Retailers, Heal Thyself: Mitigate the Supply Chain Crisis with Your Own Data

As the supply chain reels from the effects of COVID, many of the retailers I work with find themselves operating in an upside-down world. Rather than focusing, first and foremost, on generating demand, they are asking for help delivering goods to the customers they have already secured.

Together, we are discovering data-driven strategies to minimize the effect of shortages – a problem that is not going away anytime soon.

“The supply chain is stretched to its limit from end-to-end,” Jonathan Gold, vice president of supply chain policy at the National Retail Federation, said recently. “Shortages are guaranteed.”

“The logistics industry does not see 2022 as having any less disruption in supply chains than in 2021,” Scott Price, president of UPS International, predicted.

Shortages have certainly ratcheted up pressure on retailers. But the truth is, the successful retailer is always managing a supply chain crisis. Too much inventory is a bad thing, tying up capital and raising costs. Too little is a bad thing too, leading to missed sales opportunities and dissatisfied customers. Meanwhile, constant fluctuations in demand require constant adjustments.

To make optimal supply-chain decisions, retailers need insight across the entire business, from marketing and POS to merchandising and the supply chain systems. The problem is, most retailers lack a single, performant system that can seamlessly ingest and organize data from disparate technologies.

During a global supply chain crisis, that can be particularly costly to the business. And yet, the supply chain strategies retailers need to manage the current crisis are not fundamentally different from those retailers need in “normal” times.

Sure, there may be certain shortages that no amount of data can solve. Yet when decision-makers have highly granular insights based on connected data across demand, merchandising and the supply chain, they can do a great deal to mitigate the effect of shortages.

Even better, they are poised to succeed even more as the supply chain regains its footing.

Internal Data Divides Exacerbating the External Crisis

As I work with retailers on their analytics challenges, I invariably find that there are three key divides where disconnected data, systems and decision-making are exacerbating the current crisis:

1. Between merchandising and distribution centers.

   Too often, managers of distribution centers are working on priorities that do not align with those of merchandisers and, ultimately, end customers. For example, an item in high demand may be sitting in a warehouse, but it is a relatively low priority for distribution center managers, since other products have been sitting on shelves longer. As a result, stores are experiencing stockouts, even though the inventory is already in the pipeline.

2. Between suppliers and retailers.

   In a time of shortages, retailers may assume that suppliers and manufacturers are in the driver’s seat. The fact is, suppliers face shortages, too. Just like retailers, they want to ensure that, given current restraints, they are prioritizing their activities to meet the real-word demand of customers. Retailers with more granular insight into demand are in a much better position to partner with manufacturers and suppliers by sharing demand data and ensuring that their orders get prioritized.

3. Between tech teams and the business.

   The people making decisions about the supply chain are not data engineers. To make optimal decisions, they need data from disconnected systems that store data in formats that don’t talk to one another. Too often, merchandising decision-makers end up working almost exclusively with their own systems and data, and warehouse managers work with theirs.They do not have the ability or skills to, for example, combine data sets about inventory and demand in order to ensure ideal store assortments.

Meanwhile, technologists who are not trained to understand the business, are too busy to fulfill all the business’s requests, which often involve combining data from different parts of the business. And few retailers have bandwidth or the funding to build a bespoke database that can bridge these decision-making divides.

Transcending “Excel Hell”

Every retail decision-maker knows about Excel Hell. In an attempt to cross the divides above, they jam disparate data into Excel. That usually means manually cleaning up all that data. Then they have to clean up the errors they themselves made during all that brute-force copying and pasting.

And yet when all that work is done, they often lack confidence in the insights that they do manage to extract from their spreadsheets. If not, they find themselves with a new question requiring new data sets, but without the time or resources to answer it.

Whether retailers are trying to navigate the current supply chain crisis and trying to surf the permanent inventory crisis that is naturally built into the retail business, I provide the same prescription. They need a single, highly performant data platform that can seamlessly ingest all kinds of data from source systems and organize it in a way that makes it analytics-ready.

With such a foundation in place, retailers can understand and plan for demand—and prioritize, for example, high-margin items and high-value customers. Merchandisers and warehouse managers can share a single set of business-driven objectives. And in a time of shortages, they can even use granular insights about demand to help suppliers prioritize their needs.