1. Urbanization’s impact on retail
Urbanization is more than just a demographic trend. It’s reshaping retail from the ground up. Traditionally, retailers built their supply chains to handle significant volumes. Ninikas: “In lots of countries, you’ll still find suburban supermarkets with massive parking lots, catering to large shopping sprees. However, demographics are shifting. Households are getting smaller, big families are on the decline, and more people are flocking to urban areas. This has led to the emergence of “convenience stores”. Their names might differ – Local, Express, Metro – but the core idea is the same: frequent, smaller deliveries, often multiple times a day. And these stores don’t have a lot of backstage space, so their inventory is minimal.” Additionally, the urban environment itself is evolving. Congestion and tight spaces force retailers to rethink their logistics. Large trucks can’t navigate tight city streets; smaller, more nimble vehicles are becoming the norm.
2. Embracing the digital consumer
The second insight has to do with digital offerings and e-commerce that gave birth to omnichannel offerings: “Retailers must now cater both to physical and online consumers. Many fulfill online orders directly from their physical stores, complicating supply chains. This development predates COVID-19, but the pandemic accelerated it.” Interestingly, even when e-commerce isn’t as profitable for some, retailers are still diving in, recognizing that being left behind in the digital race is an existential threat. Businesses have to adapt. Sustainability and cost-efficiency are key, and society is tilting towards electric vehicles. There’s also a push towards business models like click and collect. Technology, particularly in the last-mile delivery sector, can make a difference, says Ninikas. “To illustrate, the last mile is responsible for about 53% of the total cost for an online order. Reducing this total cost can improve profitability. And you need scale; giant companies like Albert Heijn and Waitrose are proof that volume can breed efficiency.”
3. Predictive planning the norm
The capricious nature of retail demands agility. Retailers will have to recognize and adapt to shifting patterns – whether influenced by weekly trends or external events. In some countries, consumers may be more likely to go shopping during the weekend, for instance. While some patterns can be predicted, other fluctuations might arise more spontaneously due to vacations, holiday periods, or even shifts in buyer behavior. For instance, people might prefer ordering their groceries online and relax outdoors on a sunny day, affecting purchasing patterns. Furthermore, black swan events like the Suez Canal blockage are stark reminders of the importance of supply chain resilience. “In a world where disruptions – be they geopolitical or natural – are becoming commonplace, having flexible, adaptable supply chains is not just beneficial, it’s vital.” So, as Ninikas stresses, it’s not enough to simply observe; retailers must predict and prepare accordingly. By adopting a forward-thinking strategy, they won’t just have to react, but will instead be able to proactively address market needs and operational conditions. Companies can proactively prepare for various scenarios. Once a particular pattern or trend emerges in real time, they can swiftly implement the most suitable strategy based on their pre-prepped scenarios. “Let’s say that there’s a thunderstorm coming that might result in traffic congestion or a demonstration that shuts down a city center. Having these pre-planned scenarios on hand allows organizations to respond swiftly and effectively.”
4. Collaborative approaches in logistics
Gone are the days when retailers managed their logistics in isolation. The rise of third-party collaborations signifies a broader trend: shared responsibility. Retailers are realizing that partnering with specialized third-party providers can lead to efficiencies and savings. However, fluctuations in demand make staffing a challenge. Flexible third-party collaboration can alleviate these issues, while retailers stay in control and keep their eye on the big picture. Successful partnerships often involve aligning incentives, ensuring both parties work towards mutual benefits. Ninikas: “The so-called “control tower” is a facet of the broader trend of supply chain visibility that makes sure that both the retailer and third-party partner have a clear view of operations, from deliveries made to pending shipments and performance metrics. In the bigger picture, businesses want end-to-end visibility across their entire supply chain. They might outsource specific logistics, especially during peak times, but retaining control is paramount.”
5. A green shift in mobility
It’s undeniable that retail has an environmental footprint. With consumer and regulator pressure mounting, retailers are recognizing the urgent need to embrace more sustainable solutions. The move towards electric fleets presents logistical challenges, perhaps none more pressing than efficient charging strategies. As Ninikas points out, there’s a debate on centralized versus en-route charging. “Most companies choose to mainly recharge vehicles at the depot or base. While it’s certainly the most straightforward solution, en-route charging may have some untapped potential, at the expense of increased operational complexity.”
ORTEC’s approach to these challenges is holistic: the company is developing solutions specifically tailored to electric vehicles, offering optimal charging strategies and real-time analytics. “We prioritize electric vehicles in our planning to reduce carbon footprints. We want to be able to factor in real-time feedback on battery status and charge levels to make on-the-fly decisions and allow for efficient fleet management. Additionally, our analytical tools provide insights into operational costs and environmental impact, assisting companies in making informed decisions.”
6. Adressing labor shortages
A retailer’s success isn’t just about products and logistics; it’s about people. The challenges on the labor market are twofold. Firstly, there’s a significant shortage of skilled workers in warehouse operations. Companies with segregated departments often struggle to optimize their resource allocation and staff movement – and issue that’s only exacerbated by the absence of integrated management technology. Secondly, the global trucking industry is feeling the squeeze, grappling with driver recruitment and retention. Ninikas: “Our solutions focus on streamlining workforce management. With our tools, companies can ensure that skilled workers are deployed where and when they’re most needed. In addition, our employee engagement platform offers flexibility, allowing employees to manage their schedules, swap shifts, and better plan their work-life balance. This can prove crucial for retention, especially among drivers.
BONUS INSIGHT
The transformative power of AI
Technology, especially AI, is revolutionizing retail by bridging the gap between planning and real-world execution. As Ninikas suggests, the integration of real-time data with advanced AI tools can transform the retail landscape, providing unparalleled accuracy. “Two developments enable this precision. Firstly, the widespread use of GPS and mobile data collection means we have a plethora of real-time data at our fingertips. Secondly, advances in AI and machine learning have spawned sophisticated tools to analyze this vast amount of data, offering actionable insights.”
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This article is part of the 5th issue of our magazine Data and AI in the Boardroom. Get your copy now.
We've asked leading figures in different sectors about how their organizations go beyond maximizing supply chain efficiency by adapting quickly to the ever changing market.
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