Oct 20, 2019I received an email last week promoting a new research study titled "2020: State of Retail Supply Chain Report," from eyefortransport, a website focused on the logistics and supply chain industries. Since radio frequency identification technology is used in supply chains, I downloaded the document to learn what the state of the retail supply chain is.
As I suspected, it's not good. In his introduction to the report, Alex Hadwick, eyefortransport's head of research, states: "No retailer or manufacturer that responded to our survey felt that their supply chain operation was extremely efficient." No one. None. Zippo. That tells you something.
Hadwick goes on: "Technologically, there is the need for huge innovation in the retail supply chain. In order to deal with the major challenges we have identified in our survey of more than 400 supply chain professionals, which are forecasting, visibility, reaction capability and system integration, there will need to be a step change in capabilities. Players across the space must address tracking mechanisms, analytical capabilities, warehouse coordination, automation, and route planning, all of which will need a digital-first approach."
The survey offers a lot of interesting facts, such as that 62 percent of respondents cited Microsoft Excel as their most used supply chain planning solution, and that 16 percent of surveyed companies said their ability to provide end-to-end visibility was poor or very poor, up from 5.4 percent in 2018. The biggest challenge for both manufacturers and suppliers, according to the study, is forecasting demand. This has been an issue since, well, forever. Forecasting will always be difficult because weather, sporting events, pop culture and other factors influence sales changes in unpredictable ways.
Companies can greatly improve their forecasting with good data, particular about what products they have in their stores and where they are located. But studies show inventory accuracy in most stores is about 60 to 65 percent—and it can be as low as 30 percent in some categories. How can you forecast demand when you don't even know whether something is not selling because customers don't like it, or because they do like the product but it's not being replenished properly?
The second biggest problem retailers and manufacturers say they face in their supply chains is poor visibility. They don't know where things are located, and this affects their ability to react. Again, RFID technology can provide the visibility required to enable companies to know precisely where shipments are, and this allows them to react to changes in demand.
Imagine there was a snowstorm in New York City and a supplier of snow-throwers had visibility regarding where all of its inventory was located throughout the northeast region. The manufacturer could divert inventory bound for stores in Baltimore, where there was no snow, to the New York area, where the snow-throwers were needed. If the company's supply chain execution software were integrated with a forecasting and data-analytics applications, supply chain managers would receive recommendations about what inventory was in areas not expecting snow for the next two weeks or so, so they could divert that inventory to areas affected by the snow, where sales would be likely to spike.
Unfortunately, supply chain professionals don't seem to understand how much RFID could improve their supply chains. In fact, the report on the state of retail supply chains doesn't even mention RFID. Clearly, the RFID industry has a lot more work to do to educate supply chain professionals about the value of the technology it offers.
Mark Roberti is the founder and editor of RFID Journal.