Digital supply chain in retail and consumer goods

Retail digital supply chain: Facing an omnichannel customer-driven landscape

Retailers today are facing a strong imperative in an increasingly customer-centric world: transform your supply chains or risk the possibility of becoming obsolete. The “everything is convenient” expectation of shopping is becoming an ever-increasing challenge for retailers to deliver upon, as customers continuously elevate their expectations with each customer-experience innovation in the marketplace.

Traditional brick-and-mortar and pure e-commerce retailers alike find themselves up against tenaciously innovative competitors that are increasingly finding ways to engage and delight the customer in more comprehensive and differentiating ways. Behind this pervasive disruption is the unsung superhero, supply chain, which is called upon to enable what a mere decade ago would have been wishful fantasy.

With just 8 percent of supply chain executives¹ surveyed believing that their organizations are structured correctly to operate in this new environment, retailers and consumer products companies alike are now making significant investments to transform their supply chains. While urgent, the transformations need to be thought through and implemented with an enterprise-wide road map, something that nearly half of executives currently don’t have when embarking on the omnichannel journey, according to a recent survey of senior supply chain executives.²

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The impact of customer-driven supply chain

There are significant supply chain implications for retailers that seek to deliver a whatever-whenever-wherever experience.

• Increased fulfillment costs
• Complex inventory challenges
• Changing demand patterns
• Increasing returns volume
• Constrained systems
• Constrained physical network

From the traditional linear supply chain to the interconnected, always-on digital supply network (DSN)

Digital supply networks are “always on.” They’re dynamic and leverage Internet of Things (IoT) sensors, applications, and artificial intelligence to make real-time decisions, such as assessing the impact on fresh produce expiration from temperature variations or dwell time in transit to the store. DSNs are interconnected with end-to-end visibility, centrally linking information and decisions from other nodes and flows in the network, suppliers, partners, and customers.

Rather than supply chain decisions being made in a linear way, a DSN recognizes that every touchpoint, flow, and hold of the network possesses information that can influence a decision taken just about anywhere in the supply network. An out-of-stock in St. Louis may trigger an immediate rerouting in Chicago. Real-time information and decision-making enables more goods to be flowed rather than being held as staple stock.

With a DSN, the inflexible, sequential nature of traditional retail supply chains is replaced by a multidimensional model that can orchestrate inventory and fulfillment decisions dynamically across the entire network to intelligently optimize service quality and cost. The combination of humans, machines, data-driven analytics, predictive insights, and proactive action creates a closed loop of learning.

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Building a DSN to enable the customer-driven shopping experience: Getting started

Leveraging its supply chain expertise, Deloitte recently conducted executive interviews, analyzed vendor product road maps, identified a total of 158 supply chain core capabilities, and evaluated each against the relevance for enabling today’s customer-centric supply chain. Of those 158 capabilities, 10 were singled out as most essential to enabling today’s customer-centric supply chain.⁴ Perhaps most noteworthy is that all 10 of these capabilities require new digital capabilities to fully enable them.

Foundational capabilities are generally regarded as being the most fundamental of the top 10 key supply chain capabilities. Not only can they provide substantial operational benefit to the retailer, but they also provide the grounding for more advanced capabilities. In some instances, foundational capabilities may drive decisions around which core technology architecture and systems to select for key supply chain applications, such as warehouse management or inventory and order management. Every retailer is unique and has different objectives, strengths, and challenges. The sequence below is intended to serve as a general guide.

• End-to-end analytics
• Network inventory visibility
• Integrated demand forecast
• Supplier and carrier connectivity

Advanced capabilities are generally regarded as being more complex or are dependent on foundational capabilities. While the three advanced capabilities below represent three of the most important retail supply chain capabilities to have, they’re by no means exhaustive.

• Available to promise/on-shelf availability
• Order fulfillment optimization
• Continuous-flow order processing

Additional key capabilities: Rounding out the 10 most important supply chain capabilities in a customer-driven retail world are three capabilities that build upon the seven foundational and advanced capabilities:

• Last mile delivery optimization
• Dynamic workforce management
• Cross-channel returns management

While these are the top 10 capabilities generally regarded as most important, they by no means represent the only ones that a given retailer should target or focus on. However, they do provide focus to a priority starting point—one enabled by a digital supply network.

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Building a DSN to enable the customer-driven shopping experience: Getting started

The first step in developing a digitally enabled supply chain that fulfills the customer-driven shopping experience is to understand the strategic objectives and longer-term direction of the business. There’s no one-size-fits-all solution, and the future-state supply chain design should be defined by the uniqueness of the business it’s serving.

Only after understanding the strategic business requirements of tomorrow can the future state DSN be envisioned. This vision should include design of the fulfillment network to execute the business strategy, identification of the capabilities required, data needs, and scenario analyses that “pressure test” assumptions and future variability.

The capabilities needed to achieve the future-state customer-centric vision can be daunting, but organizations should take the time to develop a robust road map that starts from a strong digital core with end-to-end transparency. From there, foundational capabilities—fundamental to the business—can be sown, followed by more advanced capabilities that become differentiating.

If not prepared to make an enterprise-wide transformation, consider ways to incorporate key attributes of the DSN that move the organization closer toward the customer-driven supply chain. Establish order to the digital aspects of the supply chain, create a single source of truth, expand it end to end, provide enterprise visibility, make it dynamic, plug in capabilities—and begin down the road to a best-in-class-world-enabled digital supply network.

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End notes

¹ Gerald C. Kane, Doug Palmer, Anh Nguyen Phillips, David Kiron, and Natasha Buckley, “Achieving digital maturity: Adapting your company to a changing world,” MIT Sloan Review and Deloitte, July 13
2017, https://sloanreview.mit.edu/projects/achieving-digital-maturity/.
² SCM World, World Survey of Global Supply Chain Officers, 2017.
³ Deloitte Consulting LLP research
⁴ The Nielsen Company, “e-Commerce: Evolution or Revolution in the Fast-Moving Consumer Goods World?,” August 2014, https://www.nielsen.com/us/en/insights/reports/2014/e-commerce-evolution-or-revolution-in-the-fast-moving-consumer-goods-world.html.