August 15, 2016 | Written by: Melanie Rose
Categorized: Merchandising & Supply Chain
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The good news in retail is that the latest data from National Retail Federation (NRF) forecasts that retail sales will continue to grow at a healthy rate of 3.1% a year, higher than the ten year average of 2.7%, along with digital sales growth of between 6 and 9%. There is opportunity for the smartest and most agile retailers to thrive in the foreseeable future.
But what this forecast doesn’t speak to are the challenges associated with achieving that growth. Retailers are on the front lines every day of navigating the ongoing shift from physical stores to digital sales and are under pressure to make sure they meet ever increasing expectations from shoppers. In addition to the more visible changes that retailers are implementing to enhance the shopping experience whenever, wherever and however a customer wants to interact with them, there are are complex and significant changes to the retail supply chain that need to be implemented as well to stay competitive in this fiercely competitive industry.
The conversation we’ve been having with many of the world’s leading retailers is about how their ability to delight and retain customers in this hyper-competitive retail environment would improve if their retail supply chain could, if you will, essentially think.
Think? A supply chain? How is that possible and why would a retailer want a supply chain that thinks?
Short answer on the how: Watson and advanced data science. A longer answer on this would surely cause the eyes to glaze over of even the most curious retail technologists reading this post. For a deeper dive on the how, we can set up a session on the science and go as deep as you want to go. The perfect opportunity to engage with retail cognitive supply chains experts is coming up at the World of Watson conference in Las Vegas, October 24-26th.
Longer answer on the why: The Cognitive Retail Supply Chain is the next frontier in improving retail operations and has the potential to improve the match between supply and demand both in physical stores and online.
Traditional retail supply chains have relied primarily on internal data in the form of sales history. Some retailers have already become adept at incorporating weather related data into their forecasts, primarily to adjust for anomalies in the sales data. The potential of external data to fine tune demand forecasts can now be tapped in ways never before possible. Weather data, event data, economic data and other exogenous factors can now be filtered through demand forecasts systematically to get deeper and more accurate pictures of demand across a broad expanse of sales channels.
Advanced data science techniques such as predictive and prescriptive forecasting along with the smart and targeted use of cognitive science applied with a deep understanding of retail operations can be used to create actions that are feasible and are tightly aligned to a retailer’s business objectives. This point is important because applying these technologies in the appropriate way to yield consistent business results requires a careful mix of skills, experience and process.
The desired result is a supply chain ‘system’ that acts as the trusted advisor to your supply chain organization, that possesses an encyclopedic knowledge of the variables that affect results and remembers those results when faced with similar but different circumstances. A supply chain that thinks can alert you to significant mismatches between supply and demand at a sku/location/time level and offer prescriptive actions to address those mismatches. Your experts can then apply those uniquely human aspects of running a retail supply chain to finalize the appropriate decision. The goal is to enhance the potential of a retail organization by equipping the professionals with the insights they need to make extraordinary decisions.
I leave you with one last question – what could you do with a supply chain that thinks?