First and foremost, the coronavirus is a humanitarian crisis. Therefore, retailers have to consider how to serve their customers while protecting the health and well-being of their employees and workers of the other supply chain partners. It’s a tough challenge, which requires creative and resourceful responses. Moreover, the lessons from this challenging time can help supply chain professionals to make their supply chains more resilient. The next crisis might be no less surprising, but the right plans can keep it from causing as much disruption.
With the spread of the coronavirus outbreak, there is a definite shift in the purchasing patterns of the consumers. One of the noteworthy changes is that the demand for non-discretionary product categories such as food, household, personal care is increasing drastically. In contrast, the demand for discretionary items such as apparel, electronics, and furniture are declining.
Retailers have stepped up their efforts to cater to the increasing demand in essential goods. However, this is becoming more and more challenging for retailers due to various social distancing measures such as lockdowns placed by most governments in the world.
The common challenge of any retailers during this pandemic is to secure a fast and reliable supply to maintain their on-shelves availability. However, social distancing measures such as lockdowns, self-isolation and working from home have contributed to a notable increase in online shopping for non-discretionary goods. Therefore, the biggest challenge now is to find ways to deliver said products to the doorstep of the customers.
So it is evident that the retailers require more and more flexibility in their supply chains to navigate this pandemic successfully and the outbreak has forced them to adapt their supply chains rapidly. McKinsey & Company suggests five critical areas that the retailers should focus on meeting the demands of the ‘new normal‘.
- Establish daily meetings with strategic suppliers who supply high-demand essential goods
- Simplifying SKU profiles to reduce the variety and boost quantities
- Easing payment terms
- Widening delivery-appointment windows
- Relaxing on-time, in-full (OTIF) requirements.
- Revising purchasing plans to favour items in high demand
- Direct more inventories toward locations where sales are high
- Bypass or override inventory-replenishment and inventory-allocation algorithms to move inventory around quickly
- Retrain employees and redeploy them to distribution centres in high demand areas
- Maintain good workplace hygiene
- Cross-train back-office and store personnel to assist with e-commerce
- Allocate more transport capacity to high-demand items
- Bypassing distribution centres and ship goods directly to stores
- Simplifying assortments and packaging processes putting speed ahead of product variety.
- Explore alternative and supplemental delivery options
- Widening delivery windows from immediate or same-day to two or three days to allow retailers to rationalize the scheduling and routing of deliveries so that deliveries in the same area can be grouped and sent out in one round of drop-offs by the same driver, saving time and mileage
- Optimize routing and accommodate more delivery slots
- Expanding partnerships with gig-economy delivery services
- Converting some outlets to “dark stores,” where workers pick orders
- Temporarily shifting in-store employees to delivery jobs
- Enforce order maximums/capping order size of essential goods
(Source: McKinsey & Company)