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Demand & Supply Chain Management Evolution




26 Mar 2020
How COVID-19 Will Impact Softline Retailers

JoAnn Martin
Blue Yonder

Softline retailers have been battling store closures and traffic declines in malls for several years.  They have made moves to shift toward experiential retailers.  They have deployed omni-channel capabilities like buy online pickup in store (BOPIS) and buy online return in store (BORIS) to drive traffic and deliver a seamless experience for customers.  Ultimately, softline retailers were just starting to see the light at the end of the tunnel… until COVID-19 coronavirus arrived.

Though online commerce has been continuing to grow as a percentage to total business, most business is still done in stores.  In light of COVID-19, many chains have opted to close their doors. This is going to have several impacts to these retailers:

  • Order visibility: How are retailers able to pinpoint the status and timing of their orders in their supply chain?
  • Demand projection: On core or fashion basics, how will retailers accurately predict the demand in these uncertain time with no hard end date to closures?
  • Pricing: How will retailers stay competitive without giving away product with all store promotions?

The answers are encouraging, but for some retailers, it is a struggle in the current environment:

  1. Inventory visibility is the holy grail for many retailers.  Having the ability to sense where your inventory is in the supply chain and be able to respond proactively to a disruption to mitigate risk is not a myth, it is a control tower.  This technology will be critical in helping retailers gain visibility and control over the flow of goods.  The control tower allows retailers to ingest Internet of Things data critical to pinpointing their flow throughout their pipeline.  With advanced technologies such as artificial intelligence and machine learning (AI/ML), the data can be translated into accurate PTA vs. generalized ETAs, allowing warehouses to properly plan staff and predict flow and urgency for their retail channels.
  2. Demand projection will be critical in two fronts.  One, how do I predict my go-forward demand not fully understanding when my stores will open? Two, how do I normalize this activity for next year during this time when I go to plan for my pre-season?  AI/ML demand forecasting will provide retailers with the ability to identify anomalies and normalize their flow.  They work at a granular level to allow for the most accurate and unbiased predictions.
  3. Pricing is also critical for softline retailers.  First, retailers will have excess inventory they need to close profitably. Second, they need to prioritize liquidation to only reduce prices on items that are elastic. Some items no matter what will create a chase to the bottom in pricing. Retailers will need to ensure they leverage markdowns dollars in places where they expect to yield the highest return but more importantly, drive the unit velocity to clear the way for new incoming freight. Long-term, retailers are looking for ways to automate this process and leveraging external data and AI/ML technologies are helping them to proactively identify candidates for reevaluation and provides them with a recommendation on how to act.

Softline retailers will find an equilibrium coming out of the COVID-19 pandemic. Seeking out partners that can help to offer visibility into their current inventory and help to assess their exposure will help to give the winners a leg up. Technologies such as AI/ML will help to drive speed, urgency and the visibility that retailers are seeking.

 

 

 

 

 









 
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Last update 4 Jun 2020
Marked downturn in global manufacturing continues in May, although rate of contraction eases since April
   Source: J.P.Morgan Global Manufacturing PMI   -  IHS Markit



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