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How Can Retailers Prepare for Supply & Demand Disruptions?

Retailers Prepare for Supply & Demand Disruptions

As of early March 2020, almost three-fourths of companies had experienced supply chain disruptions as a result of global restrictions on transportation. Most consumers — usually fairly removed from what goes on behind the scenes in retail — saw the effects with their own eyes. Supply chain disruptions manifested themselves as shortages, restrictions and price fluctuations on a host of products that once were plentiful on store shelves and in online markets.

The pandemic reinforced an oft-repeated maxim in business: By the time an emergency strikes, it’s already too late. There’s little companies can do during the throes of disruptions except try to minimize the damage. The best and only time to come up with a workable plan to mitigate risk is in advance.

Here’s more on how retailers can prepare for supply and demand disruptions, whether they stem from a global pandemic, a natural disaster, geopolitical unrest, network outages or any other potential cause.

Trace & Diversify Supply Networks

Many of the shortages in retail stores stemmed from overseas production issues — like suppliers shutting down due to safety regulations and workforce shortages due to illness. Thus, the logical place to start is evaluating supply networks, then diversifying them to pad against future disruption by geography.

As RetailWire cites, a recent survey found over half (51 percent) of global retailers believe sourcing key products from multiple suppliers — thereby reducing their dependency on single sources — is the most effective strategy for minimizing the negative impact disruptions like COVID-19 can have on the bottom line.

For some companies, this means sourcing more products locally, or at least within driving range. For others, it simply means spreading out international operations so the detriment is smaller if a certain region or area suffers an interruption in production.

Build a Buffer Around Inventory

The same survey found more than six out of 10 organizations (61 percent) created an inventory buffer to handle irregularities in supply and demand, as Supply Chain Quarterly cites. Of course, while this strategy can help retailers reduce the risk they’ll run out of product to sell, it also means taking on additional risk in terms of cost. If for any reason demand drops, some of that inventory may become deadstock or expire.

Whereas inventory used to be largely a matter of forecasting based on historical performance, retail analytics today are enabling business leaders to ask questions, drill down further into data and generate reports on the fly — all capabilities that become even more important during a crisis. The ability for more workers throughout an organization to conduct real-time, ad hoc analyses positions retailers to make quick, data-driven decisions when it counts. 

Build Flexibility into the Business Plan

Minor and major crises feel less like “the end of the world” when a company can quickly assemble all hands on deck. This means every team needs to have a plan in place that allows them to pivot from business as usual to special circumstances when disruption hits.

TotalRetail offers an example of how this flexibility looks in action: Marketing, logistics and product teams are ready to collaborate and spring into action in the event of a product deviation, like a recall or out-of-stock product. This means handling back-end details, like order fulfillment times, as well as front-end details — like how to communicate with any customers affected by the shortage. It means critically problem solving in the moment to minimize the damage, salvage customer relationships and get things back up and running as soon as possible.

Above all, teams must be ready to drop their routine duties and pivot to crisis management on the spot. Therefore it behooves companies to set expectations early and train employees as needed so they’re comfortable with their duties during crunch time — and no stone is left unturned.

While retailers can’t prevent supply and demand disruptions, they can prepare for them by diversifying their supply networks, buffering their product inventory and building flexibility into their risk management plans.

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