Jul 12, 2023Ed. Note: This article was previously posted at Retail TouchPoints.
Never more so have retailers needed the mantra of resource optimization to cascade throughout their operations. Supply chain managers are having to become even smarter about how to reduce costs and drive efficiencies throughout their warehouse and supply chain. Automation was once touted as the panacea to this challenge, reducing resource wastage through manual operations and speeding up processes with a promise of delivering multiple efficiencies. As a result, retailers rushed to invest, blinded by the shiny promise of new automation widgets.
But today there isn't necessarily the capital available for such investments, and even when there is, supply chain managers must be wary of taking a short-term-fix "sticking plaster" approach without first understanding the challenges within their warehouses and the key priorities of their business. Instead, they need to take a step back, use the data from their businesses to see what's happening, identify key areas for value realization and re-examine their processes to ask if automation really will deliver what they expect, or whether there is a simpler, more cost-effective solution.
What's Keeping Retail Supply Chain Managers Awake at Night?
The goal of the supply chain manager is to fulfill demand, drive customer value, improve responsiveness, facilitate financial success and build a solid network. Nirvana is to develop a supply chain that runs so well in the background that no one notices…it just happens. But that means tight control and continual evolution of processes to increase efficiencies, optimize resources and drive down costs.
Adrian Smith
The supply chain manager has to be a key stakeholder in every department of the business since the supply chain is a retailer's backbone. If they don't already have a seat at the senior leadership table, they should. For example, if a retailer switches suppliers, not only do supply chain processes need to be adjusted to accommodate and optimize that change, but new suppliers also need to be "managed up" to fit into a retailer's existing standards. And they need to be cognizant of the challenges introduced as the business grows.
A common warehouse challenge can be minimizing multiple and, in some cases, duplicate touches when handling inventory, since every time someone touches a box as part of a handling process it adds cost. Increased and unnecessary touches run the risk of inefficiencies and potential errors, but as a business scales up it can be inevitable. For example, when South African-based fashion retailer Retailability acquired Edgars in 2020, some suppliers delivered boxes that were half full. Being charged "per carton," these new suppliers had to hone their packing standards to meet Retailability's existing efficiencies.
"They had to wrap their heads around what we were trying to do, because when they were delivering the carton that we were going to use to dispatch, many of them didn't really worry about a box that was half full," explained Steve Pearson, Head of Supply Chain and Logistics at Retailability. "Yet, we were paying per cube, so we went on a campaign to educate them, but it wasn't successful. Eventually, we resorted to just turning them away, saying we won't accept this order because it was costing us too much. After initial dissatisfaction, they all came right."
Giving Retail Supply Chain Managers a Good Night's Sleep
It is imperative to understand where you can make specific changes to have the biggest impact on reducing touches. And that means having the relevant data on hand to understand what is happening within your supply chain, to identify the cost per carton and identify where changes can be made. Accuracy is also vital. Directed tasks requested of staff based on a solid foundation of data insights and metrics help to reduce task errors, since there is less ambiguity about what is being asked and less misdirection. In turn, that helps to improve the accuracy of data within the warehouse, promoting a virtuous circle of benefit.
Another sleep interrupter for supply chain managers comes when multiple systems don't talk to each other properly—a lack of integration between ERP and warehouse systems, for example. This complexity can cause duplication of effort and inaccurate data with multiple versions of the truth—and that again runs the risk of failure points. Time is wasted checking that the same data is running between the two systems and is being processed correctly.
A single, advanced warehouse management system that is an integral part of a retail ERP platform will highlight discrepancies immediately, allowing them to be dealt with faster. If stores and warehouses are running separate systems, it causes constant discrepancy errors—and if those errors aren't dealt with quickly, it can impact flow within the distribution center. This isn't just about efficiency, however. If the data at the heart of the warehouse isn't correct, its impact will be felt beyond just the warehouse—with stock inaccuracy impacting sales and customer service, especially if the retailer is trying to manage a unified commerce strategy.
Having the Greatest Impact
Understanding what process changes are required to improve efficiency and thereby reduce cost relies on taking a step back to understand the strategic goals of the business. The most pressing priorities might differ depending on the product range. For example, for mass market, high-volume products the focus will be on driving efficiency, while for higher-end, higher-cost goods, accuracy will be the main priority. Once the goals of the business are clarified it's easier to use data insights to understand the challenge, such as identifying where the most time is being spent and how that can be improved.
It's only then that the question of whether automation is needed should be asked, or whether simpler process changes will be sufficient. Selected automation may help, but it needs to be based on data-driven decision-making. At Retailability, for example, the company's introduction of an automatic scan-and-receive operation has improved the efficiency of the receipt of goods, since the retailer simply checks the weight of each box with anomalies surfaced for further checking. The company also has added automatic diverters on outbound lines that were previously staffed, speeding up the process and freeing up resources.
These were decisions based on understanding what was happening within the warehouse environment through the retailer's data. This enabled strategic decisions based on the specific challenges within the business—which will differ for every retailer and warehouse—rather than a blanket approach to a problem that needs deeper understanding first. Such analysis helps highlight where in the warehouse and supply chain stream change is needed.
By using your warehouse management data to ask the right questions of your business, it's easier to decide if and when automation is needed, or whether warehouse efficiencies and reductions in the cost of getting goods to a store can be achieved with simpler changes first, such as ship from store.
"In a supply chain, all automation and development is expensive, so you need to get the big things right first and build your strategy around that," said Retailability's Pearson. "We've got the cornerstones of automation in place but are trying to make sure that we are using them efficiently, to tick the box completely and then move on to the next thing. Otherwise, things can be a bit blurred. You start to go for the next shiny bit of tech, and you don't get full value out of the first one."
Adrian Smith is a senior managing consultant at Retail Directions, focusing on logistics and warehousing. Smith has been in the IT industry for almost 30 years, with the last 18 focusing on the retail sector. A fundamental interest of his is using technology to simplify and enhance business processes.