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69% of ‘Retail Winners’ Prioritize Factory Worker Well-Being

The ever-changing retail landscape has lobbed myriad challenges at brands and retailers in recent seasons, and the introduction of a pandemic is nothing short of a curve ball.

However, new research shows that successful retailers generally have one thing in common: an eye toward supply chain visibility.

On Thursday, Symphony RetailAI, which creates artificial intelligence-enabled marketing, merchandising and supply chain solutions, released its sixth annual study on supply chain strategy.

Conducted with Retail Systems Research (RSR), the study revealed that a desire to keep up with an evolving retail marketplace is driving companies to rethink the way their businesses operate.

“We have years of data that points to the fact that supply chains aren’t keeping up with the changing world of retail,” Brian Kilcourse, managing partner at RSR, said in a statement. “The variability of consumer demand is the most widely reported business challenge in this year’s research.”

On top of the challenges posed by tariffs and the growth of direct-to-consumer channels, this year’s coronavirus-induced disruptions have “really gotten people’s attention,” Kilcourse told Sourcing Journal.

“The supply chain disruptions have been increasing lately,” he said, and retailers’ sense of urgency around supply chain visibility have increased since the survey was conducted last fall.

Those findings showed that gold-star companies, or “Retail Winners,” take a very different approach to managing production. The importance that these organizations place on varying aspects of inventory reveals vastly different positioning strategies, Kilcourse said.

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“The value of an AI-driven forecast is that you can consider new data,” Kilcourse said, including environmental, social, market insights, competitive promotions and even cultural markers such as expected sporting events and the like.

“You can develop alternative forecasts based on various scenarios, and the new processes are much faster and more automated,” he said. “They consider new data, so supply chain managers and merchants can develop new projected scenarios for the future.”

They might also have a model that anticipates a catastrophe, and helps develop contingency plans.

The unpredictability of demand has proven a challenge for all retailers—especially in recent weeks—but those in a position to succeed focus more on growth challenges and competitive pressures.

Two-fifths (40 percent) of retailer respondents fingered unpredictable consumer appetites as their most pressing business challenge.

RSR discovered that top performers are disproportionately ensuring that their supply chains can keep up with demand (40 percent) versus under-performing retailers—just 28 percent of whom said this was a top priority.

Two-fifths (40 percent) of Retail Winners also indicated they’re thinking about how the growth of their digital channels will put new pressures on supply chains, compared with just 21 percent of struggling retailers.

Leading retailers are also rising to meet societal and environmental challenges with more gusto than their underperforming peers. Customer expectations are changing, and retailers are being forced to examine their sourcing to meet their demands.

Product quality was the overwhelming driver of most retailers’ supply chain strategies, with 85 percent placing this concern first. Shoppers are more concerned than ever about expectations of quality, but they’re also invested in how and where products are made and manufactured.

Outperforming retailers are placing a higher importance on the well-being of factory workers, showing a desire for more awareness around their supplier collaborations and visibility into the end-to-end supply chain process.

Just 31 percent of flagging brands and retailers acknowledge the globalization of retail as a reason to rethink their strategies, compared 55 percent of winning companies.

More than two-thirds (69 percent) of Retail Winners agreed strongly that the way workers are treated in contracted factories is of highest importance, compared with just 54 percent of their peers.

Strong companies also recognize the need to know where their product is in the supply chain at all times—whether it’s on its way from the factory to the distribution center, on the store shelf or somewhere in between.

More than three-quarters (76 percent) of successful retailers see real-time visibility as an area for improvement, compared with just more than half (54 percent) of average and under-performing companies.

Outperformers have made more concerted investments in forecast tools than their peers, according to RSR. Notably, winners tend to feel they have too much inventory to move, while underperformers believe they have too little, highlighting a meaningful discrepancy in understanding.

“It’s time to address the issues that make it possible to have visibility,” Kilcourse said. “You have to know where your inventory is, and whatever issues you have need to be resolved right now,” he cautioned.

Consumers are buying more online now, he added, and they want to know that the products that appear in stock are actually available to purchase.

“Eventually this is going to give rise to the notion of the digital twin,” he added, referring to a digital representation of the physical supply chain. “It has to get there, he said, adding that retailers need to guarantee their access to real-time, accurate data.

Kilcourse told Sourcing Journal that he hopes retailers and brands will look at this moment as an opportunity for a necessary reset. Now is the time to take stock of the tools they have in place to monitor their supply chains, and ultimately build up the ability to forecast for future disruptions.

“My hope is that this will underscore the importance of that concept in a way that they haven’t felt before,” he said.