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Effective Supply Chains Are Critical
to Retailers
The retail industry will face many difficult challenges in 2010. Unemployment and underem-
ployment are high and living standards for Americans continue to erode, leaving little money
for purchases outside of necessities. Also, issues in housing, banking and health care will con-
tinue. Although there may not be much sales growth in 2010, retailers can still strengthen their
bottom lines by having an effective retail supply chain, which is essential to reduce costs and
maintain high service levels.
—Dan Avila, partner, Tompkins Associates
s consumers continue to trade down, discounters continue to perform well and luxury
item retailers continue to suffer; other sectors
are somewhere in between. While the worst
A
will be agile with their inventories and will be quick to discontinue low-selling items. Many retailers had great success in
2009 with inventory improvements. And, a paradigm shift in
retail has led to merchandisers no longer influencing inventory
of the downturn appears to be over, consumers are still cau- levels by inundating stores with product, hoping it sells, and
tious. According to a recent National Retail Federation survey, taking markdowns when it does not.
Americans are not ready to declare an end to the recession
Logistics Networks: Many retail logistics networks have
until unemployment levels subside. So, retail’s return will not not been evaluated in five-plus years and, therefore, reflect a
be sudden, but many believe it will begin recovering in 2010. different economic situation. From fuel cost to labor cost and
For this year, there are three important areas in which retail- on to offshoring and logistics outsourcing, there have been
ers can improve their supply chains and reach future success many changes that can make logistics networks obsolete and
as consumer confidence returns.
ineffective. A realignment of the logistics network can yield
Cost Reduction: The recession taught surviving retailers significant cost savings and service benefits.
many lessons. One lesson is to become lean. By eliminating
redundant positions, re-thinking the organization structure,
The Outlook
and reducing unnecessary costs, retailers are stronger. Retail- To gain a competitive advantage as they pull out of the reces-ers must continue in this manner or they may find themselves sion in 2010 and beyond, retailers will be reducing operating
floundering when another downturn occurs.
costs, reducing inventories and evaluating their logistics net-
Reduced Inventories: Several retailers did not survive the works. For retailers to survive, they must take the lessons
recession due to their high inventory levels and inability to learned from the Great Recession and use them to fully recover
adapt to demand changes. Moving forward, successful retailers and prosper during the Great Comeback.
