Fleetowner Com Sites Fleetowner com Files Uploads 2014 06 Freight Roll

Are global retail supply chains "inadequate"?

June 17, 2014
Here’s a worrisome contradiction to ponder: while 50% of global retail CEOs think their supply chains can be a “strategic differentiator” in the marketplace, 83% of them believe those very same supply chains are currently "not optimal" for today's changing retail environment.
Here’s a worrisome contradiction to ponder: while 50% of global retail CEOs think their supply chains can be a “strategic differentiator” in the marketplace, 83% of them believe those very same supply chains are currently "not optimal" for today's changing retail environment.

Based on a poll of over 400 retail industry CEOs conducted by global consulting firm PricewaterhouseCoopers and Forbes Media for JDA Software, this study – entitled The Strategic Role of Supply Chain in an All-Channel World – indicates that perhaps one of the biggest challenges facing retail CEOs is managing the transformation to “omni-channel” distribution schemes.

Yet only 34% of the CEOs polled by PwC consider the rise of omni-channel shopping to be an external threat, while only 22% said it will have a direct impact on their organization.

"The rise of ‘omni-channel’ is one of the most transformational shifts that have occurred in retail in recent times," noted Baljit Dail, JDA’s chairman and interim CEO, in the report.

"Retailers who don't understand the strategic alignment of their supply chain with consumer expectations are in danger of becoming non-competitive,” he stressed. “This isn't about making a tweak to the operating model; it requires a massive change.”

[What exactly is “omni-channel” focused supply chain you ask? John Lockton, managing director of LCP Consulting in England, provided some nice analysis on this topic in a video interview last year.]

Dail said that based on survey responses, retail CEOs say their top priorities are centered on more traditional areas of growth – by entering into new regions and markets, by opening more stores, or through mergers and acquisitions.

Yet such priorities highlight potentially missed opportunities for more than two-thirds of CEOs who failed to consider enhancing distribution capacity and their supply chains as key contributors to drive profitable growth, he pointed out.

[That’s not to say transportation and logistics companies can just wave a magic wand and make such “profitable growth” appear on retail ledger books: they’ve got their own problems to deal with. Go here, here, and here for some further thoughts down that road.]

On a different tack, retail CEOs think three fundamental risks will have the most impact on their organization over the next three years: increasing competitive threats (41%), margin erosion and cost reduction (39%), and attracting and retaining customers (24%).

Yet those answers reveal a potentially sizable gap between recognized risk and a strategy to address that risk, according to JDA, because while there are plenty of exceptions, maintaining a strong customer value proposition is directly tied to supply chain proficiency.

"Our supply chain is changing in the face of ‘multi-channel’ shopping. We're making it more responsive and faster," said Ken Hicks, president and CEO of Foot Locker in the survey. "We are looking at new ideas and new ways to distribute goods, not just to get them to the store, but also to the customer."

[Three years ago Fabrizio Brasca, VP-global logistics for JDA, delved into some of these then still developing trends where transportation needs for the retail sector were concerned.]

Here are two other key findings from PwC’s retail supply chain poll:

  • CEOs that focus on optimizing their supply chains have 15% lower supply chain costs, less than half the inventory levels and more than three times shorter cash-to-cash cycles.
  • Only 15% of CEOs believe that their supply chain today is resilient enough to address the threat of external disruptions.

Thus, from where JDA’s Dali sits, retail CEOs that take in his words a “cautious, incremental approach” to the supply chain will find it a “deadly” course of action.

"There seems to be a clear disconnect between the actions required to make the transformation to today's retail environment with what is being currently done by many of these companies,” he explained. “With speed as the new currency, accelerating time to market and responsiveness through an agile, connected supply chain must be closely aligned with growth priorities to successfully compete and defend profit margins."

If anything, though, this survey reinforces the strategic importance of obtaining and maintaining high quality transportation and logistics service in the retail environment – definitely something trucking firms should reinforce with their retail customers.

About the Author

Sean Kilcarr 1 | Senior Editor

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!

Sponsored Recommendations

Leveraging telematics to get the most from insurance

Fleet owners are quickly adopting telematics as part of their risk mitigation strategy. Here’s why.

Reliable EV Charging Solution for Last-Mile Delivery Fleets

Selecting the right EV charging infrastructure and the right partner to best solve your needs are critical. Learn which solution PepsiCo is choosing to power their fleet and help...

Overcoming Common Roadblocks Associated with Fleet Electrification at Scale

Fleets in the United States, are increasingly transitioning from internal combustion engine vehicles to electric vehicles. While this shift presents challenges, there are strategies...

Report: The 2024 State of Heavy-Duty Repair

From capitalizing on the latest revenue trends to implementing strategic financial planning—this report serves as a roadmap for navigating the challenges and opportunities of ...