It has been more than a year since the Covid-19 pandemic brought our daily lives to a screeching halt. As vaccinations are distributed across the country, we are all starting to feel a new sense of hope and excitement that the end of this unexpectedly long journey may be coming to an end. During this time, the retail industry has made great strides in transforming the lessons learned into strategic plans and actions. Some brands and retailers are still figuring out the best way to avoid the kind of supply chain disruptions caused by the pandemic in the future.
In 2020, shoppers, retailers and brands suffered alike through meaningful product availability issues, driving out-of-stocks at the shelf for extended periods in key categories. Product supply issues combined with changes in shopper behavior have created dynamics that stretch the flexibility of traditional supply chains.
Simplifying the supply chain
In response to these disruptions, some brands chose to shift and simplify their SKU assortments to allow for a more efficient supply chain. By halting production on less popular items, brands were able to free up shelf and warehouse space for their best sellers, simplifying the manufacturing process and better supporting shopper demand at the shelf.
SKU rationalization also proved to be an essential tactic when brands faced material shortages. Last summer, a shortage of aluminum forced
major beverage companies to make changes to their supply chain and reduce assortment to just the essentials. With shopper demand so unpredictable, SKU rationalization allowed brands to satisfy the largest number of consumers, maximizing space productivity and creating a simpler shopping experience — a trend likely to continue post-pandemic.
Assortment simplification is being driven by the retailers as well as by the manufacturers. By trading variety for additional shelf holding power on key items, retailers have attempted to service as much shopper need as possible with the limited amount of space they have in the store.
Applying modern methods to forecasting
In addition to trimming SKU assortment, brands and retailers have started to implement technology solutions that provide timely, continuous shelf insights to prepare supply chains quickly and adapt to the rapid changes in consumer demand. Many of the world’s leading CPG companies are using dynamic merchandising tools, analytics and shelf monitoring solutions to efficiently manage their supply chains, and as a bonus, drive positive shopper experiences and unlock revenue opportunities.
While autonomous data collection methods benefit the center store, these methods can also be applied to the perimeter. The fresh food supply chain is often difficult to manage and requires extensive manual processes. Managers are responsible for ordering the right amount of produce, which can be difficult when consumer behavior is unpredictable week over week. To reduce fresh food waste and avoid out-of-stocks, an emerging generation of tools are making their way to retailers. For example, machine learning technology applies a new approach to algorithmic forecasting of shopper demand, allowing grocery retailers to optimize produce ordering and reduce food waste.
Inventory planning and store orders aren’t the only forecasting challenges facing retailers. They also need to plan store labor in an environment where personnel is now responsible for new workstreams, including picking and packing online orders. Some retailers are using alternative labor models, such as flexible, on-demand workforces, to augment their existing associate team, meet their staffing needs and avoid overworking their permanent staff.
Finding success in the new retail reality
Flexibility and adaptability are key to success in today’s retail reality. Consumer buying behaviors may never return to the way they were, so brands and retailers must adjust to a new normal. Companies that can gather current insights on shelf and store conditions will be able to rapidly adjust their operational model to navigate changes in shopper behavior and disruptions to the supply chain. With more data, brands and retailers can effectively change their strategies to manage shifting supply and demand. Successful teams understand the importance of data to deliver consumer needs at the right time and right place. As a result, significant innovation will need to be adopted to make this possible at scale.
This article first appeared on Forbes.
