The Retail Reset And The Roles Technologies Play In Supply Chain Recovery

In Partnership with APG

The COVID-19 pandemic has left an indelible mark on the global economy. As the retail sector continues to struggle with unprecedented challenges, three particular obstacles have proven especially troublesome: inventory planning, ocean freight rate volatility, and labor utilization. 

As the pandemic struck and countries around the world went into lockdown, ocean freight rates skyrocketed to record highs and subsequently crashed to near all-time lows. 

Inventory shortages have been followed almost immediately by shortages in warehouse space due to overstock, and staffing challenges reared their head in both storefront and distribution environments. A recent market research report by C3 Solutions dug into many of these concerns deeper, identifying the problems faced, as well as potential solutions.

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“Struggle is an understatement. The supply chain was hit by the perfect storm; factories closed due to COVID, an already tight labor market made tighter, inflationary pressures from a hot economy, and more”, according to Frank Dorval, Senior Account Manager at C3 Solutions, a Truck Dock Scheduling and Yard Management Solution provider. “Retailers started buying everything they could get their hands on because they didn’t know when they’d get the products.” 

This sudden change in consumer behavior left retailers struggling to keep up. Many businesses tried to shift production as best they could as they tried to realign their supply chains to meet the new demands, while using marketing and sales pushes to guide consumers to excess inventory and away from limited stock. The situation was further exacerbated by the fact that many of these supply chains relied heavily on global trade networks that were severely disrupted by the pandemic.

As if the challenge of inventory planning was not enough, retailers were also confronted with extreme ocean freight rate volatility. Ocean freight is a key component of the global supply chain, and the pandemic has laid bare just how fragile this system can be. With international trade routes disrupted, shipping capacity strained, and port congestions intensifying, ocean freight rates soared to record highs. 

However, the pendulum soon swung in the other direction. As countries began to emerge from lockdown and the initial panic subsided, ocean freight rates plummeted to near-all-time lows, according to Shifl’s Ocean Freight Price Index. The sudden drop in freight rates left many retailers scrambling to adjust their inventory strategies yet again. The result? A bizarre rollercoaster of inventory shortages followed by overstock and glut.

This whirlwind of inventory planning and ocean freight rate volatility has had far-reaching consequences for the retail sector. On the one hand, some businesses have seen their profits decimated by the cost of unsold inventory and exorbitant shipping fees. On the other hand, consumers have had to deal with fluctuating product availability and, in some cases, inflated prices as retailers attempt to recoup their losses.

So, what can retailers do to weather this storm and emerge stronger on the other side? Three potential avenues for adaptation and resilience stand out: supply chain diversification, investment in technology and data analytics, and an increased focus on sustainability.

Firstly, retailers must prioritize supply chain diversification. The pandemic has demonstrated that reliance on a single source or region for supplies and distribution can be disastrous when disruptions occur. By diversifying their supply chains, retailers can better mitigate the risks associated with global trade disruptions and ocean freight rate volatility. This may involve forging new partnerships, exploring regional or local sourcing options, and investing in strategic stockpiling to act as a buffer during times of crisis. “Just-in-time inventory is not dead, it just needs to adapt to the new normal”, according to Neil McElvoy, VP of Customer Experience at C3 Solutions. 

Secondly, investment in technology and data analytics is crucial for retailers to navigate the complex and ever-changing landscape of inventory planning and freight rate fluctuations. By harnessing the power of data analytics and artificial intelligence, retailers can gain better insights into consumer demand patterns, anticipate future trends, and make more informed decisions about inventory management. 

Third party logistics providers (3PLs) have been increasingly utilizing data analytics, machine learning, and now even artificial intelligence to help get ahead of the curve on everything from inventory management, to returns, to labor management. Labor planning and resourcing has significant upside to help better understand not only timing trends, but location. Companies are now using automation hand-in-hand to not only onboard employees and reduce training time, but also manage where people are needed within the warehouse at a given time and provide scheduling flexibility. The ability to identify labor needs down to the specific aisle or even picking location in real time, enables 3PLs to beat many of the staffing issues encountered during COVID, ranging from general labor shortages to illness in the workforce. 

Third, by pushing for greater transparency in the supply chain, retailers only stand to benefit from the transformation. “The industry is very opaque and companies that are not vigilant can overpay by hundreds or even thousands on a single shipment without even knowing,” according to Shabsie Levy, CEO of Shifl, a digital freight forwarder that focuses on transparency and ease of booking of ocean freight. 

In the age of perpetual disruption and unprecedented times quickly becoming the precedent, retailers face challenges never before expected and difficult to plan for. With technology rapidly improving and rising to the task, however, it can serve to moderate the peaks and valleys and calm investors and teams alike. A combination of automation, smart labor forecasting, increased transparency, and improved inventory data analytics will all play a significant role in moving forward from this disruption, and will teach the industry many lessons. 

Featured image sourced from Shutterstock