Searching for savings: finding efficiency in expensive supply chains

By John Linton, Industry Director, Retail, Manufacturing and Supply Chain, Lexmark

UK retailers are under pressure; despite the Brexit deadline looming, 57% still have no plans in place should the UK leave the EU as planned. In fact, according to a survey of 200 British retail decision-makers, nearly half of respondents anticipate difficulty in sourcing products or goods against a backdrop of changing regulation.

Traditional retailers also continue to sufferfrom the "Amazon effect"' with online giants capturing market share as consumers continue to demand a new level of service from their retailers and become increasingly price conscious. All these challenges mean that uncertainty is rippling across the sector, with concerns around the impact to supply chains particularly noticeable. 

The potential disruption of Brexit to supply chains is already causing many retailers to stockpile goods. One particular concern is the likelihood of new trading tariffs being implemented between the EU and the UK, a move that could result in higher import costs for retailers - costs that will unfortunately be passed onto the consumer.

Alongside other factors such as currency fluctuation and limited resources, these challenges make it more important than ever for retailers to find new ways to drive efficiencies and cost savings across their supply chains, helping to ensure stock availability to meet critical customer requirements. Creating a healthy supply chain could be the difference between retailers thriving or failing in a post-Brexit landscape.  

A key factor here is for a retailer to enhance visibility of its logistics operations and stock in transit. Without a high level of visibility, confusion can occur around the whereabouts of products in transit, leading to inaccurate stock levels. An inability to manage inventory correctly means higher storage costs and profit loss due to obsolescence, shrinkage and deterioration. What’s more, not having the right stock in the right place at the right time can lead to poor customer experiences, forecasting difficulties, failure to track trends in consumer purchasing behaviours and ultimately, sales loss.

"Creating a healthy supply chain could be the difference between retailers thriving or failing in a post-Brexit landscape"

Radio Frequency Identification (RFID) is a technology commonly used by retailers to avoid these risks by providing improved visibility from the point of manufacture, across the supply chain and in-store, from fitting rooms to purchase. While it’s not a new technology, RFID has evolved significantly,  with Accenture citing 69% of retailers around the world as demonstrating a significant level of adoption, and 80% believing its benefits cannot be replicated.

As the name suggests, RFID uses an antenna and radio frequencies which work within a certain distance to identify a product and receive information from an RFID tag, removing the need for barcode scanning. The sheer volume of information that this provides can be matched with order management systems to automatically track shipment and stock locations as products move through warehouses and trucks.

For many retailers, the proven benefits of RFID are too good to ignore; there is no better technology to deliver ROI in inventory management. For example, River Island recently rolled out RFID solutions in 280 stores, tracking garment sales using tags applied by suppliers.

The initial project monitored overall inventory levels at each store, automating replenishment to boost sales. River Island had three key performance indicators for the pilot. It sought to achieve a 95% stock level accuracy at each store, increase sales, and receive positive feedback from workers regarding products' in-store availability. After three months, River Island had accomplished all three goals, including an inventory accuracy rise from 72 to 97%.

While much of the impact of Brexit is inevitable, retailers can get ahead of the curve by making operational improvements and providing a higher level of customer experience. RFID solutions have a lot to offer retailers in this context: enabling real value-driven efficiency across the supply chain; helping to improve profit margins; and offering real-time stock information and eradicating human error by automating processes.

With all these benefits, it’s understandable why this technology looks to be on a trajectory for wider adoption across the retail sector in 2019 and beyond.