The Grinch stole Christmas last year. COVID-19 lockdowns left people unable to see families, to travel, and with many last-minute changes of plan leaving consumers with fridges stocked full of food, and supermarkets with empty shelves as people scrambled to make do with what they could find. It was a “bullwhip” effect of demand shock, supply shock and then financial shock that retailers struggled to anticipate and respond to.
In 2021, The Grinch seems to have a different plan. Dressed up with Brexit in his leash, with a quiver full of supply chain impediments e.g., port congestion, container shortages and extreme weather driver shortages, we’re witnessing a perfect storm of adverse conditions in supply chains that could potentially steal Christmas.
Hitting both retail and hospitality hard, we’ve already seen Nando’s run out of chicken, McDonald’s less a milkshake, Sony grappling with chipset shortages for the best-selling PS5, and now, retailers are raising the red flag that turkeys and toys might be in short supply this Christmas.
If we take the example of video gaming consoles – these are complex products with multiple interlinked businesses spanning the globe providing raw materials, semi-finished goods (chip sets, moulding), and finally coming together with a big brand name like Sony or Microsoft assembling it in their factories in the Far East. Once built and packaged, they still need to be shipped via planes, or more commonly & cost effectively, ships, to reach distributors warehouses, that in turn deliver to retailers.
The supply chain storm has been battering retailers and manufacturers for a while now.Raw materials are more expensive to move and lean production mechanisms have stripped all contingency out of networks and warehouses; semi-finished goods are not available either because of demand from healthcare or bitcoin mining, assembly plants are running at partial capacity due to social distancing measures in some countries, and the finished product is languishing at manufacturers as they wait for a container ship with affordable space. Throw into the mix political tensions, sanctions and other socio-economic factors and it’s not surprising that we’re going to see high demand and reduced discounting for 2021’s must-have gifts this holiday season.
Consequently, retailers are already preparing for a tough Christmas with reduced stocks. Some are ordering deeper inventory and reduced lines, whilst others prepare for a leaner peak with greatly reduced promotion to prop up margins. But there is no doubt that consumers will be the ultimate losers unless a miracle magically makes containers re-appear, or purges COVID-19 once and for all. Given the current situation, both look unlikely.
So, how can retailers prepare?
Retailers like Walmart and IKEA are reserving capacity by chartering ships. While this is possible for companies which move billions of dollars from China towards the west, mid-sized retailers can invest in building a consortium that can charter ships and influence their logistics providers to get leverage in the market with the Ocean carriers.
In addition, retailers who rely on the Far East are front loading or pulling forward their Christmas purchases so that they have availability for the Christmas peak. However, with port congestion affecting lead-times, the delivery assurance on the containers is at risk.
Retail industry consortiums are currently trying to shape demand for peak but inevitably, need to do more. There is already an awareness of potential disruption to Christmas, however, this message also needs to be amplified by the government, retail industry groups and the retailers themselves. We are also seeing some retailers, particularly in fashion, starting their Christmas season much earlier this year to smooth out the busy period.
Driver shortages are also likely to remain for some time to come. With this in mind, retailers can incentive drivers with signing and retention bonuses to ensure that they have sufficient capacity when demand is at its highest.
How technology can help
IMACH Technologies: – Leading retailers are leveraging technologies to overcome supply chain challenges. Using intelligent AI/ML enabled microservices, API, cloud native and headless architecture technologies coupled with strong product development teams to develop both small tactical apps that can alleviate the issues in the short term, but also strategic solution in the long term.
Driver apps: – Retaining drivers is critical a key area of focus. Retailers and logistics service providers can design apps that reduce cognitive load on the drivers and provide in-app incentives.
Nudge algorithms: Consumers can be encouraged to purchase items that are overstocked based on historical purchase patterns. This is done by the use of alternate engines that calculate the best alternative to a product based on multiple factors – previous buying patterns, similar products characteristics etc.
Intelligent alternate engines: Given that shortages of goods are expected this Christmas, retailers could look into providing alternate engines i.e., provide alternative items to customers when items are not in stock.
Intelligent available to promise engines: Major retailers are using promise engines that can update the inventory availability with a lag of 50 milliseconds. They not only provide availability at the fulfilment centres but can also calculate availability of in transit goods at the national/regional dc’s and if needed, at the factories.
Smart substitution: Grocers could use smart substitution at the point of picking based on consumer preference. This could be based on the recommendation/ alternate engines or also, augmented with insights on substitutions that were rejected previously by customers.
Demand sensing and shaping technology: Retailers could use granular demand signals e.g., search, clickstreams, to capture the evolving demand with demand sensing tools. They could use ad campaigns that are personalised to help shape the expectation of the consumers.
They could leverage the power of cloud-based solutions that can enable demand simulation tools that can run multiple scenarios in minutes for their entire portfolio of products across all the channels and store locations.
Retailers are also leveraging the power of product teams to drive an agile test and learn approach to tweak algorithms. They are investing in AI/ML ops for continuous deployment of fine-tuned algorithms.
Digital twins: Retailers are investing in visibility of every item that flows through the supply chain. They are overlaying this with ML based engines that can predict disruptions and provide next best actions. Digital twins provide the ability to rapidly simulate alternate flows and actionable insights onto the mobile apps. Real time movements of trucks and ships, coupled with geo fencing, is used to provide updates on the movements. RFID/ Bluetooth tagging devices are used to track item level flows.
In the run up to Christmas, the outlook for consumers and retailers alike is stormy. However, if retailers and retail consortiums start sending a stronger message to consumers on the impending shortages it may help set expectations. To do this, retailers can use personalisation technologies to nudge customers towards the items that they can provide. In parallel, they could investigate next generation supply chain tools to help predict the supply choke points. Consumers should start planning for their Christmas presents and dinner and start booking and buying them as early as October. With these interventions, hopefully, we could possibly outsmart Grinch stealing Christmas this time.
Author:
Nitin D’Souza, Supply Chain and Transformation Lead, Publicis Sapient
You are in: Home » Guest Comment » GUEST COMMENT Will the UK supply chain storm steal Christmas?
GUEST COMMENT Will the UK supply chain storm steal Christmas?
by James Pearson
The Grinch stole Christmas last year. COVID-19 lockdowns left people unable to see families, to travel, and with many last-minute changes of plan leaving consumers with fridges stocked full of food, and supermarkets with empty shelves as people scrambled to make do with what they could find. It was a “bullwhip” effect of demand shock, supply shock and then financial shock that retailers struggled to anticipate and respond to.
In 2021, The Grinch seems to have a different plan. Dressed up with Brexit in his leash, with a quiver full of supply chain impediments e.g., port congestion, container shortages and extreme weather driver shortages, we’re witnessing a perfect storm of adverse conditions in supply chains that could potentially steal Christmas.
Hitting both retail and hospitality hard, we’ve already seen Nando’s run out of chicken, McDonald’s less a milkshake, Sony grappling with chipset shortages for the best-selling PS5, and now, retailers are raising the red flag that turkeys and toys might be in short supply this Christmas.
If we take the example of video gaming consoles – these are complex products with multiple interlinked businesses spanning the globe providing raw materials, semi-finished goods (chip sets, moulding), and finally coming together with a big brand name like Sony or Microsoft assembling it in their factories in the Far East. Once built and packaged, they still need to be shipped via planes, or more commonly & cost effectively, ships, to reach distributors warehouses, that in turn deliver to retailers.
The supply chain storm has been battering retailers and manufacturers for a while now.Raw materials are more expensive to move and lean production mechanisms have stripped all contingency out of networks and warehouses; semi-finished goods are not available either because of demand from healthcare or bitcoin mining, assembly plants are running at partial capacity due to social distancing measures in some countries, and the finished product is languishing at manufacturers as they wait for a container ship with affordable space. Throw into the mix political tensions, sanctions and other socio-economic factors and it’s not surprising that we’re going to see high demand and reduced discounting for 2021’s must-have gifts this holiday season.
Consequently, retailers are already preparing for a tough Christmas with reduced stocks. Some are ordering deeper inventory and reduced lines, whilst others prepare for a leaner peak with greatly reduced promotion to prop up margins. But there is no doubt that consumers will be the ultimate losers unless a miracle magically makes containers re-appear, or purges COVID-19 once and for all. Given the current situation, both look unlikely.
So, how can retailers prepare?
Retailers like Walmart and IKEA are reserving capacity by chartering ships. While this is possible for companies which move billions of dollars from China towards the west, mid-sized retailers can invest in building a consortium that can charter ships and influence their logistics providers to get leverage in the market with the Ocean carriers.
In addition, retailers who rely on the Far East are front loading or pulling forward their Christmas purchases so that they have availability for the Christmas peak. However, with port congestion affecting lead-times, the delivery assurance on the containers is at risk.
Retail industry consortiums are currently trying to shape demand for peak but inevitably, need to do more. There is already an awareness of potential disruption to Christmas, however, this message also needs to be amplified by the government, retail industry groups and the retailers themselves. We are also seeing some retailers, particularly in fashion, starting their Christmas season much earlier this year to smooth out the busy period.
Driver shortages are also likely to remain for some time to come. With this in mind, retailers can incentive drivers with signing and retention bonuses to ensure that they have sufficient capacity when demand is at its highest.
How technology can help
IMACH Technologies: – Leading retailers are leveraging technologies to overcome supply chain challenges. Using intelligent AI/ML enabled microservices, API, cloud native and headless architecture technologies coupled with strong product development teams to develop both small tactical apps that can alleviate the issues in the short term, but also strategic solution in the long term.
Driver apps: – Retaining drivers is critical a key area of focus. Retailers and logistics service providers can design apps that reduce cognitive load on the drivers and provide in-app incentives.
Nudge algorithms: Consumers can be encouraged to purchase items that are overstocked based on historical purchase patterns. This is done by the use of alternate engines that calculate the best alternative to a product based on multiple factors – previous buying patterns, similar products characteristics etc.
Intelligent alternate engines: Given that shortages of goods are expected this Christmas, retailers could look into providing alternate engines i.e., provide alternative items to customers when items are not in stock.
Intelligent available to promise engines: Major retailers are using promise engines that can update the inventory availability with a lag of 50 milliseconds. They not only provide availability at the fulfilment centres but can also calculate availability of in transit goods at the national/regional dc’s and if needed, at the factories.
Smart substitution: Grocers could use smart substitution at the point of picking based on consumer preference. This could be based on the recommendation/ alternate engines or also, augmented with insights on substitutions that were rejected previously by customers.
Demand sensing and shaping technology: Retailers could use granular demand signals e.g., search, clickstreams, to capture the evolving demand with demand sensing tools. They could use ad campaigns that are personalised to help shape the expectation of the consumers.
They could leverage the power of cloud-based solutions that can enable demand simulation tools that can run multiple scenarios in minutes for their entire portfolio of products across all the channels and store locations.
Retailers are also leveraging the power of product teams to drive an agile test and learn approach to tweak algorithms. They are investing in AI/ML ops for continuous deployment of fine-tuned algorithms.
Digital twins: Retailers are investing in visibility of every item that flows through the supply chain. They are overlaying this with ML based engines that can predict disruptions and provide next best actions. Digital twins provide the ability to rapidly simulate alternate flows and actionable insights onto the mobile apps. Real time movements of trucks and ships, coupled with geo fencing, is used to provide updates on the movements. RFID/ Bluetooth tagging devices are used to track item level flows.
In the run up to Christmas, the outlook for consumers and retailers alike is stormy. However, if retailers and retail consortiums start sending a stronger message to consumers on the impending shortages it may help set expectations. To do this, retailers can use personalisation technologies to nudge customers towards the items that they can provide. In parallel, they could investigate next generation supply chain tools to help predict the supply choke points. Consumers should start planning for their Christmas presents and dinner and start booking and buying them as early as October. With these interventions, hopefully, we could possibly outsmart Grinch stealing Christmas this time.
Author:
Nitin D’Souza, Supply Chain and Transformation Lead, Publicis Sapient
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