Supply chain disruptions have been a major concern for businesses across all industries in 2023. According to KPMG Global, disruptions to supply chain operations are set to stay in 2023 due to existing or new geopolitical conflicts, inflationary pressures and the recessionary environment, climate change weather events, or other issues yet to emerge1.
To protect against material access issues, KPMG recommends that businesses should protect their core offer and mitigate risk by removing critical time spent managing low-demand items. They should also resolve redundancy in their supply chain by shifting from Just-In-Time to Just-In-Case, holding extra inventory for critical items1. Forbes suggests that businesses should invest in the right technology, diversify suppliers and manufacturing partners, incorporate risk management into their supply chain management, create a procure-to-pay purchasing system and focus on the basics—cash is king2.
Consumers should brace for continued supply chain disorder in 2023. Supply chain leaders predict that food, gas, and computer chips are most at risk of impact in 20233.
Impact on Retail industry and preventive measures.
The COVID-19 pandemic has caused significant disruptions in the global supply chain industry. The most relevant elements are difficulties in the logistics and transportation sector, semiconductor shortages, pandemic-related restrictions on economic activity, and labor shortages1.
According to McKinsey analysis, concurrent disruptions have the potential to decrease earnings before interest, taxes, depreciation, and amortization (EBITDA) for retailers by 20 to 40 percent in the near term, with 15 to 20 percent of that decrease enduring if these supply-chain shocks go unaddressed2.
Retailers have taken several measures to prevent supply chain disruptions. These measures include buying limits, continuous inventory review, government rationing, substitutability, and omnichannel fulfillment. Effective communication and price and availability guarantees can mitigate the negative impact of panic buying.
The retail industry has been undergoing a significant transformation in recent years, with the rise of e-commerce and the increasing importance of omnichannel retailing. To improve supply chain management in the retail industry, companies are adopting new technologies and strategies that enable them to better manage inventory, reduce costs, and improve customer satisfaction.
According to Forbes India, successful omnichannel retailing strategy requires four major pillars. These are an integrated supply chain strategy, inventory transparency across channels, technology footprint to facilitate the execution, and right alignment of the operations & supply chain strategy with the marketing strategy1.
McKinsey suggests that to realign the supply chain with the new omnichannel environment and related challenges, the next generation of operating models integrates state-of-the-art guiding principles for reshaping processes, structures, and people2. McKinsey also recommends creating a differentiated supply chain strategy that includes the right network strategy, world-class planning and allocation muscle, omnichannel-fulfillment capabilities, and the right omnichannel operating model to enable each consumer-back segment3.
The retail industry is expected to see large-scale deployments of innovative technologies in supply chains in 2023. These will not only deliver greater efficiencies and cost-benefits to the retailers but also shape the future of supply-chain operations 1. Some of the key tech-driven innovations that are likely to scale in 2023 include AI, computer vision and omnichannel customer journeys 2.
Omnichannel retail is an approach to commerce that focuses on providing shoppers with a unified experience across digital and physical channels, from browsing to order fulfillment 3. It is based on the premise that integrating multiple touchpoints adds extra value, and as a whole, it’s greater than the sum of its parts 3.
