The Australian Consumer and Competition Commission released a worrying report into the state of the world’s global ports and supply-chain networks – and the impact this is having on Australia – in November. It painted an accurate picture: our supply chains – for long years rigid, brittle, and elongated – failed in the face of the pandemic, exposing vulnerabilities that had existed without any incentive to fix them. Until now. Pre-Covid, consumers were enjoying a plethora of choic
oices. Wide varieties of international products, fast delivery from international shops, seasonal produce all year round, new fashion and beauty products almost weekly. Supply chains were invisible – pulled, twisted, and managed by retailers in such a way that shelves were always full. Consumers never cared how those products got there, just that they were there. And as soon as they weren’t there anymore, consumers cared very much.
As we have come to learn in the last two years, there are some things that are simply outside of our control. In light of this, you can’t sit on your hands until things change – sitting still is a death knell in the retail world. Instead, focus on what you can measure and change. This is particularly true for retail supply-chain management.
Start with the data
A good place for retailers to start is with an assessment of existing data to see if it can tell you something new about how to respond to consumers in a period rife with uncertainty. Shopping patterns, types of purchases, who is purchasing, and where they are purchasing have almost certainly changed in the last two years and they are set to change again as vaccination rates increase and restrictions reduce.
This leaves many questions for retailers that data analysis can help answer. In the past, supply-chain challenges may have redirected consumers to local products. Having made such a switch, are consumers likely to return to old favourites this time? Are your systems fine-tuned to capture how consumers choose to splash their cash as supply chains allow more products onto the shelves? And are retailers prepared to fine-tune their supply chains in response to new consumer behaviours? It could take years for a new balance to emerge. Access to data in real time, or nearly in real time, will support retailers in not only responding to future challenges, but also in capturing new opportunities.
For instance, while consumers are left wanting products as supply chains groan under restrictions – and more recently industrial action – they still crave variety and novelty. Retailers are learning from category disruptors like Who Gives a Crap, Nude Wines, and Hello Fresh that customers are eager to change their behaviour from habitual or opportunistic purchasing to planned subscriptions across many categories.
/ The Hello Fresh menu changes week to week, as the data generated from consumer choices supports future menu options. Nude Wines quizzes consumers at the beginning of their subscription, to help make better recommendations but also to support better partnerships and purchasing decisions within its supply networks.
We can expect to see savvy retailers expand this model and others like it to reduce friction and produce more accurate demand forecasts, especially in categories like garments and beauty, where product lines are seasonal. What might be lost on impulse purchases in checkout queues will be more than regained in the lifetime customer value linked to an enhanced brand experience, and the reduced supply-chain costs stemming from more detailed and accurate demand forecasting.
More accurate supply-chain models
The customer data required to undertake better demand forecasting and product development should also be used to inform retailers’ more traditional supply-chain management activities. Greater customer intelligence and stronger, more certain demand forecasts will allow retail leaders to be more precise in their investments in redundancies and flexibilities. Leading retailers are now combining richer customer data sets with advanced AI and machine learning tools to produce more accurate, intelligent and data-informed scenario plans.
Retailers seeking lower costs and shorter, more resilient supply chains should feed current and dynamic customer data into models. These models should take into account customs and tariff barriers, trade agreements, and logistics scenarios, to produce a holistic supply-chain model that can balance efficiency with resilience and price each of these values accordingly.
Scenario planning and the customer experience
The final piece of this puzzle is to reprioritise customer experience in scenario planning for interruptions and delays. Current scenario planning doesn’t go beyond the immediate disruption to consider the long-term implications of a disruption on customer experience or loyalty. Instead of an inevitable pain point that consumers simply must endure, scenario planning can provide an opportunity to differentiate by rewarding customers for patience and loyalty.
Qantas has found an innovative way of doing just this, by offering Frequent Flyer points to double-vaccinated Qantas members. People might not be able to hop on that flight to Bali right now, but they will want to use those points when they can. Clearly, customer data can also deliver a superior experience in adverse circumstances, so that lifetime value and loyalty are retained whether the supply-chain winds are blowing fair or foul.