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The way retailers need to operate their supply chains in 2024 is very different to the way it used to be. From consumer spending habits to online or subscription-based selling models, supply and demand patterns in retail are changing dramatically. For retail businesses to succeed in this shifting environment, and crucially, remain profitable, they need to make sure their supply chain is not only working, but is optimized.
It’s one thing to have a supply chain that keeps your inventory well stocked; it’s another thing entirely to have a supply chain that empowers your business to efficiently meet the demand of your customers, while optimizing costs and reducing excess stock. The requirements of an effective modern-day supply chain are putting pressure not only on the supply chains themselves, but on your business’ planning, forecasting, and economics. As a result, it’s leaving retailers more susceptible than ever to supply chain risks.
What are supply chain risks?
Supply chains are multifaceted, bringing together a variety of suppliers, partners, and processes. This makes them inherently susceptible to risks both in and out of your business’ sphere of control. These risks can pose a real threat by increasing overheads and affecting your ability to meet your customers’ needs. This in turn could negatively impact your reputation, as well as your bottom line.
Generally, you need to protect your supply chain from both known and unknown risks. Known risks are usually directly in your sphere of control, whilst unknown risks present more of a challenge, often being out of your control.
Known risks include:
Manufacturing workflows, processes, and operations
Business resource, management, and processes
Internal IT systems and cybersecurity
Quality assurance and compliancy standards
Supply chain transparency and intelligence
Unknown risks include:
International politics and trading
Environmental disruptions, including natural disasters
Global economies
Cost and availability of materials
Supply and demand fluctuations
Whatever risks your supply chain is facing, the first step to managing them is to develop a strategy.
How to develop a supply chain risk management strategy
There are two things you need to aim for in your supply chain risk management strategy – building up your agility, and your resilience. Building up your supply chain agility will help make sure your business can adapt swiftly to either reduce known risks or redirect activities when an incident occurs.
Core tactics to improve your supply chain agility are:
Document and score all known risks.
Consider partnering with nearshore suppliers.
Bolster supply chain cybersecurity for both in-house and supplier teams.
Implement in-house quality assurance processes.
Then finally, and most importantly; improve your supply chain intelligence.
New technologies, including AI, can be used to improve your supply chain intelligence. By maximizing visibility across your supply chain, this tactic can help to improve workflows, identify issues quickly, accurately forecast demand, and optimize costs.
When it comes to managing unknown risks, this is where building up your supply chain resilience becomes key. When risks are out of your control, and can result in major impacts on your operations, the best your business can do is prepare to see through these incidents with as little customer-facing impact as possible.
Crucial steps to improving your resilience include:
Establishing a safety and risk-aware company culture.
Optimizing operations elsewhere in your business to help balance potential financial losses.
Build up inventory buffers for consistent supply.
Work with your marketing team to create a crisis response PR plan.
Pre-prepare contingency plans.
Alongside improving your supply chain visibility, technology and generative AI can also be used to model potential critical scenarios in simulated environments. This tactic is key to helping create contingency plans and workflows to fall back on in the case that an unknown risk occurs.
How can we help?
Building an effective supply chain strategy requires a number of different disciplines to be brought to the table. At TPC, we can provide our expertise in retail supply chain management and best practice to help your business develop a strategy that meets your needs. Using a data science approach, we can also simulate what the performance of your new supply chain is likely to be, so you can implement your transformation feeling confident that it is attuned to meet any potential risks.
Our goal is to advise you on a long-term solution for your business’ supply chain, as well as support you in implementing models, processes, and systems. Our experts will work with you step by step until you meet your supply chain objectives; from initial consultation to helping you select your suppliers, to future optimization and support.
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