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Perspective
5 minute read

Making merchandising and supply chain integration a reality

Unlocking transformation in your retail supply chain

Many retailers have dreamed about integrating merchandising with the supply chain. Now that technology has caught up with the vision, even companies with world-class retail supply chains have the opportunity to more effectively operate their supply chains in an agile, digital way. How? By using predictive merchandising analytics.

Weaving your supply web
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Merchandising and supply chain integration

Involve your executives. Such a large-scale transformation of processes and organisation requires the highest level of executive commitment. Only when the organisation agrees on the level of investment, time and resources required can the change be sustainable and generate timely results.

Pick the right KPIs and metrics. Measuring and tracking joint performance with strategic KPIs enables joint accountability that can lead to a more optimised assortment range, availability, efficient retail supply chain service and an improved customer experience across all channels.

Make every project a joint project. Consumer demand is in a constant state of change. These changes, when not understood across the entire retail value chain, can lead to sub-optimised decisions. When this occurs frequently across multiple business lines, it can contribute to transformation fatigue across the organisation.

Review your hiring model. Much of today’s workforce is looking for multiple experiences, bite-size projects, and new opportunities to grow. With the rapid advancement of technology and customer demand, the workforce playbook is shifting to a more flexible way of working (flexible hours, ability to work remotely, etc.).1

How can these capabilities help unlock transformation opportunities for retail supply chains?

As retailers create an integrated merchandising and supply chain capability, they have the opportunity to unlock a variety of new opportunities that can potentially make the company more efficient and profitable while providing additional value to customers. Here’s what retailers can do to help build it:

Involve your executives. Such a large-scale transformation of processes and organisation requires the highest level of executive commitment. Only when the organisation agrees on the level of investment, time and resources required can the change be sustainable and generate timely results.

Pick the right KPIs and metrics. Measuring and tracking joint performance with strategic KPIs enables joint accountability that can lead to a more optimised assortment range, availability, efficient retail supply chain service and an improved customer experience across all channels.

Make every project a joint project. Consumer demand is in a constant state of change. These changes, when not understood across the entire retail value chain, can lead to sub-optimised decisions. When this occurs frequently across multiple business lines, it can contribute to transformation fatigue across the organisation.

Review your hiring model. Much of today’s workforce is looking for multiple experiences, bite-size projects and new opportunities to grow. With the rapid advancement of technology and customer demand, the workforce playbook is shifting to a more flexible way of working (flexible hours, ability to work remotely, etc.).1

Optimise based on the value of service and speed to your customers. Particularly in this omnichannel world, it’s important to decide what level of service to provide to which customers through which channel, then make inventory, pricing and delivery option decisions based on that understanding.

Build your virtual warehouse. The rise of multiple retail supply chain channels will potentially decrease the overall productivity of stock. Having a single cross-channel view of stock gives the entire organisation the ability to calculate the most cost-effective fulfillment mode for any item stocked or shipped.

Pool inventory closer to customers in urban and suburban markets. As multihour delivery to both online customers and rapid store replenishment become table stakes, the deployment of inventory could move to the front of the line in the “supply chain challenge” list.

Package merchandise in a multichannel-ready way. Inventory should be packaged so it can be sent to customers from any channel. Providing channel-ready and allocated merchandise from the manufacturers and/or vendors also helps reduce lead times and create cross-dock efficient flows in distribution centres.

Integrate sourcing for innovative experiences. Experiences are an important part of retail now, but many retail supply chains are struggling to support customers’ constant appetite for novelty. To manage the cost side of the equation effectively while enabling the innovation required by the marketing and merchandising teams, integrated planning is key.

Keep up with emerging sales channels. The desire to shop anytime, anywhere, and for anything has created a niche service industry. Aligning or acquiring such capabilities may need to be part of your digital playbook to respond to new competition or drive costs out of the operations to invest in a more agile marketplace. Integrated planning enables you to see and proactively operate across the network, collaborate at the appropriate time with your suppliers and customers, and use all the data and analytics in the ecosystem to identify the most appropriate channel to meet or exceed your customers’ needs.

Integrated planning is the future of predictive merchandising analytics

Integrated planning enables you to see and proactively operate across the network, to collaborate at the appropriate time with your suppliers and customers, and to use all the data and analytics in the ecosystem to identify the most appropriate channel to meet and exceed your customers’ needs. This could translate to:

  • Enhanced customer experience
  • Optimised and efficient product flow
  • Smarter stock management
  • Improved capital performance

And this phase is only the beginning. The digital supply chain continues to learn from every order, which means that over time, your entire supply chain—not just individual links in the chain—can continue to see improvement and continue to provide insights across the entire organisation’s value chain.

Move your retail supply chain forward

Developing a more integrated way of working across the enterprise entails a significant amount of cultural change. This shift requires executive support, a long-term vision and, often, plans vetted by industry experts. As you begin your journey to an integrated supply chain, consider the following:

  • Make sure all digital supply chain projects have representation from all functional areas and at the leadership level to build executable solutions for the integrated capabilities of the future.
  • Understand that the journey to a digital supply chain involves significant structural changes.
  • Establish a digital network planning steering group from all parts of the organisation to guide the organisational design and development.
  • Encourage cross-functional interconnectedness to blend skill sets within the workforce to ultimately help build new behaviours, break silos and rapidly innovate and accelerate new solutions.
  • Clearly picture not only the future integrated supply chain, but also understand the present; having a baseline of current KPIs is a critical part of development.

After careful assessment of the strategic options and their impact on the culture and organisation, it’s time to be decisive. A significant roadblock to most journeys is taking the first step. Pick an area of your supply chain and get started…today!

Clearly picture not only the future integrated supply chain, but also understand the present; having a baseline of current KPIs is a critical part of development.
End Notes

1 Jeff Schwartz et al., “What is the future of work?”, 2019, https://www.deloitte.com/global/en/services/consulting/services/human-capital.html

Jeff Schwartz et al., “The future of work: The augmented workforce”, 2017, https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2017/future-workforce-changing-nature-of-work.html.

Deloitte Consulting, “The workplace of the future is flexible and connected–but managers are still failing to set a good example”, July 12, 2018, https://www2.deloitte.com/ch/en/pages/press-releases/articles/the-workplace-of-the-future-press-release.html.

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Brian Baker

Managing Director | Retail and Consumer Goods

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