken by retailers have been only at the front end of the value chain that has to do with customer-facing technologies, such as augmented reality, personalized shopping recommendations and self-service technologies. The study’s thesis is that it’s only when retailers take a closer look at the entire end-to-end supply chain that customers’ needs can be fully addressed.

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Parker said consumers “have been conditioned to expect instant gratification, requiring the latest on-trend products now, without having to wait for their orders to get processed and delivered, and this is driving the demand for faster speed to market.”

In the survey, 56 percent of retailers who have digitized said order tracking across all touch points has improved customer experience. The study believes real time data provides visibility into the exact location of orders and can help remove obstacles that can disrupt availability. Further, the tracking can also help identify process inefficiencies. And another 52 percent believe that digitization can help retailers “differentiate their product from competitors, [which in turn can] increase customer loyalty by enabling retailers to source and manage their inventory more efficiently.”

For those still relying on manual platforms, using spreadsheets to track products is the key pain point. That’s because disparate information is likely stored in different silos, which can also make the data harder to find. And by the time the manual reports are compiled, which can take days, the information being used for decision making is most likely already outdated.

Those using hybrid supply chain models also say that tracking products in spreadsheets is their pain point. For those retailers when trying to work with different suppliers and vendors, having to search for information in different locations “can negatively impact collaboration and teamwork,” the survey’s report said.

The report also emphasized that digitization improves collaboration efforts and provides instant access to the right data at the right time. It cited a McKinsey & Company report on “Supply Chain 4.0–the next-generation digital supply chain,” which said “[s]upply chain clouds are joint supply chain platforms between customers, the company and suppliers, providing either a shared logistics infrastructure or even joint planning solutions.’

Currently, nearly 49 percent said they have not even begun their planning for a digitization project and only 22 percent said they are at the planning stage. Seven percent said they are at the piloting stage and 22 percent have started digitization. And for those who are still using manual supply chains, 29 percent said they are planning on being digitized in the distant future–or about five years out.

“Choosing the right SaaS [supply chain management] provider will mean a supply chain can become digitized in structured stages, and in a matter of months, which may be surprising to some of those retailers holding back from beginning their digitization journey,” the report noted.