Logistics Optimization: Retail Supply Chain Best Practices
Working with the many moving pieces of a supply chain is one of the most complicated aspects of being a successful retailer. Even though the behind-the-scenes supply chain operations are messy and unglamorous, successful retailers know that following retail supply chain best practices can make the difference between a struggling business and a thriving one. A retailer who takes on the role of a supply chain leader will see the huge benefits of well-handled logistics.
The supply chain, a business’s network of suppliers and distributors, makes a retailer’s successful sales possible. When the supply chain is working as it should—on-time deliveries, appropriate inventory levels, minimal mistakes, and optimal cost—retailers can enjoy smooth operations and maximum profits. But breakdowns in supply chain management that affect the operating logistics of the retailer show up in your bottom line.
Fortunately, supply chain management does not have to be the headache that it often becomes. Logistics solutions for the retail supply chain can save you money and keep you from making mistaking while ensuring your business runs smoothly.
An optimized supply chain with good logistics management can help you meet the needs of your business today and prepare you for sustainable growth in the future. The following best practices for effective retail supply chain management can turn a complicated nightmare into a well-run operation.
Importance of efficiency in the retail supply chain
When most of us hear the term supply chain efficiency, we think one thing: fast. However, a supply chain that works quickly isn’t necessarily one that works well. Effective supply chain management will ensure that your retail business gets the inventory it needs on time without getting bogged down in unsolved logistics tangles, poor communication, and supplier mistakes.
Successful supply chain efficiency optimizes time, labor, and resources by eliminating waste and redundancies. When you work toward optimization as a supply chain strategy, you make sure that you aren’t paying for two different suppliers to do the same work, for half-full trucks to make deliveries, or for wasted raw materials. Simply, an efficient supply chain is a well-managed one.
And it doesn’t just save you from headaches: supply chain efficiency will increase customer satisfaction. Here’s how.
Supply chain efficiency focuses on optimizing all components of your supply chain: production, distribution, inventory management, and retail operations. Supply chain managers who prioritize efficiency will trim the fat wherever possible to reduce costs, improve reliability, and set themselves up for future growth.
The foremost reason to prioritize efficiency in supply chain logistics is to cut costs. The cost a retailer pays depends on the labor and resources used in every step of the supply chain. If you’re not paying for costly waste, mistakes, and redundancies, you get to keep a higher percentage of your retail profits. Cost-effective resource efficiency also helps your supply chain remain sustainable: optimal use of raw materials saves you money and shrinks your environmental impact.
An efficient supply chain strategy also improves reliability and customer satisfaction, giving your retail business a competitive advantage. An efficient supply chain operates on mostly self-sustaining logistics, where things run the way they should without much management intervention or correction. Precise, quick operations improve customer satisfaction, which shows up in your bottom line: according to Lawson, customers who are happy with their “perfect orders” create a 1 percent increase in revenue, which can translate to extra earnings per share.
Importantly, supply chain efficiency gives your business room to grow. When you’re not worried about whether you’ll have products on the shelves, you can invest your time in consumer forecasting, demand planning, and exploring new technology. Following proven logistics solutions and best practices for retail supply chain management will help your business succeed now and improve over time.
Supply chain processes
To achieve supply chain efficiency, a business needs advanced logistics at every step of the process. Here are some key methods for maintaining an efficient supply chain strategy from start to finish.
Production is the furthest step from retail, but it has a huge impact on successful sales. Get to know your producers, including the steps they take to make their processes more efficient. Consider working with producers to create a plan for reverse logistics: the process of collecting unused, damaged, or spent products and returning them to a producer who can use them as raw materials in new production at a lower cost.
Efficient distribution requires skilled management and careful logistics planning. A company can lose a lot of money, time, and fuel from inefficient distribution: half-full trucks, wasteful packaging, and complicated shipping routes. A good supply chain manager should know exactly where and when products are moving in order to make plans for optimizing distribution. Some large companies have even incorporated distribution into the retailer’s operations to facilitate that oversight.
Finally, effective inventory management is the key to an optimized retail supply chain. Best practices for optimized inventory management, including successful demand planning and technology implementation, appear later in this article.
Managing an efficient supply chain
A retail supply chain cannot become truly efficient without excellent chain management. A retailer’s best practice is to play active roles in oversight, coordination, and management of the supply chain.
All supply chain functions will benefit when supply chain managers build relationships with all the suppliers and distributors in their network. Logistics management becomes much easier when there is a trusting, mutually beneficial network of supply chain partners. Fixing mistakes, planning for growth, and managing inventory become much easier when the retail supply chain members have solid working relationships.
Ensuring proper staffing for your retail supply chain
The best-planned supply chain in the world can’t run without talented, dedicated staff. Fortunately, supply chain organization and workforce planning often go hand in hand. Supporting the supply chain talent who run the show will help you plan logistics and manage more effectively.
A retail manager has two main staffing concerns: the staff on the ground in the retail store and the staff working behind the scenes in the supply chain. A few basic principles of supply chain management apply to both arenas, but each calls for its own specific best practices.
How to manage retail staffing
The two most important principles for effective retail staffing are anticipating customer needs and upholding a strong company vision. An optimized, united, well-trained staff is instrumental for retail success.
The best staffing managers use consumer data analysis and demand forecasting to build a customer-focused and data-driven staffing plan. Here are some steps to creating an optimal retail staffing plan:
Keep detailed records of the times, days, and seasons in which sales are busiest in your stores. The more detailed your customer data is, the more effective your staffing plan will be.
Match your staff schedules to peak sales times and customer demands.
Check your inventory levels to ensure that your highest stock is available at times with the highest customer demand.
Evaluate your staffing plan for efficiency. An optimized retail staff should always have enough people on the clock to meet the sales demands but never have so many that staff run out of work to do. Check your ratio of wage payout to sales profits.
Adjust your staffing plan according to this new data. Continue to tweak your staffing plan through ongoing data collection and evaluation.
Implementing these steps will guarantee positive customer experiences by eliminating wait times and out-of-stock signs. Over time, improved customer experiences and lessened labor payouts will translate to higher profits for you.
As the faces of the business, retail staff must keep the company’s vision at the forefront of what they do. The operations manager on the ground has the responsibility of keeping staff morale high and offering strong training that sets precise expectations for customer interactions. Supply chain leaders recommend involving staff in higher-order operational work to build a sense of responsibility to the company vision among staff members.
Staffing the supply chain
Supply chain logistics complicate external staffing. A supply chain leader needs to account for multiple suppliers, producers, and distributors, all while staffing the overarching operations of the supply chain organization. Best practices for hiring, sourcing, and managing supply chain talent can help to streamline supply chain staffing.
The primary oversight for supply chain staffing should come from trustworthy, well-placed operations managers, each responsible for a portion of the supply chain. It’s often too much to ask one manager to be the expert on every supplier, distributor, and inventory manager. Conversely, multiple midlevel operations managers can work to coordinate logistics from several areas of the supply chain and ensure all processes work well together.
One highly effective method for managing supply chain staffing is through strategic sourcing, a method of choosing your suppliers based on their ability to meet or exceed your standards for effective business practice. By setting high standards for the operations of your suppliers, you can guarantee that you are hiring good people.
Supply chain talent often comes from outside the retail operation. Get to know your suppliers and other network partners. As retail adapts and diversifies, retailers will need new areas of expertise on the latest developments in buying experiences and supply chain needs. Looking to supply chain leaders throughout your organization can help you adapt smoothly to industry changes.
Becoming a retail leader
Above all else, a retail supply chain leader understands the importance of a well-managed, well-functioning supply chain on the success of the retail business. By investing in mutually beneficial business relationships and innovative supply chain planning, retailers can become leaders in the sales field.
Of course, having strong relationships across the supply chain organization is the best tool a supply chain leader can have. In addition to increasing the reliability of your supply chain, good relationships make it possible for you to grow with your suppliers and distributors. Supply chain talent who understand their value to the company will give your business an enormous competitive advantage.
Supply chain leaders are always looking toward the future. You want more for your business than to simply have products on the shelves. You want to lead a business that grows with the markets and sees ever-expanding success. Leaders should always be aware of the latest technologies, new research on sales best practices, and the adaptations that businesses must make in a changing world. This is the real benefit of innovative practices such as strategic sourcing, demand forecasting, and supply chain management that prioritizes flexibility: a retail operation that is ready for whatever comes its way.
Effective retail supply chain leaders should consider four major areas of supply chain management. The supply chain must be efficient, using all labor and profits to their optimal potential. Effective staffing management should allow for successful sales, supply, and distribution. Optimized inventory management will ensure that capital costs are manageable and that consumers have access to the products they want. Finally, a strong supply chain leader will consider the ecological impact in all steps, guaranteeing a business-friendly and sustainable supply chain.
Inventory management in your retail supply chain
The final step of the supply chain is inventory management. Whether managing inventory in a brick-and-mortar retail store or in a warehouse for online distribution, an effective retailer should have strong command of the supply ready for sale. The following best practices for inventory management will maximize profits and increase customer satisfaction.
The importance of inventory management
Successful inventory management is a nonnegotiable for customer satisfaction. According to RetailWire, businesses lose $984 billion worldwide each year to customers abandoning a search when they learn their desired product is out of stock. To bring in high profits and maintain customer loyalty, retailers must strike a precise, complicated balance of customer demand and retail supply chain operations.
When all elements of the supply chain are working effectively, the retail manager can leverage supply chain management to optimize inventory control. A supply chain that is sensitive and adaptable to demand, especially demand fluctuation between selling seasons, can help prevent a retailer from wasting money by purchasing more than they can sell or losing sales opportunities by not stocking enough.
Inventory management is important to supply chain planning because the end goal of an optimized retail supply chain is a perfect match of inventory to customer demand. In an efficient supply chain, no sellable products or raw materials are wasted. Best practices for monitoring and maintaining good inventory management can help retailers maximize profits and minimize waste in their stores.
Monitoring retail inventory levels
Today’s best practices for inventory control all revolve around the latest business technology. New technology can help to optimize all areas of the supply chain, but information technology (IT) is particularly helpful for inventory management.
First, data analysis, including demand planning and consumer forecasting, is the most critical component of innovative inventory management. To properly stock inventory, a successful retailer should have a detailed understanding of how products are selling. With this consumer data, the retailer can optimize stock by increasing inventory visibility: the percentage of inventory immediately available for sale. Tailoring high inventory visibility to shopping trends will increase both sales and customer satisfaction.
IT solutions are revolutionizing inventory management systems on the ground in retail stores and warehouses. According to IT Craft, automated supply chain technology, including automated inventory management, can optimize inventory by making up to 99 percent of stock available for sale, cutting inventory costs by about 30 percent. Automated and digital inventory management systems are giving cutting-edge retailers significant competitive advantage over old-fashioned inventory systems managed with paper and pencil.
Retail inventory costs
The retail inventory cost is a calculation of the ratio of the cost paid by the retailer to the sale price for any item. A successful inventory management system should take this holistic view of retail inventory costs to ensure that the retailer is operating cost-effectively.
To optimize retail inventory cost, a retailer should work to minimize costs in two ways. First, the retailer can cut the cost of inventory storage by using the advanced warehousing methods detailed above. Second, inventory managers should be careful not to purchase more products than they will be able to sell. Efficiency in the supply chain and inventory management systems can help retailers keep operating costs low and profits high.
Sustainability considerations in your retail supply chain
One of the surest signs that your supply chain is operating well is its ability to adapt to changing markets. Today, the most important consideration of a supply chain ready for the future is its ability to meet sustainability and environmental impact standards. Both to meet the demands of tomorrow’s businesses and to ensure best practices in your retail business today, it is more important than ever to meet sustainability standards by working with certified sustainable supply chain leaders.
In a broad sense, sustainability in business means the ability to operate with minimal negative environmental impact. Sustainability is difficult in the simplest business management tasks, but the messy supply networks that compose a large-scale supply chain further complicate a company’s ability to meet sustainability goals. Fortunately, a supply chain leader who knows how to keep a supply chain efficient and optimized should have no trouble creating and managing a strong sustainability strategy.
Supply chain sustainability
In supply chain management, the retailer or operations manager is responsible for the entire supply chain process. When it comes to sustainability, that supply chain manager should strive for sustainable, ethical supply chain practices from every network partner. Sustainable supply chain management will ensure that the entire supply chain operates sustainably by monitoring every supplier, distributor, or other network partner.
Sustainability is good business. One study in the International Journal of Logistics Management claims that environmental sustainability will be the single most important consideration for successful businesses moving into the future. As governments around the world introduce more and stricter environmental impact legislation, the global supply chain will necessarily shift toward more sustainable supply. Supply chain leaders will be ahead of the legislation and take sustainability measures before they are required.
Consumer demand is also beginning to favor sustainability. More than ever, customers believe that businesses have a social responsibility, which includes a responsible environmental impact made possible by an ethical supply chain. According to the University of Pennsylvania’s Wharton School, the twin consumer demands of sustainability and affordability are at the forefront of supply chain leaders’ management plans. Managing logistics for an efficient, cost-effective, and sustainable supply chain is the most important challenge for today’s global supply chain management.
Managing a sustainable supply chain
Best practices for supply chain sustainability are diverse and complex as they try to target sustainability in the entire supply chain. Logistics considerations for effective supply chain management must include sustainability practices at all levels: from hiring to packaging to data collection and beyond. In broad strokes, here are some recommended practices for managing a sustainable supply chain.
First, supply chain leaders are responsible for ensuring that all suppliers meet sustainability standards. When retailers and supply chain leaders set their own high sustainability standards for suppliers, distributors, and other network partners, they can actively control the environmental impact of their entire supply chain. Some of the sustainability practices that supply chain leaders can prioritize include fuel efficiency for delivery vehicles, waste or recycling in the production process, energy supply for production centers, and strategic sourcing of raw materials.
Second, innovative supply chain leaders will use sustainability to invest in new business methods and technology so as to maintain a competitive advantage. Companies that undertake major sustainability initiatives while remaining profitable have emerged as leaders in the global supply chain. Retailers that are willing to constantly adapt and innovate in order to develop more ethical supply chain practices will help their businesses pull ahead of global competition and anticipate the increasing consumer demand for sustainability.
One of the smartest ways to begin adapting your supply chain to become more sustainable is through new technology. Sustainable technology will provide the breakthroughs that make supply chain logistics more cost-effective, efficient, and environmentally friendly. Investing early in promising sustainable technology will give your company a competitive advantage and position you as a leader in global supply chain sustainability.
Placing new hardware and machinery throughout your entire supply chain will immediately move you and your suppliers toward sustainability. For example, green warehouse technology, more sustainable trucking technology, green energy solutions such as solar power, and reverse logistics plans for product and raw material recycling will cut your waste and emissions immediately upon implementation. These on-the-ground solutions will shrink your supply chain’s environmental impact without disrupting your existing logistics.
Software and IT innovation can also make sustainable supply chain management more practical. Digital tools such as carbon emissions modeling and digital freight matching can help supply chain managers plan for updated logistics that make sustainability part of the fabric of the company. While individual suppliers control implementation of specific sustainable practices, supply chain leaders will be the ones bringing their companies toward ambitious sustainability goals such as net-zero emissions through innovative logistics planning and technology.