News / US retail supply chains may not cope with a bumper holiday season

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Retailers are looking forward to a strong peak shopping season, but their supply chain capabilities can’t cope with the changing landscape, according to a new study.

Deloitte claims the US retail sector will see sales overtake the 2018 peak season by between 4% and 4.5%, with sales between November and January to exceed $1.1 trillion.

And the consultant sees e-commerce sales advancing by 14%-18%, $144bn to $148bn, over the holiday season.

This will be a challenge on the logistics front, but operators have signalled confidence that they can cope. An arguably bigger concern is the sector’s ability to cope with the pressure for increased speed and flexibility.

The 2020 State of Retail Supply Chain report from logistics analyst EyeforTransport (EfT) warns that the sector needs to step up its game to meet challenges in forecasting, visibility, reaction capability and system integration.

The study, which is based on input from more than 400 supply chain professionals, suggests sector capabilities are barely enough to cope with current demands. Retail supply chains need to be more agile, communicative and forward looking, it warns.

Legacy planning tools and traditional planning solutions are no longer suitable, EfT analysts stress, but their study found that the retail sector still firmly relies on Excel spreadsheets, for example.

The majority of technology providers that participated in the survey report that installed systems barely meet current needs and are not good enough for the change required, and 14.8% rate their customers’ systems “not useful at all”. A year ago, 8.8% of tech providers had rated customers’ systems “useless”, EfT said.

Nearly one-third of the manufacturers and retailers surveyed identified forecasting as their greatest challenge, as systems often lack automatic planning and optimisation capabilities, while just over two-thirds don’t use forecasting software.

These forecasting problems affect planning horizons, EfT found. According to the study, 58.5% of retailers and manufacturers plan their logistics operations a week or less in advance.

By the same token, the industry relies too much on metrics over short periods and analyses only the recent past, it says. Only one-quarter of the manufacturers and retailers use historical data alongside advanced analytics, while 49.2% of them base their workload forecasts on actual orders.

The same myopia extends to the assessment of their planning processes, says EfT. Most firms use KPIs after the conclusion of operations, and 15.6% rely on the experience of their planners. Only 14.1% have analytical systems of some sort to help judge the success and cost of their planning.

System integration is another challenge. Slightly over one-third (34.6%) report that their planning systems have poor integration. Inevitably this makes it difficult to achieve supply chain visibility, and retailers’ discomfort with this situation is on the rise.

EfT analysts cited a survey of 450 supply chain professionals published earlier in the year that showed 71% found the lack of visibility hurt their business.

While 23.1% of those surveyed by EfT regard visibility as their greatest challenge, 16.2% rated their ability to provide end-to-end visibility “poor” or “very poor”. A year earlier, only 5.4% found their end-to-end visibility that inadequate.

Digitisation is a key element for the industry to embrace, EfT concludes. Of those participants in the survey that have not moved forward, 22% are now in the planning stage to do so, 7% have launched pilot projects and 22% are beginning to implement it – but 49% have not started planning it.

Eft expects, in the foreseeable future, “considerable friction will remain”.

“Frequently, different actors lack the investment capability, the will or the technological base to create digital monitoring and feedback loops necessary to create an integrated digitalised supply chain that stretches from source materials to customers.”