Expanding the number of routes to market can help retailers reach new customers and generate new revenue streams. However, it can also create a web of stock management complexities. Caroline Ellis looks at why there’s more to solving these supply chain challenges than simple scaling up capacity.
Growing sales channels
Research by Advanced Supply Chain Group (ASCG) shows the impacts of Covid-19 and Brexit are accelerating growth in retail sales channels. Nine in ten retailers planning to grow their channel footprint are doing so in response to the pandemic and Britain’s departure from the EU.
More channels can mean more sales opportunities, which helps mitigate the impacts of market uncertainty. A greater number of channels will also mean there’s increasingly varied ways for retailers to connect with customers. This can safeguard trade during any of the retail restrictions of lockdown, as some channels remain open as others may temporarily close.
Although the expansion of sales channels is particularly relevant to recent global events such as the pandemic, it’s a trend that’s been gathering pace in recent years. Demand for e-commerce is rising, and more importantly, it’s also evolving. Consumers now regularly purchase through many different channels, from online marketplaces through to social media, click and collect, subscription services and TV.
Retailers are responding to this evolution by adding new channels to their sales strategies. ASCG research found that two thirds (65 percent) of retailers now sell through more channels than five years ago, with 71 percent expecting the number to increase further in the next five years.
On average, retailers currently utilize five different sales channels, with around a fifth (22 percent) expecting to add another three to four channels to the mix in the near future. This growth in channels can bring with it a growing number of stock inventory management challenges.
More people, places and processes
Selling through more channels and selling a higher volume of products go hand in hand. Therefore, the addition of new channels can mean more people, places and processes are added to stock inventory management strategies. Storing, handling and distributing more goods often requires larger teams, greater warehousing and fulfilment space, and expanded supplier networks.
This enhanced scale of operation, can, by its very nature, create more possibilities for errors and inefficiencies. There’s a higher number of products moving to many more different places and points of sale, and it can become more challenging to hold the correct level of stock and then get the right product to the right place at the right time and at the right price.
The challenge of scaling up supply chains is intensified by the real-time demands of consumers shopping via digital channels. E-commerce is increasingly associated with immediacy and an expectation for goods to arrive quickly and cheaply. This puts extra pressure on stock management strategies and can cause mistakes.
A quarter (25 percent) of retailers have experienced an increase in errors when selling through more channels. This includes issues such as incorrect labelling, picking and packing, sending the wrong goods to customers and not following their preferred delivery options. The research also showed that when expanding channel footprints, retailers report that stock inventory management and customer service is compromised by issues including managing stock levels (38 percent), forecasting stock requirements (37 percent), overselling problems and out of stock situations (35 percent).
Solving stock inventory management problems
To meet the challenges of selling through more sales channels, retailers will often prioritize investment in the capacity of their supply chains. Forty-seven percent of retailers have recruited more staff to manage stock, whilst 45 percent have expanded warehouse and fulfilment space, and four in ten (42 per cent) have increased the number of suppliers they source goods from.
While this will go some way to accommodating the higher volume of goods being sold, increasing capacity is only part of the solution. Effectively managing the stock inventory management complexities of selling through more channels requires an integrated supply chain strategy.
Every channel needs to be integrated into the supply chain management as a stand-alone outlet. This must make a distinction between each of the channels, appreciating and understanding the differing functionality of each and how this impacts stock inventory management. Online marketplaces, for example, involve another vendor layer compared to an owned website store, whereas bricks and mortar retail may have a blend of traditional in-store sales and click and collect functionality.
Each of these sub-levels of functionality mean it’s increasingly important for supply chains to have a ‘control tower’ view of stock. This central coordination requires constantly updating communication across all channels to ensure that every time a product is sold, stock availability is immediately updated. As well has helping to avoid overselling, it means there’s a reliable stream of accurate data, which enables retailers to respond to trends in demand more quickly.
This level of accuracy and control sits at the core of ASCG’s web-based supply chain management tool, Vector. By constantly collating data from different channels, it enables retailers to optimize the flow of stock. This may involve moving products to different locations to reduce delivery lead times and enhance customer service or forecasting stock levels to satisfy peaks and minimize costly excessive stock.
Harnessing human intelligence
To further optimize stock inventory management as channel footprints expand, supply chains must strike a balance between people, artificial intelligence, and automation. As capacity and scale increases, there can be a temptation to manage problems associated with growth by minimizing headcount. The premise being that the chance of human error can be lessened by reducing the number of people involved in storage, handling and distribution.
Undoubtedly, automation can improve accuracy and efficiency as supply chains grow. However, agile stock management strategies still require human intelligence and intervention.
A study by Warwick University showed that a once-in-a-generation drop or surge in demand, such as the impacts of Covid-19, would trigger a disproportionate automated response. Fit-for-purpose supply chain management strategies and software solutions must harness the experience of employees, with a design that is bespoke to the operation. This approach can help to continuously optimize the flow of products being sold through multiple channels.
Data from ASCG’s research shows 38percent of retailers are prioritizing the recruitment of staff with relevant expertise to solve the stock management problems of growing retail channels. This, along with bespoke software and data-led supply chains will prove a winning formula for selling more products to more customers through more channels.
Caroline Ellis is the Commercial Director at Advanced Supply Chain Group. Advanced Supply Chain Group in an international logistics company, which provides full end-to-end supply chain services. The business was founded in 1997 and specialises in developing its own software to offer customers bespoke solutions that remove the complexities of omnichannel supply chains and keep goods moving efficiently and effectively.