COVID-19 has accelerated the retail market’s digital transformation, according to a new study released by Avery Denison in July. Avery Denison’s 2020 market insights report indicates a “revolutionary” digital transformation of retail is under way in which supply chains will become increasingly transparent and data can be shared across the industry in order to ensure flexibility and sustainability. The study found that as consumers are demanding greater transparency and versatility, supply chains must become more visible to accommodate.
The report, titled “IoT and the Imminent Supply Chain Digital Transformation,” is the result of hundreds of interviews with global executives, says Francisco Melo, Avery Dennison’s VP and general manager for intelligent labels. The research was commissioned prior to the 2020 pandemic-based quarantines and was already under way in early March 2020, and COVID-19 has played a role in the responses that took place throughout a two-month period.
As Avery Dennison began planning the study, Melo says, its goal was to learn how the C-suite (senior executives) and other leadership roles view the impact of the Internet of Things (IoT) on supply chains. Due to the report’s timing as the pandemic began, he explains, “We were able to incorporate specific questions surrounding the impact of COVID-19, which has provided vital insights into the hearts and minds of the industry during this very challenging time.” The research, which relied on questionnaires and interviews with business leaders in the supply chain, retail, logistics, technology and sales segments, spanned five key global markets: the United States, Central Europe, the United Kingdom, China and Japan.
The primary takeaway from the study, Melo says, is that “Digitization and the IoT [are] at the forefront of the majority of leaders’ minds that we interviewed.” The study found that rather than slowing down efforts toward the digitalization of supply chain data, COVID-19 has accelerated it. That, in part, is due to a shift in consumer demands. Supply chains are being expected to provide greater transparency and flexibility, and the study found that companies that have already digitized their supply chains, by automatically tracking individual goods traveling through those chains, are best positioned to navigate the uncertain future.
COVID-19 has changed the playing field for many in the retail industry, Melo says. The pandemic has generated several common questions that consumers and retailers are each asking: Where did a product come from? What is in it and is it sustainable? And what guarantees are there that certain products—groceries, for instance—will be on the shelves when consumers enter a store? A growing number of retailers are expected to find ways to accommodate COVID-19-era buyers, according to responses from study participants. As a result, Melo says, “We anticipate a rapid scaling of new frictionless, touchless use cases over the next 24 months.”
The retail and apparel categories may employ IoT-enabling technologies, Melo adds, “as a solution in response to public demands and the ongoing need for social distancing.” For example, an item with a unique identifier that is automatically captured by a reader as it moves through the supply chain, such as an RFID tag, can be digitally tracked. That data can then be shared via software, including blockchains, in which the record is immutable. “This [technology]will be integral to enable businesses to respond to ever-changing demand and shifts in consumer habits,” Melo states.
“We have also seen trends emerge as businesses diversify their offering in order to remain operational,” Melo says. He cites new phrases, such as “quay to curb” or “sea to fork” for seafood, and “source to POS” [point of sale] to describe the vision of a transparent supply chain. Already, the report finds, numerous brands and retailers have started selling products (or parts of products) direct to consumers, thereby transforming their businesses into what Melo calls micro-supply chain offerings.
Restaurants such as Panera and Subway provide an example, Melo says, as they have begun shifting their business models to selling food directly to customers, demonstrating how supply chain versatility is becoming more important. In order for this to be a successful model, he notes, companies need to know what they have and where it sits in the supply chain. This, Melo says, is where RFID and the IoT come into play as core enabling technologies. “We believe a supply chain revolution is required” to meet the needs of the newly evolved retail market, he explains. “A ‘revolutionized supply chain’ provides transparency and accuracy from a product’s source to its point of sale.”
COVID-19 is not the only driver for consumers seeking greater supply chain visibility, however. Sustainability is reportedly a key motivator for companies investigating RFID or IoT deployments. In fact, 65 percent of respondents indicated that sustainability will be a greater priority for them than it was before the COVID-19 crisis. Sustainability is no longer just a matter of good citizenship, Melo says. “We will see how industries and companies around the world start to more closely scrutinize the cause-and-effect roles they play,” he states.
Eighty-three percent of those surveyed said they believe supply chains and associated technologies can assist businesses with their sustainability objectives. Some brands are moving toward a circular economy that eliminates waste and focuses instead on the continual use of resources. A trend toward reuse, sharing, repair, refurbishment, remanufacturing and recycling, Melo says, requires digital awareness of where materials and products are, as well as their status in the supply chain. Avery Dennison’s market research report focuses on a product launched by Adidas known as Futurecraft.Loop, a sneaker with a circular lifespan that can be traced as it is purchased, returned and recycled after use.
Overall, the study found, although there is a common understanding that technology will provide the digital transformation required in the changing economy, there are still hurtles ahead. For instance, 67 percent of respondents claimed they are actively maximizing the potential value across their supply chain, yet more than 30 percent indicated they are still not exploring all of the opportunities available. There are several reasons for this, Melo says, including a lack of awareness about what those opportunities are; 31 percent said a lack of awareness was a barrier. Additionally, 35 percent cited skills gaps, while another 35 percent perceived high investment costs.
Though supply chains have typically been considered in what Melo calls “behind the curtain” terms, “it doesn’t mean that they should ever be hidden from view or accountability,” he says. To provide visibility, every product requires unique identification on a tag, such as an RFID tag that transmits its ID number each time it is interrogated while moving from the source to the customer.
Through RFID labels, the report explains, supply chains can be transformed into an IoT ecosystem that can be tracked, traced, interrogated and held to account, for the benefit of all. This will be triggered both by operational needs and by consumer demands to have their needs fulfilled transparently, when they need it and how they want it.