Retailers are entering the new decade after what the British Retail Consortium described as the worst year on record for the sector.
For many, the challenges of 2019 were aggravated by tense Christmas trading with worries fueled by tightening consumer budgets and subdued spending.
At what is generally the most money-spinning sales period of the year, some leading brands were downgrading forecasts and even issuing profit warnings.
As well as demand-side issues, post-Christmas results analysis shows there were significant end-of-year problems with supply chains and internal processes.
Among those taking a hit due to supply-side factors was Marks and Spencer. It ordered too many slim and skinny fit men’s trousers which it couldn’t ultimately shift and has since pledged to return to more classic styles in time for spring.
While this seasonal wardrobe malfunction was partly offset by higher food sales, the food department was wrestling with its own supply chain issues. M&S said it had ordered too much festive fare in the fortnight leading up to Christmas, creating a surplus. Having to discount this food mountain inevitably harmed profit margins.
At the same time, M&S said an ‘overly complex’ supply chain meant food spent more time in the delivery system and less time on shelves.
The Christmas supply problems at M&S capped a disappointing few months. In October the retailer blamed supply chain issues for a 5.5% drop in clothing and home sales in the first half of the financial year. Clothing, home and food had all been held back, said M&S, by ‘limitations in supply chain capability’.
The upshot, while too late to turn round fortunes at Christmas, has been a fundamental rethink in how M&S should manage supply-side delivery. The aim is to improve the visibility of supply chain processes and make chosen products quicker and easier to source and track right through to the shelf. A new internal programme is under way to achieve this. It includes more support for the replenishment system behind order fulfilment.
Taking out cost and complexity in the supply chain has many benefits. Done properly, it means you can avoid excess stock and markdown while shortening clearance periods and maintaining product availability.
Must do better
M&S can point to the results of an early trial that indicate the potential success of its new programme. Changes were made at one store to the forecasting and movement of goods and the optimisation of transport and depot processes.
M&S said initial findings showed significant improvements in availability and waste levels. Further assessment is being done ahead of a potential roll-out to more stores.
Among the retailers going so far as to issue profit warnings to investors after Christmas were fashion brands Superdry and Joules.
Factors behind Superdry’s lower-than-expected trading performance included an ‘inherited inventory position’.
At Joules, meanwhile, managers blamed technical problems for stock shortages affecting its online retail store during an end-of-season sale promotion.
Asda, which had Christmas woes of its own alongside fellow big-name supermarkets, is also looking at improving back-office operations to simplify ways of working across administration, compliance and cash office.
What all these retailers are grappling with is the need to ensure different supply chain systems can speak to each other.
Essential information associated with orders, invoices, advanced shipping notices and other paperwork has to be clear, accurate and easily managed so it can be shared with trading partners.
Designing systems to interact is both a challenge and an opportunity.
Across the world, the preferred solution for the exchange of retail trade information is EDI.
Standing for ‘electronic data interchange’, EDI is the software solution that enables digitised information to flow easily in a supply chain.
Instead of raising orders and invoices manually, and sending documents by email or post that then have to be keyed into partners’ systems, EDI has automated the whole activity of sharing transaction data. It has introduced universal time and cost savings, eliminating the need for paper documents while improving accuracy.
Given the wide take-up and success of EDI in retail, you might well ask why our list of struggling brands had such a hard time with supply-side issues last year.
One key point to note, common in IT development generally, is the relentless march of technical innovation coupled with user expectations.
If you are a retailer dealing with multiple trading partners, especially if together you are processing thousands of customer orders, you are likely to diverge in your EDI ‘world view’.
This is because different users will have typically deployed a range of data formats, source files, interface files, management tools and processes. There will be different trigger points for extracting data, different ways of encoding and using data, and a spread of expectations on the outputs.
What then is the best way to optimise the use of EDI to solve some of the headaches our retailers faced on the supply side over Christmas?
The answer lies in a managed solution that works, one that means you stay generating profit rather than spending precious time ironing out technical complexities or diverse partner approaches.
Supply chain automation
Your solution will ideally have solved all the formatting and translation requirements of your supply chain already.
Built-in integration means all your business documents, including structured and unstructured data, can be exchanged without you having to learn the technical ins and outs.
A cloud-based EDI solution such as Transalis OpenEDI™ automatically maps the required data output from the source file into the relevant EDI format for you. As soon as it is up and running, you and your partner or partners can be trading electronically within minutes, secure in the knowledge that you are supported by a robust, agile, scalable and high-performance platform.
Of course EDI can’t of itself claim to conjure up consumer demand. Declining markets, weak product take-up and ever more intense competition – factors that retailers also saw over Christmas – will remain, however good you make your data exchanges.
That said, bolstering supply chain efficiency is a sensible, pragmatic move that will help overall cost control and ultimately underpin competitive advantage.
Here’s to more success with automated trade processing in 2020 and beyond.
For more information, visit www.transalis.com.