MARTEC & RELEX SOLUTIONS PRESENT ‘STATE OF THE RETAIL SUPPLY CHAIN 2016’
Second annual research indicates the automation of key processes is UK retailers’ top issue regarding supply chain planning and execution.
London, 20th April 2016: Today, the second annual supply chain research study: ‘State of the Retail Supply Chain 2016’ is published, highlighting the key priorities for UK retail supply chain executives. This year’s research provides an in-depth analysis of how UK retailers’ supply chain priorities have evolved over the last 12 months, as well as the first international research of its kind. The study has been conducted by research firm Martec International and commissioned by RELEX, the first supply chain solution provider to offer retailers, wholesalers and manufacturers the power of in-memory computing.
The new research asked retailers from the UK, North America, Germany and the Nordics with annual sales exceeding €100 million (£78 million)* about the top issues affecting supply chain planning and execution, the challenges they face with forecasting, the visibility they have of their supply chain, whether they operate a single stock pool across all sales channels and how productive their staff are.
Some of the key findings for UK retailers include:-
- The top business issue regarding supply chain planning and execution is the automation of key processes (52%) compared to last year’s key issue: increasing availability without increasing stockholding.
- The top forecasting challenge is forecasting effectively across the supply chain (67%). Last year, 72% of UK retailers cited forecasting demand for new products as their key priority.
- UK retailers rate the visibility of their supply chain the lowest of all regions surveyed, at 5.4 out of 10, compared to the global average of 6.2. This is also a lower score than last year, when the UK average was 6.4 out of 10.
Mikko Kärkkäinen, Group CEO, RELEX Solution comments: “For me, it is interesting to note the progression in how UK retailers view their supply chain challenges, even in the last year alone. It would appear that, despite seeming slightly more pessimistic in overall outlook, UK retail is starting to look more holistically at the supply chain and recognising the key role that automation can play in addressing some of the more specific challenges.”
More in-depth analysis of the findings of the ‘State of the Retail Supply Chain 2016’ includes:-
Issues regarding supply chain planning and execution
The top issue regarding supply chain planning and execution for UK retailers is automating key processes (52% of companies), which is number three for retailers in all of the regions. This correlates to the joint top reason retailers cite for replacing systems, which is the amount of time manually spent data crunching, which in turn affects productivity and profitability. The UK has the same priorities as for the all-retailer average, which are increasing availability without increasing stock holding (the top issue in the UK in 2015) and reducing stock holding without impacting sales.
Challenges regarding forecasting
Last year, UK retailers cited forecasting demand for new products (72%) as their top forecasting challenge but if we look at challenges regarding forecasting by country in 2016, UK retailers fall in line with the global averages and their key concerns are forecasting effectively across the supply chain at 67%, forecasting effectively for promotions & promotional lift at 63% (last year’s third biggest challenge) and forecasting heavily seasonal items at 48%. The advanced state of omni-channel (physical and online outlets) retailing in the UK means that forecasting across sales channels is a particular challenge.
UK retailers rate the visibility of their supply chain at the lowest of all the regions at 5.4 out of 10. In comparison, German retailers give themselves 6.6, North America 6.5 and Nordic retailers 6.0.
Operating a single stock pool across sales channels
UK retailers with more than one sales channel are marginally less likely to operate a single stock pool than the average (39% of retailers vs the all country average of 43%), although UK retailers do score the same as North American retailers. German retailers with more than one sales channel are however marginally more likely to operate a single stock pool at 46% and Nordics based retailers even more at 48%.
Retailers in the UK are the least efficient in terms of staff productivity. The average full time equivalent employee (FTE) forecasts and replenishes an average of €73 million (£57 million) of sales. This is up €1 million (£775,000) from 2015 but is much lower than the all-country average of €172 million (£133 million) of sales in 2016. There are however a high proportion of older and in-house developed systems in the UK than in other countries and this, coupled with the smaller size of retail chains compared with North America – that has an average full time equivalent employee forecasts and replenishes an average of €245 million (£190 million) of sales – may account for the UK’s relatively poor performance.
Fran Riseley, Deputy Managing Director, Martec International comments: “In addition to UK retailers, this year’s report provides valuable insight into how countries compare in terms of the issues and challenges supply chain managers face and the visibility of their supply chains. Overall, it highlights that for many, current systems, processes and technology are not supporting supply chains effectively. This is reflected by a high proportion (20%) of the retailers interviewed confirming that they have plans to replace or implement for the first time supply chain planning and execution systems.
Mikko Kärkkäinen adds: “The research makes clear that whilst there are some regional variations, overall retailers globally share the same supply chain challenges. Updating systems and processes will prove key to addressing these issues in coming years.”
“Worryingly, 26% of retailers claim that they have no plans to invest in new systems due to their perceived complexity and 23% due to investment ties within existing ERP or in-house solutions that can offer little flexibility and can be complicated to improve.”
“Today’s advanced forecasting systems make it possible to manage several overlapping forecasts for different purposes. Additionally, Software as a Service (SaaS) business models offer the flexibility needed to streamline implementation and have the ability to adapt to changing requirements during, or even after, the implementation – without additional coding. As a result, organisations rarely need help managing or configuring the system. When looking to replace or implement new supply chain planning and execution systems, it will be those that rethink their supply chain planning processes and lead their people through change that will be most successful.”