By Rakesh Jaitly, Senior Sales Director, Oracle Applications
Jul 27, 2022 / 8 MIN READ
As we step into the post-pandemic recovery phase, industries across the spectrum embark on their new journey and fast-track their unique business strategies, same goes for the retail industry where retailers and store managers must keep ahead of the curve to stay afloat. The onset of the healthcare crisis made shoppers panic about purchasing things, resulting in a disturbance in the supply chain and a significant rise in the number of out-of-stock items in stores. This further caused a bullwhip effect, which is basically a sudden increase in supply chain error that creates false supply and demand variations — disrupting not only retailers but also distributors, manufacturers, and suppliers.
To overcome these challenges, retailers’ sole aim must be to ultimately reverse the bullwhip effect and plan for the road ahead by determining how to effectively manage their supply chain and meet the demand of today's consumers.
Over the last few months, supply chains have been struggling with several factors like empty shelves, halted production, and slow distribution. It’s been challenging for retailers to shift their lean operations to match the changing global circumstances. As integral countries in the global supply chain were largely impacted, huge disruptions cascaded across the industry. The API supply chain was also hindered since the majority of products were imported either from China or the USA. There was an acute shortage of semiconductor devices in India which led to inflation in almost all key emerging sectors.
Factors like high customer expectations, panic buying, fluctuating trends, and ambiguous consumer data have led to manufacturers, distributors, and retailers, all finding it difficult to forecast the actual demand. Panic buying of oxygen cylinders in India represents a great example of this challenge. The medical equipment was only to be used under specific conditions based on the doctor’s advice. Because of the dire circumstances, people bought the cylinders to store in their homes to avoid a future emergency, unnecessarily causing a shortage in the market. Cases of hoarding also came to light; all this together caused a severe disruption in the supply chain of the oxygen cylinders in the market. Retailers are facing a slew of new challenges as a result of severe demand variations for a variety of products they have never come across.
Retailers, as a significant part of the supply chain and a source of information, must recognize and adjust their strategy to change consumer habits and favourability. Consumers not only want properly stocked goods but also novel ways to access items which are quite evident in the steady rise of online ordering and curbside pickup. Price elasticity is another important aspect to be looked at as demand manipulation through discounting and markdowns will serve a significant role in amending inventory imbalances generated by the supplier shortages, store closures, and huge shifts in consumer category and channel demand. While dealing with inventory and cash risk is key. Risk-based scenario planning is extremely critical, and it’s comparable to investment methods in that it’s a quantitative approach. The breadth, pricing, and inventory optimization of localized channel assortments combined with predictive information may help retailers plan budgets, availability, and inventory flows to enhance customer demand fulfillment while reducing inventory risk.
A survey of consumers indicated that 47 percent of shoppers said out-of-stock inventory is a deal-breaker, while 63 percent will shop from alternate instead of waiting for a restock. These facts further highlight the damaging impact that the Bullwhip effect can have on customer retention and also the long-term growth of the business.
Retailers confront everyday issues ranging from coping with uncertain suppliers and supply chain inaccuracies to growing demand, panic/hoarding buying patterns, and understanding consumers' every move and next moves. But with scientific and well-thought planning, retailers can work towards a successful period in the coming years.
Data Utilization: Data is one important component of success for this sector. Retailers should plan at a granular level and forecast inventory and consumer behavior using real-time data from point-of-sale systems, supply chain and inventory management systems, and customer relationship management systems, all of which should be updated explicitly with integrated capabilities.
Simulation Models and Scenarios: Once retailers have collected their real-time data, fusing this data with real-life scenarios will be critical to help predict customer behavior. Setting scenarios for past epidemics and current occurrences is crucial for dealing with what lies ahead.
Adjusting to the New Next: The ‘new next’ will not resemble the retail industry's past. Customers and their needs continue to evolve as we see rapid advancements in technologies with it. Retailers will need to develop new risk profiles and present customers with new and improved options. Meanwhile, they also need to understand and predict what this means for sales, supply, and demand as the majority of people choose to shop online. On both the supply and demand sides, finding new and alternative sources will be critical.
The complete supply chain has been toppled, and flexibility and resiliency will be crucial for retailers as they charge forward. To flourish on the other side, retailers will need to listen to their data, quantify risks, simulate scenarios, and alter their overall plans. Adapting to the realities of the industry will be critical in reversing the bullwhip effect in the end.
As we step into the post-pandemic recovery phase, industries across the spectrum embark on their new journey and fast-track their unique business strategies, same goes for the retail industry where retailers and store managers must keep ahead of the curve to stay afloat. The onset of the healthcare crisis made shoppers panic about purchasing things, resulting in a disturbance in the supply chain and a significant rise in the number of out-of-stock items in stores. This further caused a bullwhip effect, which is basically a sudden increase in supply chain error that creates false supply and demand variations — disrupting not only retailers but also distributors, manufacturers, and suppliers.
To overcome these challenges, retailers’ sole aim must be to ultimately reverse the bullwhip effect and plan for the road ahead by determining how to effectively manage their supply chain and meet the demand of today's consumers.
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