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NRF 2018: 5 characteristics of the future retail supply chain

The future retail supply chain will be defined by speed rather than cost, and it will see customers playing an integral role in the design and development of products, NRF delegates heard on Monday.

Spencer Fung, CEO of Li & Fung, the supply chain component of the multifaceted Fung Group, said speed trumps cost savings in the supply chain, and the whole process will be digitised in the future.

From his presentation there were five clear predictions for what the future of the retail supply chain will look like. Let’s take a look.

1. Speed

Historically, retailers – not all, but many of them – have worked to a circa 50-week model between original product concept to in-store availability, but Fung argues that this system has to change based on modern consumer requirements. especially in fashion.

In the past, as retailers started offshoring their manufacturing to Asia, the aim was to take costs out of supply chain management. But now, it appears, speed is of the essence.

“Retail hasn’t caught up with the speed the world is moving,” Fung argues.

“When you think consumers are on their mobile six or seven hours a day, and every minute they’re being influenced by something, it’s almost inconceivable that in today’s world you have to decide today what to buy for next Christmas.”

There are multiple benefits in terms of reduced markdown and overall sell-through the closer retailers’ buying decisions are to when they actually sell those items, according to Fung. Retailers know this and c-level executives are starting to act accordingly, he adds.

2. Fully digitised

Much of the global supply chain is still analogue, according to Fung, but he says the data benefits of digitising each stage are compelling in terms of increasing transparency and improving operational processes.

The “end-to-end stream of data” from digitising the value chain will shift the battleground between companies to the data side, he adds.

“Everything will become digital – it’s just a matter of time,” Fung says.

“If you look at other industries, other supply chains have already gone fully digital. Look at automobile, look at electronics, aerospace – there are industries that have digitised the supply chain.”

He highlighted how it is now possible to digitise clothing samples in the product development process, which can simulate different types of draping, check tension and fit all via machine. This is one way the supply chain process can be sped up, Fung explains. Digital samples can be created and shared globally in a matter of hours.

3. Fewer suppliers

In the same way many retailers are looking to streamline their tech provider partnerships, retailers have been reducing the product supply base. US department store chain Macy’s is a case in point, reserving a bigger capacity for fewer suppliers.

Fung says this trend has been going on for several years, primarily for efficiency reasons, but he urges retailers to tread with caution and ensure the supplier network is continually evolving.

4. Increased nimbleness

Retailers are continually talking about the importance of being agile, but in an increasingly digital world there is a need for suppliers to think similarly.

“In the world where everything is moving faster and faster, where order size is getting smaller and smaller, and the number of orders is actually increasing, it’s possible that some larger suppliers do not actually move fast enough,” Fung explains.

“Our recommendation is that while a retailer streamlines their supplier base they should always have to have some new suppliers coming in that are more nimble and agile – and sometimes smaller – who can actually deal with a lot faster types of production.”

5. Consumer-led product development

Fung said his company worked with a business called Betabrand to create 3D designs of shoes, co-developed by consumers via social media and an online survey process. During the process no physical sample was ever made, highlighting the capabilities of digitisation in the supply chain.

It is perhaps not surprising that Fung is keen for retailers to digitise the supply chain, considering his company offers some of the tech solutions to help them move in this direction, but his message of speed, transparency and increased digitisation in the supply chain should strike a chord across all sectors of tthe industry.

“Nobody is going to be immune from this digital disruption, and I would urge every company to look at their space, and see how quickly they need to digitise [their supply chain].”

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