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Retailers: The five zeros reshaping the stores

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Retailers: The five zeros reshaping the stores

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Hi all, I've just surfed some stuffs on the Internet and I inadvertently catch up this amazing article.

The post mainly focuses on the up-to-date situations of retailers, deeply discusses the trend "five zeros" as well as recommends some ways for retailers moving towards.

Task 1: What did you earn from the article? Do you think what should we need to add for that one?

Task 2: In case you've already read the new post on SCMission fanpage, that post mentioned 3 industries being suitable for the SC Agility the most including apparel, healthcare, and microchip manufacturing industry. Why don't we try choosing one industry and apply what we learned from the article into some real life cases? 🤔

Hope that you're gonna love my first post. Have a good day ^^

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Shoppers are reshaping the retail landscape faster than ever before. Nearly 40 percent have switched brands or retailers during the pandemic, and more than 80 percent have new shopping behaviors. More than half of those who used a new channel or service such as "buy online, pickup in store," for example, said they would continue the practice post-COVID-19. As such, the omnichannel consumer has never been more powerful. They make purchases 70 percent more often and spend about 34 percent more than people who shop exclusively in stores. Based on the above, we expect cross-channel shopping to continue even as the pandemic fades.

However, consumers today are likely to be looking for more than convenience and cross-channel connectivity. As one 20-something shopper told us, "I don't spend money in places I don't believe in." According to our survey of 999 American consumers in 2021, 45 percent of all consumers and more than half of Gen Z, millennial, and Black consumers believe companies should support Black-owned businesses. Among our survey respondents who agreed that companies should pledge to support Black-owned brands, more than 40 percent intentionally buy from Black-owned brands and are bigger spenders overall, doling out an average of 30 percent more on holiday shopping.

The implications for retailers are profound. As the shopper continues to change-and expects retailers to do the same-customer experience, store operations, and talent become more inextricably linked on the journey to keep pace with customer preferences.

A great customer experience, in store and online, now requires end-to-end product availability and visibility, which in turn requires first-rate operations: talent in IT, logistics, procurement, fulfillment, and other functions. Similarly, in-store staff need to recognize when customers need help-and when they don't. And with high employee turnover and the need to keep up with rapid changes in the marketplace, retailers must train new hires and longtime employees quickly, effectively, and at scale.

In case that to-do list doesn't seem long enough, consider that one in three shoppers now expects same-day delivery -a share that will accelerate as fast-moving retail giants and nimble start-ups compete in the realm of customer experience.

One thing is clear: shoppers aren't just browsing-they're taking sides. To win their loyalty, retailers will need to keep raising their games.

How retailers can meet rising challenges

The margins for error in retailing are shrinking toward zero in five areas: shopping channels, customer assistance, delivery times, equity and sustainability, and talent (exhibit). We believe retailers will have to bend, reinvent, and innovate to meet customers where they are-and where they're going.

Zero difference in channels

To serve omnichannel customers better, winning retailers are reimagining channels and bridging the gap across supply chains, stores, web presence, and partners. Some players, such as Target, are transforming stores into supply chain nodes to serve customers both online and in the store. Target moved quickly and early to devote operations and space to e-commerce fulfillment, including curbside and in-store pickup, and has since evolved to ship-from-store in most locations. Staff are now cross-trained to pick goods from the sales floor and "fast moving" zones for certain SKUs to get nearby customers what they want, when they want it. A few retailers are now bypassing stores altogether with manufacturer-to-consumer (M2C) models.

Further blending channels, the "all on, anywhere" service model is permanently raising consumer expectations of zero differences in channels. Apple, a leader in this realm, makes specialist advisers available by phone, online, and in stores. Across every channel, advisers are armed with data about what products customers own, what updates they have made to their operating systems, and what support they have needed in the past. Staff are trained to advise customers on multiple elements of the purchasing process, including product selection, carrier plans, and financing options. Channels integrate seamlessly with Apple ID, allowing customers to schedule in-store appointments in seconds and helping reps to quickly recognize customers.

As channels blur, retailers will need to rethink traditional measures of productivity and what success looks like in the eyes of the consumer. Omnichannel is the new four wall, and metrics should reflect the cross-channel contributions of stores and managers.

Take action-suggestions on where to start

Redefine channels and the bridges between them. To provide a seamless omnichannel customer experience, companies can identify their weakest links and build a road map to strengthen them. Retailers could start by integrating back-office processes, for example, using inventory-management systems that incorporate distribution centers with stores and building reporting and tracking capability to track new four-wall metrics.

Zero need for assistance with transactions

Shoppers are giving retailers less "credit" for traditional and transactional services from checkout at cash registers to beyond. Our research shows that more than 70 percent of those who began using in-store self-checkout in the past two years, or used it more often, intend to keep using it after the pandemic. This indicates that self-service is the preferred service in these instances. By introducing technology at "transactional moments" of the in-store journey, retailers can redirect associates to activities that shoppers value more, such as intercepting the digital experience when it isn't working and doubling down on consultative selling where help and guidance really matter.

Sephora and Trader Joe's have both adapted the roles of in-store associates to pack more punch in customer support. At Sephora, they provide personalized recommendations and tips with the help of mobile devices loaded with customer loyalty data. Trader Joe's, perhaps counterintuitively, urges staff to stock stores during peak shopping hours, increasing the chances that they will interact with customers in what they believe is a high value-add way: answering questions, introducing new products, and making cross-selling suggestions.

Similarly, Sam's Club and Decathlon have greatly eliminated low-value activities from the responsibilities of associates. Sam's has partnered with Brain Corp to use robots that not only check for stockouts but also double as floor cleaners. Decathlon has partnered with Simbe Robotics to use its "Tally" robot to count inventory, identify out-of-place inventory, and assess trends in customer-purchase behavior to help sales associates serve customers more effectively.

The race to zero is on for self-service. Self-checkout is at the forefront, and other areas such as stockouts, cleaning, and even returns are well on their way.

Take action-suggestions on where to start

Focus on value-added service. Every retailer should know which services matter most to the customer experience and the bottom line. Do customers truly prefer self-service, and when do they value consultative, personalized selling? How important is the expertise of in-store associates? The answers can guide decisions about where automation investments are warranted.

Zero wait for delivery

Two-day delivery is the new five-day, and instant will soon take its place in many markets. Amazon led the way in raising expectations by cutting average delivery times from eight days in the early 2000s to two days and even same day in some locations. More than 90 percent of consumers now see two- or three-day delivery as the baseline. Thirty percent expect same-day delivery, and they're more likely to be willing to pay for it, especially if they're younger, urban, and generally more time constrained.

Falling short on delivery times has consequences. When online customers discover during checkout that they may need to wait longer for delivery, about 46 percent abandon their shopping carts. This helps explain why more than 75 percent of specialty retail supply chain leaders have made two-day delivery a priority, and more than four in ten are aiming for same-day delivery in 2022. Many are now trying to figure out whether two-day or faster deliveries are realistic, how much each customer segment cares about speed, and how to partner with other companies to create new delivery models to meet rising expectations.

Some retailers are responding to the challenge by offering more options. Walmart, for example, has continuously evolved its delivery offering. It acquired Jet.com in 2016 to offer a broader assortment online and grow e-commerce capabilities. Since then, the company's delivery model has grown to include free two-day shipping with a purchase of $35 or more or with membership in Walmart+. In the new Walmart InHome program, delivery associates bring groceries into consumers' homes and put them directly into cabinets and refrigerators.

Retailers that don't have these in-house abilities are already partnering with third-party delivery services. Macy's now partners with DoorDash to provide same-day delivery of select goods. The emergence of quick-commerce players such as Gorillas in Europe will raise the stakes even higher. Gorillas' vertical or "dark store" model includes micro fulfillment centers to deliver groceries and other everyday items by bicycle in as little as ten minutes for a fee of about two dollars.

Take action-suggestions on where to start

Define the delivery promise. Based on what customers expect, a retailer should determine the capacity needed to meet those expectations-and how quickly they might change. Delivery capabilities range from in-house (through ramped-up in-store fulfillment) to new partnerships with rapid delivery players. Retailers whose products are customized or otherwise worth a wait can be more transparent with customers about where their products are in the journey to their front doors.

Zero tolerance for inaction on equality or sustainability

Consumers, especially the coveted Gen Z and millennial segments, are increasingly anchoring their retailer and brand choices on sustainability, diversity, equity, and inclusion. About 90 percent of Gen Z shoppers believe companies should address racial equity, for example. Their convictions can be strong. As one shopper told us, "Companies have huge leverage. And if they don't support diversity, equity, and inclusion efforts, they do not share my values. So why would I give them my business?"

More than half of Gen Z and millennial consumers say they're aware of brands' commitments to sustainability, and more than 40 percent consider sustainable practices in their purchases, spurring a rise in preowned items in the circular economy. Retailers are responding with innovations in their business models. Rothys, for example, has moved to streamlined packaging including a minimalist, eco-friendly shoe box that can be resealed without tape for returns. The company relies on wind to power its headquarters.

Consumers no longer just talk about their values; they spend to support them. In the current marketplace where 40 percent more shoppers are trying new brands, their zero tolerance on values is more consequential than ever.

Take action-suggestions on where to start

Put diversity front and center. Every retailer should take a clear-eyed look at diversity in the ranks and on the shelves. It can count the number of diverse and Black-owned brands in its merchandising mix, for example, and tally the revenue generated by those brands. (Most fall short of where they and their customers want them to be.) It can also review diversity in staffing, particularly in leadership positions. Based on its baselines, the company should set aspirations, craft realistic plans to get there, and near-in key performance indicators (KPIs) to measure progress. Many companies enlist the guidance and partnership of nonprofits, accelerators, and other third parties.

Zero wiggle room for talent

The pandemic has greatly raised the stakes in recruiting and retention. Retail job vacancies in the United States rose from about 446,000 in April 2020 to more than a million in December 2021, according to the St. Louis Federal Reserve. To recruit and retain the right people, retail leaders are raising pay, providing more autonomy (through, for example, flexible "gig" schedules), promising better career paths, and more. Traditional recruiting and onboarding will not be enough for most retailers in the years ahead. They will need new approaches to talent that infuse data from end to end, from AI-driven hiring to digital training throughout employees' careers to flexible staffing models.

Automated recruiting and management are still in their infancy but showing great promise. For example, CVS partners with Modern Hire to bring data and personalization to the hiring process and raise recruiting success. Modern Hire automates parts of the hiring process including screening and initial interviews while gathering and leveraging personalized data to ease the process for candidates, recruiters, and hiring managers.

On the training front, Walmart pioneered the use of virtual reality (VR) in 2018 in a partnership with Strivr, using Oculus Go headsets to train employees on in-store pickup. Since then, the company has offered this training to more than a million associates in the United States. According to Walmart, those who use the new system report 30 percent higher satisfaction, score higher on tests 70 percent of the time, and demonstrate 10-15 percent more knowledge retention than before VR. Sam's Club put its own martial arts spin on training by awarding white, blue, and orange belts based on the skills employees master, from using knives in food preparation to budgeting.

Take action-suggestions on where to start

Modernize talent management. With competition for labor fiercer than ever, retailers must up the ante on how they hire, train, and retain people. We often recommend surveying frontline employees to understand their pain points. Some retailers are too slow to respond to applicants and lose out on great talent. Some training creates stress rather than getting associates excited about their work and career opportunities. Compensation is always important, but talented people are looking for much more today, including autonomy, flexibility, and especially a sense of purpose. (For more on this topic, please see " Great Attrition or Great Attraction? The choice is yours.")

The time is now

As changes accelerate in consumer behaviors and attitudes, retailers with "wait and see" approaches will only fall further behind. The bad news may not be apparent immediately, since frustrated or disappointed shoppers may not lodge a complaint. Instead, they may simply walk out the door or abandon their shopping carts, never to return. They will find another retailer that understands them and moves fast to meet their needs.

There's no time to waste-the race to zero has already begun.

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Shoppers are reshaping the retail landscape faster than ever before. Nearly 40 percent have switched brands or retailers during the pandemic, and more than 80 percent have new shopping behaviors. More than half of those who used a new channel or service such as "buy online, pickup in store," for example, said they would continue the practice post-COVID-19.

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Six strategic priorities for modern merchant leaders

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Six strategic priorities for modern merchant leaders

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Six strategic priorities for modern merchant leaders

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Another deep analysis article I found on the Internet. New situation, new background means new mindset for the leaders like us in the future 😉

Please leave any comments of your throughs regarding the upcoming trends, opportunities as well as challenges merchant leaders have to deal with later.

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The retail landscape has shifted radically over the past several years, and retailers have raced to meet changing consumer preferences while grappling with increasing complexity and fierce competition. The COVID-19 pandemic has accelerated many of these changes and highlighted a number of opportunities for retailers to come out of the pandemic stronger. Now is the time for retail leaders to rethink their merchandising priorities to help deliver a compelling omnichannel experience for customers, shape levels of service, and further evolve their value proposition.

New McKinsey research on senior retail merchants and their priorities explored the most salient market trends and their impact on retail organizations in the short and long term (see sidebar, "About the research"). The findings highlighted their priorities as merchant leaders and gauged their retail organizations' readiness to address these macro trends. We believe merchant leaders can focus on six priorities to create the distinctive merchandising value proposition needed to set their companies apart.

Insights from retail's front lines

Our research revealed that merchant leaders are focusing their current efforts on a few specific market challenges and trends over the next 12 to 18 months (Exhibit 1). Respondents report expecting these same trends to shape the retail landscape for the foreseeable future, although supply chain disruptions and the tight labor market were viewed as nearer-term issues (in the next 12 to 18 months). Across these areas, merchants highlighted the disconnect between their priorities and their organizations' preparedness to respond.

Merchants highlighted the disconnect between their priorities and their organizations' preparedness to respond.

Inventory shortages and supply chain fragility are top of mind for most merchant leaders in the near term. The pandemic destabilized retail supply chains around the world, shining a light on weak links and reinforcing the need for resilient, adaptable operations to meet rapidly changing consumption patterns and market dynamics. Although supply chain fragility is the top trend for three-quarters of senior merchant leaders, the vast majority feel their organizations are unprepared. Indeed, less than 10 percent of leaders report being ready to address this challenge.

The competitive labor market, fueled by the Great Attrition, has created near-term urgency for executives across retail sectors. More than 23 million US workers-and counting-have quit their jobs since April 2021. While a majority of respondents think talent is a critical trend, less than 15 percent feel secure in their organizations' ability to address it.

In addition, retailers are focused on the continued rise of digital-and with good reason. COVID-19 had a "years in months" effect on digital retail and the adoption of omnichannel features by consumers and retailers alike. Online spending has more than doubled over the past five years, and consumers are increasingly using digital touchpoints during store purchases and vice versa, highlighting the need for an integrated, seamless experience. Conversely, brick-and-mortar locations are still seen as important factors in shaping the consumer shopping journey (such as to support customer acquisition), but some senior merchants believe that it will become less of a focus over the next three to five years.

In the longer term, respondents cited the use of data, analytics, and automation as the most influential trend. Retailers have access to increasingly more granular and sophisticated data on their customers' behavior and purchases. This visibility will enable merchandising to accelerate the move from "art" to "science," particularly for certain categories of business (such as replenishment goods and commoditized products). However, the art of merchandising will always play a critical role. The human touch will remain important in providing a curated, compelling, and relevant assortment to customers.

Six imperatives for merchant leaders

In light of current trends, merchant leaders and their teams need to reimagine the role of the merchant and rapidly invest in a range of capabilities to keep pace in today's marketplace. Our research underscored six imperatives that are likely to separate the winners from the also-rans over the next several years (Exhibit 2). To make progress, retailers will need to take several specific actions for each of these imperatives.
1. Partner with supply chain and sourcing teams to build resilience in inventory planning and management
In the short term, addressing supply chain fragility is critical to meet the consumer's greater need for speed. In the long term, building a resilient, sustainable supply chain will be an enabler for other aspects of retailers' omnichannel offerings.

While strengthening the end-to-end supply chain should be on the broader leadership agenda, merchants should also take this opportunity to reset their operating model and understand the downstream implications of their decisions across a couple of areas:

Diversify sourcing and strengthen the vendor base. Merchant leaders should seek to shift to vendors in countries with lower costs and tariffs, invest in nearshoring, and forge deeper strategic partnerships with existing vendors. In this exercise, retailers must balance cost, speed, and distance while building the capacity to ramp up or down quickly. In addition, there is an opportunity to leverage vendors more as strategic partners and less as transactional seasonal executers by partnering on fabrics (for example, usage, sustainability innovation, and recycled goods), having a more open line of communication (for instance, around capacity needs), and establishing more consistent feedback loops. This would enable retail organizations to more easily forecast future costs. More than 30 percent of survey respondents identified this as a top nearer-term imperative.

Accelerate speed to market. Over the next three to five years, merchants must look to reduce the time it takes to get products on shelves or online. Survey respondents cited this goal as their top priority for the long term. Innovations in the design process, analytics, and new tools can help retailers reimagine their go-to-market calendar, define speed lanes (for example, shorter development cycles for trend-focused products versus longer cycles for core items), and implement agile seasonal processes. The Chinese online fast-fashion retailer Shein, for example, combines its own data with third-party sources to predict trends. Its end-to-end, "consumer-to-manufacturer" model can get goods to market in one to two weeks, on average-or even, in some instances, in as little as three days.
2. Build and activate a next-generation merchandising organization
As consumer journeys become more complex and integrated, with many touchpoints across channels, retailers that operate in silos will be less effective. Ever-rising expectations for personalized, seamless omnichannel experiences have elevated the need for a "360 degree" approach and better collaboration across teams. In addition, merchandising talent will need to broaden the use of customer and transaction analytics to inform decision making across assortment and experience. Changing consumer dynamics-in particular, the continued rise of digital and social commerce-also means merchants must develop a broader skill set that encompasses marketing, greater digital literacy, and data analytics.

The state of the labor market has significant implications for retailers' ability to retain top merchandising talent, especially in the face of competition from high-paying sectors such as technology.

Merchant leaders should consider several actions to shore up their organization:

Establish new ways of working across merchandising to break down silos. This collaboration can provide a more customer-centric experience. For example, retailers could form integrated cross-functional teams instead of sticking to the traditional functional matrix, or organize around consumer lifestyle segments instead of product categories. In our survey, 64 percent of merchants ranked this action as a top priority in the short term.

Attract and retain diverse talent. To bring in the right candidates, retailers should have a clear vision and goals for their organizations' makeup in the future. One-quarter of respondents ranked talent as a top priority in the next 12 to 18 months. Of this share, all respondents have made some investments in this area. However, we have seen that consumer and retail companies were more likely to put their diversity, equity, and inclusion (DE&I) initiatives on hold, despite evidence of the importance of diversity programs for hiring and retaining talent.

Enhance and evolve the role of 'traditional' merchants through upskilling and training for broader skill sets. Retailers demand more from today's merchants than ever, including increased coordination with analytics, supply chain, consumer insights, and even digital marketing. It is crucial to continue developing merchants across these varied knowledge areas.

Offer more competitive compensation and a clear career path. Retailers will need to consider ways to retain top talent to combat "brain drain." Despite the stated importance of talent and the acknowledgment among retailers of the highly competitive labor market, less than 5 percent of survey respondents are focused on offering competitive salaries and benefits along with a well-defined progression in the short term (Exhibit 3).
3. Bolster your merchandising value proposition, and reinforce it with customer-centric experiences across channels
Consumer journeys are becoming more integrated. For example, shoppers are increasingly using digital touchpoints during store purchases and vice versa-a behavior that was accelerated by the pandemic. Therefore, retailers should focus on delivering a compelling omnichannel experience wherever their customers shop.

To increase sales and share of wallet in today's competitive environment, retailers must understand the key drivers of each channel and how shopper priorities and motivations differ across them (Exhibit 4). Our research shows, for instance, that "best prices" are the most important factor in online purchases, while "interacting with products in person" is the biggest driver of store sales. Retailers must tailor their channel experiences to play to these factors.

To increase sales and share of wallet in today's competitive environment, retailers must understand the key drivers of each channel and how shopper priorities and motivations differ across them.

A well-integrated and engaging cross-channel experience is also essential for creating a "closed loop" to retain customers. If a retailer cannot address a need in one channel, it must consider where else it can meet consumers and how to prevent them from leaving.

Merchant leaders seeking to develop new omnichannel experiences should focus on several actions:

Get the omnichannel basics right. Offering options such as "buy online, pick up in store" (BOPIS) and omnichannel inventory can enable retailers to delight customers through frictionless, enjoyable, and easy-to-use modes of engagement.

Articulate and deliver on a unique product and merchandising value proposition across channels. One-third of respondents, led by apparel and soft-lines companies, cited a unique merchandising value proposition as their organization's top nearer-term imperative. Several retailers serve as valuable examples: Amazon's endless aisles and extreme convenience, Moda Operandi's curation and novelty, and Glossier's content and community.

Create immersive, digitally led experiences online and in stores. New digital tools can give customers new ways to discover and engage with products. Beauty retailers and brands have led the way in this area. For example, L'Oréal's augmented-reality tools enable customers to try on products virtually, and SK-II's "smart store" uses AI and facial-scanning technology to assess customers' skin.

Use social commerce to interact digitally with consumers. Implementing new ways for individuals to be heard can increase customer loyalty and foster online communities that translate to the real world. For instance, Food52's online community provides input on product development, and Beautycounter makes its in-store studio available to influencers for livestreaming.
4. Invest in analytics to increase profitability and free merchants to focus on the 'art'
Investing in analytics to support the day-to-day foundation of merchandising functions is critical to speed up and improve the quality of decision making and to boost profitability. By integrating data and analytics into operations, merchants can dedicate more time to tasks that require thought, creativity, and a deeper, more human understanding of products and the consumer.

In the short term, merchants should take two actions:

Implement a rules-based, analytics-driven approach for pricing, promotions, and markdown decisions. Such capabilities and insights can, for example, enable dynamic pricing within a defined band based on competitors, resulting in incremental margin improvements. While algorithms can become more advanced over time, even starting with very simple rules that mirror the logic that merchants are using today (for example, minimum and maximum gap to competitor pricing or recommended discounts based on current weeks on hand) can provide material financial benefit and time savings. The end state could also be the automation of all repeatable decisions-across both pricing and assortment-in which standardized buys and pricing increases are taken through a more rules-based approach.

Draw on a broader set of consumer, behavioral, and external market data. When analyzed together, these sources can inform targeted buying and allocation decisions. Customer analytics can also be used to influence product decisions at a more granular level, such as for a specific consumer subsegment. Some retailers have used weather data and demographics to support microsegmented buys.

Looking to the future, retailers should consider more novel ways to incorporate data and analytics into the merchandising universe. They should also seek a more diverse set of data sources instead of an overreliance on historical data. Nearly a quarter of merchant leaders cited as a top long-term priority the use of advanced analytics and AI to influence product development and to rapidly test concepts before they go to market. Examples include web scraping for social mentions and hashtags to inform geographic-specific assortment, as well as third-party solutions such as MakerSights, which allows retailers to test products and concepts with consumers early in the development process.

Looking to the future, retailers should consider more novel ways to incorporate data and analytics into the merchandising universe.

5. Unlock greater value for consumers by expanding product and service offerings
In recent years, retailers have sought to extend their offerings across product categories and services to play a bigger role in consumers' lives. Traditional retailers that can successfully execute this strategy have the potential to leapfrog the competition, counter challenges from digital rivals, and become a "stickier" platform for consumers.

Retailers can find their next wave of growth in untapped adjacencies (such as products and services bundles or flat fees to access many offerings) while also offering superior value. More important, expanding the scope of products, services, and experiences creates a self-reinforcing loop, provided retailers do it in an authentic, on-brand way. This approach could create an ecosystem of end-to-end services as well as the ability to play across different stages of customers' lives, strengthen loyalty, increase share of wallet, and unlock additional customer lifetime value (Exhibit 5).

Expand existing offerings to enhance category authority. Partnerships between retailers such as Sephora and Kohl's, as well as Walmart and Gap, have extended the reach of these brands. Organic expansion, such as Ulta's salons and Williams-Sonoma's recipe app, has also allowed them to engage with their customers with greater frequency. Organizations can also accomplish this goal by partnering with or launching third-party marketplaces to drive increased assortment without taking on additional inventory.

Seek to play a bigger role in consumers' lives. Complementary ventures can meet customers where they are while serving their regular needs. The combination of Macy's and DoorDash or Target and CVS Minute Clinic locations offer service and convenience beyond the purchase of goods. Walmart pursued a similar angle when it began offering home and financial services. Our survey found this approach is a higher priority for multibrand retailers compared with their vertically integrated competitors.

Offer end-to-end value proposition to customers through participation in the circular economy. Customers increasingly care about sustainability and environmentally friendly goods. This trend offers retailers opportunities to use recycled materials to produce new goods (for example, H&M aims to have 100 percent of its products made from recycled or sustainably sourced materials by 2030), to upcycle products (such as UNIQLO's RE.UNIQLO program, which converts clothing donations into insulation), and to launch their own resale platforms, as in the cases of Madewell and Lululemon. Retailers will reap the greatest benefits from such efforts when they are relevant and authentic to their overall portfolio.

Despite consumer buzz about sustainability, less than 10 percent of respondents said greater participation in the circular economy was a priority in the short term, a share that fell to 4 percent for the long term. Only apparel and soft-lines merchants selected this trend as a top priority.
6. Cut through the noise with truly differentiated assortments
At a time when consumers are constantly looking for the next best thing and have a high propensity for switching brands, retailers must give shoppers reasons to choose them-and to keep coming back. Product differentiation is a critical lever, but standing out in a crowded market can be a challenge.

Several forces are contributing to assortment ubiquity in the market, making it more difficult than ever to create and defend a unique assortment. In some categories, such as beauty, channels are significantly blurring across price tiers, meaning consumers are increasingly willing to purchase products at higher price points, as well as specialized items in low-touch environments (for example, prestige skin care sold on Amazon). At the same time, brands are seeking new distribution for growth; in many cases, they are willing to pursue distribution channels they had previously rejected. Lastly, as the barriers to entry for brands in many categories fall, consumers are inundated with a sea of sameness and copycat brands.

Merchants must consider ways to develop and maintain differentiated assortments season after season:

Distinguish assortment through meaningful exclusivity. Retailers can take several paths to achieve this goal, including private and owned brands, exclusive limited-edition assortments, collaborations, diffusion lines, and sister brands, among others. One-quarter of respondents cited assortment exclusivity as a top initiative in the short term.

Develop a clear strategy to identify and maintain a consistent pipeline of new, innovative brands aligned with the overarching value proposition. Consumers are more aware than ever about attributes that can add to a product's allure, such quality at a lower price and celebrity involvement. Direct-to-consumer brands generating buzz can also contribute to a retailer's cachet. For example, Nordstrom, Sephora, and Target have established dedicated brand sourcing and incubation efforts.

Deliver hyperpersonalized assortment and product recommendations based on consumer preferences, using advanced analytics to provide relevant assortments. For example, HelloAva deploys AI to power its clean-beauty recommendation engine, and Stitch Fix uses customer data and insights to create personalized assortment boxes for each customer.

As retailers seek to achieve growth and carve out a differentiated position, merchant leaders must ask themselves how their organizations are tracking against these imperatives. Some questions can pinpoint their current position:

How aligned is the organization on its customer and merchandising value proposition and how the brand shows up across channels?

Do merchant teams have visibility into omnichannel performance and profit, and are they making decisions based on profit in addition to top-line growth?

How is the organization thinking about the customer's end-to-end experience and understanding their paths to purchase as an integrated, omnichannel journey?

Is the organization investing appropriately in systems, data, and analytics not only to allow merchants and partners to focus on value-added activities but also to support faster and more granular decision making on pricing, promotions, product development, and assortment?

How can your retailer's brand extend into new categories and experiences? Could this be achieved through new capabilities or strategic partnerships?

What is being done to retain the retail workforce? How effectively is the organization attracting, developing, and retaining talent?

How integrated are merchants with functional partners such as analytics, marketing, and supply chain? How can teams work better to achieve the priority imperatives?

The answers to these questions can help merchant leaders determine where to focus their energy and resources to elevate their function and meet the needs of increasingly demanding consumers in the years ahead.

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Six strategic priorities for modern merchant leaders

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The retail landscape has shifted radically over the past several years, and retailers have raced to meet changing consumer preferences while grappling with increasing complexity and fierce competition. The COVID-19 pandemic has accelerated many of these changes and highlighted a number of opportunities for retailers to come out of the pandemic stronger.

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Agile Supply Chain | Zara Supply Chain Case Study | Fast Fashion | SCM | Supply Chain Analytics

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Zara, which is a Spanish-based apparel retailer, has some methods to archive an agile supply chain both before and after pandemic. The video shows a few features of Zara supply chain as well as their agility strategic throughout their operation.

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Agile Supply Chain | Zara Supply Chain Case Study | Fast Fashion | SCM | Supply Chain Analytics

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Building a resilient and proactive supply chain

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Do you know about supply chain resilience?

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Do you know about supply chain resilience?

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I found an article about supply chain resilience, which defines the meaning of this concept and shows how the businesses could build their own companies an agile and resilient supply chain.

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The last decade was a redefining era for global supply chains in many ways. Acceleration of e-commerce, the rise of Amazon, and events like the COVID-19 pandemic have put a new supply chain priority into the spotlight - supply chain resilience. Additionally, these factors have exacerbated already existing issues within the industry, such as capacity shortages, increasing globalization, and economic pressures. With too many unprecedented risks occurring, companies are now trying to form a strategy that will make their supply chains less prone to emerging issues, regardless of their size and impact. Supply chain flexibility has become a new focus for supply chain executives around the world.

Many organizations have undergone notable disruption due to the COVID-19 pandemic, which has demonstrated how unprepared supply chains were for such events. In fact, a survey by Jabil stated that nearly 80% of supply chain executives said that the pandemic has impacted their operations more than any previous disruption, and 95% said they care about supply chain resilience. By their nature, supply chains are like live engines, and these ecosystems are now more complex than ever.

To proactively manage exceptions, there is a need for transparency, flexibility, and connectivity at every stage. Ultimately, this boils down to the conclusion that businesses will want to eliminate the consequences of disruptions, and even more - prevent them from happening in the future at any cost. That's why risk management and supply chain resilience will become essential priorities for companies in the upcoming years.

Supply Chain Resilience: What You Should Know

Supply chain resilience is the company's ability to face and overcome supply chain challenges utilizing existing resources and with minimal disruption to the supply chain. Basically, it is the ability to stretch without breaking and get back in shape as quickly as possible. According to the Michigan State University definition, supply chain resilience is the capacity to resist and capacity to recover from various supply chain disruptions.

Resistance to emerging issues indicates a supply chain's capacity to minimize the damage of disruption, and recovery is the supply chain's capacity to quickly return to regular procedures after an unprecedented event. Resilience in supply chains is heavily reliant on agility and transparency across every operation and transaction.

There are numerous successful corporations with strong supply chains, but recent events have shown that even seemingly large and equipped businesses have endured a lot of frustrating and costly consequences due to the pandemic. While no organization is immune to risks, some companies definitely recover faster and experience less damage than others. The clue to this difference lies in their risk management strategies: companies with robust and well-thought-out risk management strategies in place are better able to navigate difficulties. Proactively managing possible risks and achieving end-to-end visibility is what enables supply chain resilience, which is the main differentiator for businesses today.

The problem is that many supply chain executives put risk management down the business list or implement some half-hearted measures simply to tick the right boxes, with real actions often only taken when something damaging has already happened. Until recently, resilient or agile supply chains weren't such hot topics because nobody could see such a slew of disruptive events occurring.

However, this doesn't mean that only massive events matter. Eventually, supply chain risks encompass things like natural disasters, capacity shortages, production issues, logistics bottlenecks (like the recent Suez canal blockage), and shallow relationships with suppliers. There are many other factors that interfere with supply chain operations daily, so building a flexible supply chain is a win-win strategy for any scenario.

To implement best practices for risk management, a business should answer the following:

What threats does your company currently face?

What outcomes would those risks produce?

What's the likelihood of these risks happening?

If the risk is likely to occur, is a plan of avoidance in place?

A Strategy for Building a Resilient and Agile Supply Chain

Another challenge with building an agile supply chain is understanding that this alteration doesn't happen overnight and doesn't have to be disruptive to the business flow. It is a careful yet effective approach that involves slowly detecting the weak points in the supply chain and steadily working towards preventing any possible risks.

Proactive - Identifying risks before they occur

Identifying feasible risks is the initial step in the roadmap to a proactive supply chain. Often, executives underestimate how many 'unpredictable' risks are actually lying on the surface. Analyzing all former disruptions that happened within a supply chain can help distinguish weak spots and repeatable patterns. For instance, whether there is a consistent failure with inventory, inbound shipments, or last-mile delivery. Huge and significant disruptions are not the only ones businesses can gain valuable experience from. Small mistakes occur daily and are also worthy of attention in order to build resiliency. However, even proactive supply chains find it impossible to adequately estimate risks and possible outcomes if the supply chain lacks visibility.

A connected network of suppliers

Trusted relationships with vendors and suppliers are a major part of a successful risk management strategy. Apart from clear communication and shared values, supplier visibility is what enables credible and long-standing relationships. Having clarity in transactions and operations adds more confidence and credibility to all parties involved. In terms of agility and flexibility, having a wider network of suppliers makes the business less prone to disruptions, as there is less dependency on one particular vendor. Diversifying suppliers and building a transparent, connected network of supply chain partners is an imperative for successful risk management and supply chain resilience.

Proactive standard risk management procedures

Before diving into innovative and transformative processes, it is important to make sure the company complies with basic rules and standard practices for risk management. This involves engaging your suppliers in vendor compliance programs, creating and following guidelines for inventory management, operations, and product manufacturing. Implementing these fundamental practices across all facilities and processes makes the proactive supply chain way more agile and less prone to risks.

Supply chain visibility & digitalization

Having a transparent and well-integrated supply chain is the main factor that enables true resilience and agility. Visibility and simultaneous control over processes not only allows for the detection of issues at an early stage but also the ability to quickly react to emerging challenges and prevent them from becoming calamitous.

In the modern supply chain environment, supply chain visibility and digitalization are the key driving force for a proactive and resilient supply chain. The integration and interconnection of all parts of the supply chain are heavily reliant on the company's digital infrastructure. Processes can be broken down to a granular level, which allows for the detection and prevention of risks at the early stages. Data centralization also provides valuable insights and a complete picture of the supply chain. Eventually, more data enables supply chain agility, accurate forecasts, and better risk management.

Proactive and agile supply chain with automation software

Data centralization and robust, integrated digital infrastructure are the drivers of end-to-end visibility, and consequently, agility. Eventually, resilience can be gained with a high level of supply chain transparency and connectivity. Investing in sophisticated digital solutions for data centralization and automation will be listed at the top of business priorities in the near future.

Tech solutions like supply chain visibility platforms are an essential tool for proactive supply chain transformation without disruption. They can help companies streamline processes, track shipments and transactions in real-time, see historical data, and investigate supply chain gaps. In addition, data centralization software helps companies enhance relationships with suppliers, improve on-time delivery rates, reduce operational and labor costs, automate processes, and improve collaboration and communication within the supply chain.
Agistix's robust visibility software can help tackle visibility challenges without disrupting your company's business flow, as a seamless integration process requires no change to your regular operations. Check out Agistix solutions today!

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Building a resilient and proactive supply chain

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The last decade was a redefining era for global supply chains in many ways. Acceleration of e-commerce, the rise of Amazon, and events like the COVID-19 pandemic have put a new supply chain priority into the spotlight - supply chain resilience.

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Four ways pharma companies can make their supply chains more resilient

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Another deep-researched journal relating to supply chain getting resilient. In this article, I found some accentuated information regarding this topic:
- In the pharma industry, cyberattacks and trade disputes create the greatest risk of supply-chain disruption
- Although the pharma supply chain is more global than those of other industries, companies often source critical materials from a single region, putting them at risk of shortages during natural disasters and local conflicts.
- Supply-chain resilience requires four elements: end-to-end transparency, routine stress-testing and reassessment, reduced exposure to shocks, and supply-chain resilience on the executive agenda.

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In the past two decades, the worldwide value of pharmaceutical goods traded has grown sixfold, from $113 billion in 2000 to $629 billion in 2019. Amid this growth, supply chains have become increasingly global, complex, and opaque. More companies are outsourcing production to contract manufacturers, adding new modalities (such as cell therapy), and exploring novel ways to reach patients. For some products, this results in supply chains that are so complex that they start in Asia and circumnavigate the globe twice.

Leading pharma companies have succeeded in shifting their supply chains to drive growth and manage costs. But unless they assess and plan for the risks that come with these changes, they can suffer huge losses.

Pharma executives say supply-chain risk is a significant reason for their companies' susceptibility to disruption, according to a recent McKinsey Global Institute survey. Nearly 50 percent of respondents cite sole sourcing of inputs as a critical vulnerability, and 25 percent point to a lack of visibility into supplier risks. Although supply-chain risks are unavoidable, companies can minimize their disruptive effects through greater visibility, rigorous risk management, and newer technologies that help companies better anticipate and respond to shocks. But first, building supply-chain resilience begins with understanding the nature of the risks the chain faces.

Disruptions have become commonplace

Natural disasters, international trade tensions, cyberattacks, and global pandemics are just a few of the shocks that can immobilize pharma companies (Exhibit 1).

Pharma companies are somewhat more insulated from supply-chain shocks than other industries are because they generally hold higher inventory levels, but that can't protect them from everything (Exhibit 2). In 2017, Merck reported that a cyberattack that occurred in June 2017 unfavorably affected revenue in the fourth quarter of 2017 by $125 million and for 2017 and 2018 by $260 million and $150 million, respectively. As such events become more commonplace, McKinsey Global Institute estimates that the pharma industry will lose an average of 24 percent of one year's earnings before interest, taxes, depreciation, and amortization every ten years.

In the pharma industry, cyberattacks and trade disputes create the greatest risk of supply-chain disruption (Exhibit 3). That's primarily because of the industry's abundant proprietary knowledge, capital intensity, international data flows, and moderate level of digitization. Trade disputes pose a threat because of the industry's high levels of international trade and constant pressure to relocate parts of the supply chain for economic and other reasons.

Regional dependencies and potential supply-chain shifts

Although the pharma supply chain is more global than those of other industries, companies often source critical materials from a single region, putting them at risk of shortages during natural disasters and local conflicts. Around 40 percent of pharma trade occurs within a particular region, while the average is 50 percent for other industries (Exhibit 4). For example, 86 percent of the streptomycin sold in North America and 96 percent of the chloramphenicol sold in the European Union come from China.

Companies can reduce their exposure to single sources and other supply-chain risks by diversifying where they buy materials. To secure an input better, a company might revert to domestic production, nearshore the supply, or offshore to new locations. We estimate that 38 to 60 percent of the international pharma trade, worth $236 billion to $377 billion in 2018, could potentially be considered for sourcing diversification (Exhibit 5).

For pharma companies, relocations are often driven by noneconomic factors, such as governments' desire to bolster national security and become more self-sufficient. For example, the Indian government is seeking to increase domestic production of bulk drugs and medical devices with a $1.3 billion stimulus plan. And the Austrian government is jointly investing with Sandoz International to support antibiotic production at the company's Kundl facility to ensure that the country has an adequate supply.

Four ways to build supply-chain resilience

Supply-chain resilience requires four elements: end-to-end transparency, routine stress-testing and reassessment, reduced exposure to shocks, and supply-chain resilience on the executive agenda.

End-to-end transparency

A lack of visibility into the business practices of suppliers and suppliers' suppliers can be a significant risk for pharma companies. Major consumer brands have been accused of unfair labor practices when overseas suppliers have been found to have used child labor.

A company must map its suppliers by tier to have an end-to-end view of the supply chain and identify vulnerabilities. It's also vital to have a clear understanding of exposures beyond supply, including how products are developed, delivered, and stored, because each stage poses its own potential problems. For example, the bankruptcy of a small transportation provider at a critical location could shut down an entire supply chain.

Getting a clear picture of what's happening at each stage requires gathering from internal and external data sources the leading and lagging resilience metrics in seven areas: data security, finance, operations, organizational maturity, regulation, reputation, and structure (Exhibit 6). For example, a review of one company's data security may reveal insufficient data-protection protocols. A structural review may uncover a heavy concentration of suppliers in a region subject to significant effects from climate change, such as hurricanes.

To conduct these analyses, companies can use a range of technologies. Some companies partner with third-party organizations, including start-ups funded by venture capital, to make investments (often of less than $1 million) to map their value chains and set up risk-monitoring systems. Others are investing up to $50 million in digital and advanced-analytics use cases to eliminate operational risks. For instance, some pharma companies are using AI-driven root-cause identification to improve quality performance. Others have set up reliability rooms to track performance and risk metrics across their end-to-end networks in close to real time to identify and resolve issues before they cause disruptions.

Routine stress-testing and reassessment

Companies often use scenario planning and simulation models to anticipate their vulnerabilities, quantify the potential impact, and mitigate the effects. For example, during the COVID-19 pandemic, a leading pharma company used a digital-twin simulation to understand the impact of production slowdowns and shutdowns on the supplies of patient medication. This helped the company realize that it had more time than it had anticipated to design and implement safer ways of working at its manufacturing plants, allowing it to take more time to get the best solutions. Once a company has visibility into its supply chain, it can assess the likelihood of different risks continuously.

Reduced exposure to shocks

One of the most common strategies for building resiliency is to expand the network of suppliers. Relying on a single source for critical components or raw materials can be a vulnerability, as can depending on multiple suppliers concentrated in the same place.

But multisourcing isn't the only answer. A company can also strike a better balance between just-in-time and just-in-case inventory levels, harden its physical assets to withstand hurricanes and storm surges, and provide financial support to distressed but essential suppliers. Many companies are experimenting with technologies that enable quick changes among suppliers and advanced analytics that help predict potential challenges better.

Being able to reroute components and flex production among sites can also keep production going in the wake of a shock. This requires robust digital systems and analytics to explore different scenarios. It also requires a standardized operating model-a company that has different specifications for the same API at each of 20 sites has dramatically reduced ability to flex its production. Also, regulatory filings should include the technical specifications of the supplies on which a product depends. If a company's filing relies on a particular brand of venous-access device, it's difficult to substitute alternates.

A case in point is Biogen's recovery from the impact of Hurricane Maria on its production plan in Puerto Rico. Applying its prior experience with natural disasters, the company identified the threat days before the hurricane made landfall. A global risk team created a war room to pinpoint supply-chain threats and critical subtier suppliers. It transferred production from Puerto Rico to Kentucky and secured alternative suppliers for critical materials in advance, paying $1.3 million for items at risk of shortages. As a result, its stock price recovered and surpassed the prestorm price within 15 days of Hurricane Maria's landfall.

Supply-chain resilience on the executive agenda

Supply-chain risk and resilience should be embedded in an organization's strategic planning and day-to-day execution, with structured governance to ensure that decisions are made and acted on at the right level and time. There are two common approaches:

Embed supply-chain resilience in existing forums. Each function and line of business conducts risk assessments, which are aggregated and discussed in existing forums, such as management-team meetings. Each unit must have risk-identification and -analysis tools, capabilities, and expertise for this approach to work. The organization must combine disparate risk assessments and have the incentives and escalation criteria for unit leaders to take ownership of risk management. The operation-leadership team serves as the forum for reviewing risks and making mitigation decisions about daily and strategic risks.

Create a chartered risk committee. A risk committee comprises a subset of a company's operation-leadership team and risk experts. A company can have committees at different levels of its organization. This approach ensures that a group of people is accountable for assessing and managing risk across the company. The committee will need strong analytic capabilities and tools that provide useful data. And there should be tight connections with existing governance forums to secure ownership of risk by functional leaders.

Leaders need to be able to see their organization's risks and have people continuously evaluate and mitigate them. Supply-chain shocks are inevitable, but as Biogen illustrated during Hurricane Maria, disruptions aren't. Every pharma company has some of the four elements we describe, but few have all. A company that wants to increase its resilience to shocks can review itself against these elements to determine where to start and how to proceed.

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Four ways pharma companies can make their supply chains more resilient

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In the past two decades, the worldwide value of pharmaceutical goods traded has grown sixfold, from $113 billion in 2000 to $629 billion in 2019. Amid this growth, supply chains have become increasingly global, complex, and opaque. More companies are outsourcing production to contract manufacturers, adding new modalities (such as cell therapy), and exploring novel ways to reach patients.