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Q: How will better forecasting impact the business? What does this mean for my supply chain? Will this build cost efficiency?
The Covid-19 pandemic has accelerated the shift towards eCommerce and revealed retailers’ capability gaps in omnichannel fulfillment and supply chain optimisation. Moves to regionalisation, mass customisation and hyper-local are putting more pressure on capacity planning, assortments and inventories.
According to the Retail Drive Group, retailers are potentially losing $1 trillion in sales from inventory out-of-stocks due to poor assortment planning or real-time tracking. The main challenges are poor in-store execution, excessive inventory carrying costs and frequent markdowns. This has now become an area of focus, as now more than ever retailers need to be able to share information across their organisation, understand the shifts of consumer behaviour on inventory and be able to optimise assortments and fulfillment capabilities in real-time.
Supply chain optimization is a crucial area of operational improvement which starts with creating data accessibility and consolidation. Building a technology architecture that enables you to gather, consolidate, analyse and report on all the data elements across your value chain is key for complete visibility. In addition, scenario planning for business continuity is also important in order to build resilience in your supply chain. You can then use Artificial Intelligence (AI) or Machine Learning (ML) technology to optimise specific use cases such as demand forecasting, assortment planning, route and inventory optimisation to drive further efficiencies in your supply chain.
Demand forecasting solutions can provide retailers with accurate forecasts of future sales of products at locations of interest along with insights to enable merchandising planners to make planning decisions using advanced analytics and AI or ML. Decisions made on accurate forecasts reduce lost revenue through stockouts, excessive discounting and reduce inventory holding and spoilage costs. Using technology partners like Google Cloud will allow retailers to better predict customer demand, market trends and anticipate demand forecasts through using real-time analytics capabilities.
A great case study of a retailer leveraging technology to drive operational efficiency by optimising their supply chain is Home Depot. The American home improvement chain partnered with Google Cloud to build their demand forecasting and inventory optimisation engine. This engine manages their data and monitors store inventory in real-time, ultimately enabling their associates to keep over 50,000 items stocked at over 2,000 store locations. Another example is Carrefour, one of the largest grocery retailers in France. Carrefour needed to provide the right products, in front of the right shoppers at the right place, time and price. Through running SAP on Google Cloud, Carrefour developed an assortment recommendation tool to optimise selection at the store level — ensuring On-Shelf Availability for customers as well as giving the store directors influence on inventory decisions.
While shoppers are increasingly becoming channel agnostic, they are still looking for a consistent experience during their purchase journey. Hence, the need to build a connected platform that integrates digital and physical stores. Solutions like Google Cloud API Management for Retail (powered by Apigee) allows retailers to easily integrate their different platforms and systems to provide a more unified shopping experience for customers. Retailers often struggle to centrally manage multiple applications across store operations. By using a Cloud application like Google Cloud Anthos for Retail, retailers can streamline store operations by consistently deploying, configuring, and managing applications across all their stores at scale.
Operational improvements are the key to driving digital and omnichannel revenue growth. By using a connected platform across all channels, retailers can create end-to-end visibility across their supply chain and build capabilities to optimise product assortments in real-time. In this manner, retailers can keep up with changing consumer behaviours and expectations in particularly turbulent times.
Q:. How can retailers best approach improving operational capabilities across multiple stakeholders? How can we improve collaboration and productivity across my organisation?
This question is ultimately about a paradigm shift that needs to happen at an organisational level. The concept of the IT department needs to move away from an infrastructure, “keep-the-lights-on” mentality and instead be viewed through a strategic lens. Can data drive this decision or change better? Could we move faster by enabling a service or platform in the Cloud instead of building it ourselves? Can we leverage existing data in the system? In this way, IT becomes a core strategic ally instead of a cost centre.
IT departments over the last 30 years have usually worked in a siloed manner. There were infrastructure teams that were mostly dedicated to keeping the lights on and managing racks of servers — physical and metal infrastructure. On top of that, functional application managers and specialised teams have emerged over time to address new requirements such as cyber security, data and information management, business intelligence, data warehousing and analytics, to name a few. In this way the IT department has become a large and complicated construct with a lot of effort focussed in maintaining the infrastructure that enables the business to run.
When the Cloud emerged, there was a move away from traditional on-premise solutions to data centres. But ‘being in the Cloud’ alone doesn’t translate to digital transformation. Some organisations transfer their existing paraphernalia onto a new environment and outsource their infrastructure — essentially an infrastructure ‘lift and shift’. They’re still paying for infrastructure as a service for the data centre, but they don’t have elasticity. They can’t quickly ask for ‘more’ from the data centres as they still need the physical infrastructure — blades and racks — to do so.
When organisations simply move their existing setup to a Cloud, or are using a private Cloud in a data centre, they are not getting the full value of what the Cloud is capable of. Plus it becomes expensive over time as they are replicating an old model rather than building from the ground up.
The Cloud truly delivers value to organisations when they do it as part of a transformation process. At a minimum, this requires a re-platform where you’re not only refactoring what was built before but reinventing and transforming the solution for your needs. That’s when you capture the full value of the Cloud.
When the core processes are truly running in the Cloud (not just a lift and shift), your previous structures to support the infrastructure become obsolete. So you can reduce the IT budget, and the Cloud can hyperscale and cover the infrastructure and app layers. When you move to that layer of abstract and think about platform as a service, you don’t need to budget for infrastructure costs and resources any more. The more you can enable your business to leverage a Cloud service, the more value you will realise over time and the more elasticity you can give back to the business.
Now you can focus on the remaining investment and double down on ROI. For example, say the marketing department wants to run a reactive campaign that requires a degree of IT capability. To do that in the old world you’d need months of notice to stand up infrastructure and create capacity plans. When you use the Cloud, outcomes are one to two weeks away. Once you know your budget and cap, all that is required is to activate servers, increase computer power, and store data for the campaign. That’s when the Cloud transforms core business.
Carlos Aggio is an Analytics and Cognitive Partner at Deloitte Australia. He specialises in the intersection of data, Cloud, and analytics. In his role, he helps clients move towards modern analytical platforms and drive operational improvement and Cloud-led digital transformation.
Sameer Dhingra is Director of Retail and Consumer for Google Cloud. He leads the Google Cloud strategy, product solutions and go-to-market across Asia Pacific and Japan. Working at the intersection of consumer, technology and retail, Sameer works with top retailers and brands, helping them to scale, drive technology innovation and accelerate digital transformation.
James is a Partner in Deloitte’s Consulting practice. He has played an instrumental role in the development and leadership of the firm’s Cloud and Infrastructure team. Several years ago, he had a vision to have a more focused technical team in the IT infrastructure space, as a catalyst to technology transformation work. James has been successful in leveraging the intersection of the team’s deep technical capabilities, and an understanding of client issues.