Supply chains are the engine rooms of great retail brands and, when executed well, are the quiet achiever of retail value chains, until something goes wrong, of course.

Though most of the supply-chain disruptions the Covid-19 global pandemic caused are over, geopolitical fault lines developed in 2024, with heightened military tensions in the Middle East and global power brokers flexing their muscle to the detriment of the stability and cost of some global supply chains once again.

Many Australian retailers have complex supply chains, or at the very least, supply chains with long lead times that limit their flexibility and ability to respond quickly to global interruptions or black swan events, such as what we saw during the pandemic.

With margins under pressure as customers tighten their belts, how are Australian retailers adapting and improving the efficiency of their supply chains? We sat down with leading supply-chain experts from Amazon, Showpo, Tinyme, Snuggle Hunny and Shona Joy, to find out.

Focused on convenience

As retail conditions remained soft through 2024, and with the real prospect of these conditions continuing through 2025, e-commerce giant Amazon has kept its supply chain focused on its three core drivers – product, price and convenience.

“Over the past 12 months, we have been building up our selection of products, investing in our operations network, and opening new fulfilment centres,” said Anthony Perizzolo, general manager of delivery and supply chain for Amazon Australia. “We have been focused on building out the convenience aspect, by providing customers with a price-value proposition through subscribe-and-save models, and over 2025 we will be doubling down on speed to market, to get faster in the click-to-delivery time.”

Unlike Amazon, Tinyme is the opposite of a commerce platform giant, creating personalised products for children and operating a made-to-order model that doesn’t hold any finished-goods inventory. As such, rather than delivery and logistics, Tinyme is focused on improving its production speed and consistency as it continues to build its portfolio of products in international markets.

Tinyme COO Ben Hare said the company seeks to broaden its product range. It is also optimising its multi-carrier portfolio domestically and internationally to try to be faster, more consistent, and cost-effective in its production and delivery processes.

For apparel retailer Shona Joy, the last 12 months were focused on improving the traceability and transparency of its supply chain, as well as improving its customer journey. Shona Joy CEO Danielle Millar said that, looking ahead to 2025 and 2026, the retailer has reduced the size of its product range, enabling it to focus on what it does best and remain agile in manoeuvring stock and being reactive to market trends.

Not always about cost-cutting

Cost-cutting measures in the supply chain can become a double-edged sword for retailers operating in a multichannel, seamless commerce space.

Amazon’s Perizzolo warns that it is a ‘slippery slope’ to focus only on cost and risk the business losing sight of what’s important – the customer. “We frame the narrative internally as focusing on reducing the ‘cost to serve’ to provide those competitive prices to make it easier for customers to buy,” Perizzolo explained. “Too many times in other industries it just becomes about cost and that gets embedded in people’s minds.”

Millar, of Shona Joy, emphasised that cost-cutting cannot come at the detriment of the customer experience, as customer expectations have risen over 2024.

Furthermore, customers will jump between brands if there is a convenience factor, a price factor, or a better experience elsewhere. “Our customer expects things quicker, the process to be more seamless, the ability to do returns, and better advice – all of which has a cost associated,” Millar said. “There is a tightrope of figuring out where there is an opportunity to pull back versus where there is investment needed to ensure continued growth.”

For David Ibanez, operations manager of Australian apparel retailer Showpo, the main driver in supply-chain management is all about reducing costs and making it more efficient.

Ibanez cautions that once a high level of efficiency is reached within the existing supply chain, further cost reductions often require investment. “What we try to do is drive efficiencies all along the supply chain, as it is not a part of the business where we can win customers but definitely one where we can lose them,” Ibanez added.

Getting the last mile right

Unsurprisingly, last-mile delivery has become a focus point for many retailers as it is crucial to the customer experience whilst also being a significant cost centre.

“There is no point in investing in the best upstream forecasting tool or robotic fulfilment centres only for customers to be let down by slow and unreliable last-mile delivery services,” Amazon’s Perizzolo said. “We are investing heavily in this space and working closely with our commercial carriers to raise the bar in the delivery experience, investing half a billion dollars in building out our own in-house last-mile delivery business, Amazon Logistics.”

Shona Joy, meanwhile, has been focusing on improving speed through localised delivery and returns, as well as building out its delivery options to give customers more choice in choosing delivery speed over price or vice versa.

Reinventing inventory management

Since the onset of the pandemic, consumer demand has fluctuated and forced retailers to reassess their inventory management and processes.

Perizzolo said Amazon has taken steps to fine-tune its distribution processes, including updating its machine learning forecasting models to be more proactive rather than reactive if it sees customer demand deviating from the initial forecast. Amazon also works closely with its seller-partner retail teams to get their inventory precision right – down to a box-level placement – and ensure that the inventory is sent to the ‘right place’ among its seven fulfilment centres in Australia.

For retailers like Shona Joy, which has downsized its product range to become more focused, one of the ways to manage demand is to work on improving its CMT capability and agility, which it has done.

“We have been forecasting closely with the factories, to turn product around quickly, and be quite responsive,” Millar said. “We work with a lean stockholding and have firm parameters in the business to make sure [we’re] never over-producing, and staying within demand.”

Australian baby products retailer Snuggle Hunny understands the importance of managing its inventor after it was left overstocked following its shift from a B2B model to a B2C. “What we are trying to do now is work with the factories and give them more visibility on volume so they can secure the raw materials further out in advance to bring lead times down,” COO Tom Abraham said.

In contrast, Tinyme, rather than focusing just on efficiencies, frames its efforts to increase local sourcing in its business as a response to overseas freight becoming more uncertain as geopolitical tensions grow, and a move to improve supply-chain resilience.

Can automation save the supply chain?

In the last few years, automation has found more practical applications in the retail space, and nowhere is this more evident than the growing interest amongst Australian retailers in this technology. Last year’s Australian Retail Outlook found that 19 per cent of retailers said that the technology they were most interested in using right now was robotics and automation.

If there is one name in the retail space that has become synonymous with automation, it is Amazon, with its decades-long investment in automating its supply-chain operations. For Amazon, automation is used to reduce waste by using robotics to eliminate the picker’s non-value-added walking time in retrieving items in the fulfilment centre by bringing the inventory to the picker instead.

One area where automation holds a lot of promise is for businesses focused on the made-to-order model, such as Tinyme. “Increasingly, automation is getting a lot less capital-intensive in many ways – nowadays you can get much smaller-scale opportunities, such as automating one part of the production
process,” Tinyme’s Hare said.

For Tinyme, the investment into automation was into two areas: the software layer that enables customers to personalise the product with colour and design options to have it produced without human intervention, and production scheduling to allocate staff efficiently to produce the made-to-order products. “A lot of the automation implementation [in Tinyme] is incremental, it is very much done process-by-process by asking ourselves ‘Where does it make sense to make it more efficient?’, such as addressing labour-intensive processes,” Hare explained.

Beyond just robotics, Shona Joy’s Millar said that there was real value in automating its reporting systems.

“The data [from the reporting systems] gives us an understanding of what is going right or wrong with the customer, how frequently, where the pain points are, so that we can determine where the investment should be and understand where the demand is,” Millar explained.

Keep it real

Though automation has the potential to drive efficiencies along the supply chain, the costs associated can often outweigh its benefits if done too ambitiously and beyond scope.

“Having tripped up on building expensive project road maps [in our warehouse operations process], in reality, we had really great wins by getting back to basics and addressing the process,” Millar said. “That is not to say technology is not a focus for us; there is a lot to be said about getting the process right and focusing on that.”

Likewise, when looking at where automation can be implemented in the business, Ibanez of Showpo said that the customer doesn’t care if it is a machine or person behind the order fulfilment. It comes down to the nature of investment into automation that will bring the business closer to the efficiencies needed.

Similarly, Abraham said the technology investment in Snuggle Hunny is aimed at addressing “little things, pain points, blockers, choke points, anything where there is an overly manual element, to remove, reduce or replace steps or processes, nothing particularly crazy or expensive”.

No silver bullet

While there are many uncertainties when it comes to the economy and supply-chain integrity in 2025, one thing retailers can take for certain is that the customer is king, and their convenience is key.

Though there are many approaches to delivering the experience customers expect, there is no one solution that fits all. High-level machine learning and robotics can work for a giant serving a wide range of products but may not be cost-effective for a boutique retailer that could extract huge efficiency gains through simple process improvements.

Instead, retailers should take a detailed look at their operations and supply chain to find a solution that fits the demands and realities of their business.

This story is from Inside Retail’s 2025 Australian Retail Outlook powered by KPMG. Download the full report here.