Automation is the biggest issue keeping supply chain execs in the UK awake at night, according to the second annual State of the Retail Supply Chain report from Finnish supply chain expert RELEX.
The study, which was conducted by research firm Martec International, asked retailers from the UK, North America, Germany and the Nordics with annual sales exceeding €100m (£78m) about the top issues affecting supply chain planning and execution. It looked at challenges with forecasting, supply chain visibility, whether respondents operate a single stock pool across all sales channels, and how productive their staff are.
Some of the key findings for UK retailers include:
- Automation of key processes is the top business issue regarding supply chain planning and execution (52%). Last year it was increasing availability without increasing stockholding.
- Looking specifically at forecasting, 67% of respondents said forecasting effectively across the whole supply chain was a challenge.
- UK retailers rate the visibility of their supply chain the lowest of all regions surveyed, at 5.4 out of 10, compared to the global average of 6.2. This is also a lower score than last year, when the UK average was 6.4 out of 10.
Mikko Kärkkäinen, group CEO at RELEX Solution said: “It would appear that, despite seeming slightly more pessimistic in overall outlook, UK retail is starting to look more holistically at the supply chain and recognising the key role that automation can play in addressing some of the more specific challenges.”
However, the report also highlights more than one-in-four (26%) of retailers who took part in the study say they have no plans to invest in new systems due to their perceived complexity. In addition, 23% are blocked from investing in new supply chain systems by existing spending commitments on ERP or in-house solutions that they identify as offering little flexibility and which are complicated to improve.
Issues regarding supply chain planning and execution
The top issue regarding supply chain planning and execution for UK retailers is automating key processes (52%), which is number three for retailers in all of the regions. This correlates to the joint top reason retailers cite for replacing systems, which is the amount of time manually spent data crunching, which in turn affects productivity and profitability. The UK has the same priorities as for the all-retailer average, which are increasing availability without increasing stock holding (the top issue in the UK in 2015) and reducing stock holding without impacting sales.
Challenges regarding forecasting
Last year, UK retailers cited forecasting demand for new products (72%) as their top forecasting challenge but if we look at challenges regarding forecasting by country in 2016, UK retailers fall in line with the global averages and their key concerns are forecasting effectively across the supply chain at 67%, forecasting effectively for promotions & promotional lift at 63% (last year’s third biggest challenge) and forecasting heavily seasonal items at 48%. The advanced state of omni-channel (physical and online outlets) retailing in the UK means that forecasting across sales channels is a particular challenge.
UK retailers rate the visibility of their supply chain at the lowest of all the regions at 5.4 out of 10. In comparison, German retailers give themselves 6.6, North America 6.5 and Nordic retailers 6.0.
Operating a single stock pool across sales channels
UK retailers with more than one sales channel are marginally less likely to operate a single stock pool than the average (39% of retailers vs the all country average of 43%), although UK retailers do score the same as North American retailers. German retailers with more than one sales channel are however marginally more likely to operate a single stock pool at 46% and Nordics based retailers even more at 48%.
Retailers in the UK are the least efficient in terms of staff productivity. The average full time equivalent employee (FTE) forecasts and replenishes an average of €73m (£57m) of sales. This is up €1m (£775,000) from 2015 but is much lower than the all-country average of €172 million (£133m) of sales in 2016. There are however a high proportion of older and in-house developed systems in the UK than in other countries and this, coupled with the smaller size of retail chains compared with North America – that has an average full time equivalent employee forecasts and replenishes an average of €245m (£190m) of sales – may account for the UK’s relatively poor performance.
Kärkkäinen added: “The research makes clear that whilst there are some regional variations, overall retailers globally share the same supply chain challenges. Updating systems and processes will prove key to addressing these issues in coming years.”