Skip to main content
2 Dec 2022
industry insights

What Is Retail Supply Chain Management?

Online shoppers’ expectations of retailers continue to rise, with more and more being demanded. Delivery has to be faster, cheaper, and more flexible, and retailers need…

Online shoppers’ expectations of retailers continue to rise, with more and more being demanded.

Delivery has to be faster, cheaper, and more flexible, and retailers need to provide all of this without hiccups. If something goes wrong, many customers aren’t forgiving.

In fact, 85% of online shoppers say that a poor delivery experience would prevent them from ordering from that online retailer again.

With the increase in online ordering and overconsumption, supply chains are under immense pressure around the world. The cost of shipping is rising, orders are backlogged, and brands are losing production time due to global disruptions. 

To tackle this, retailers are hiring Chief Supply Chain Officers and other experts to lead their logistics operations, reducing delays and resolving inventory issues.

This article will give you an overview of the retail supply chain, supply chain management, why it is important, and some tips to help you improve your supply chain for 2023.

What Exactly Is The Retail Supply Chain?retail supply chain management

The retail supply chain is the series of processes involved in the manufacture and distribution of your products. A supply chain consists of various discrete elements such as order management, inventory management, procurement, carrier partnerships, warehousing and more.

Many companies refer to the retail supply chain as the logistics processes that enable the product to reach the end customers in order to simplify it. It includes everything from obtaining the raw materials needed to manufacture the product to delivering that product to your customers.

What Is Retail Supply Chain Management (SCM)?

The term “retail supply chain management” describes how you manage the inbound and outbound logistics of a good, from raw materials to delivering the finished product to a customer.

Supply chain managers enhance supply-side operations to reduce costs, speed up product delivery, and gain a market advantage. Retail supply chain management is distinct from other supply chain management due to the volume of product movement and the fast-moving nature of retail industry products.

Due to the low cycle time and constant movement of the products, the retail supply chain must be closely monitored and defect-free. Furthermore, retailers need to move materials continuously throughout the supply chain to succeed. Retail management is therefore extremely important to any organisation in the retail industry and must be carefully monitored and maintained.

What Makes Retail Supply Chain Management So Important?

Retailers of all sizes are struggling to live up to consumers’ expectations.

75% of global shoppers are heavily influenced by free shipping when making a purchase, with 58% expecting free next-day delivery.

The best shipping experiences will significantly impact costs and give providers a competitive edge. Your fulfilment strategy and delivery capacity can help you differentiate yourself from competitors in the cutthroat retail market. This can be accomplished by the following:

  • Managing inventory costs
  • Avoiding stockouts
  • Building customer trust

Managing Inventory Costs

Inventory costs include any expenses incurred in the ordering and storage of inventory. It is one of the most significant expenses for retailers: for every dollar a US retailer earns, they have $1.35 worth of inventory in stock.

Proper SCM can help you save money on inventory in the following ways:

  • Improve demand forecasting.
  • Strike the right balance between purchasing, ordering, and storage
  • Reduce storage costs
  • Prevent stockouts and high carrying costs
  • Eliminate dead stock
  • Simplify order management

Inventory serves as a safety net for retailers against supply and demand instability. You can precisely maintain the right amount of stock in the right place at the right times throughout your distribution network with an effective retail supply chain management strategy.

Avoiding Stockouts

When you run out of inventory for a specific item, you have a “stockout.” Even though out-of-stock situations can occur anywhere in the supply chain, they most negatively affect retailers’ profits because they prevent customers from buying the goods they want. A recent survey found that 30% of consumers believe stockouts negatively impact their shopping experience.

According to recent data, stockouts increased by 250% in October 2021 compared to pre-pandemic levels.

Stockouts can be caused by:

  • Inaccurate inventory counts
  • Increased demand
  • Delayed suppliers
  • Limited cash 

SCM enables you to forecast and handle logistical challenges, reducing stockouts and boosting profits more accurately.

Building Customer Trust

Effective supply chain management results in happier customers and more products on the shelves. Customers are more likely to return to your store if they can find exactly what they want.

The opposite is also true. If you get SCM wrong, your customer retention will suffer because they will not buy from you at all or will switch to a competitor. You can deliver on commitments if you are proactive with your SCM, and if you can’t be open and honest with customers which is essential to providing the best service and ultimately building trust.

3 Ways to Improve Your Supply Chain Processes

Order fulfilment necessitates the coordination of all of the people, processes, and technology needed to deliver an order to a customer. Everything from your online checkout process, payment provider, and order management system to how you pick, pack, and ship items falls under this category.

When examining your current processes, start at the beginning. A lot can go wrong with an order between the time it is placed and shipped. This is the area where most retailers have the most inefficiencies and the greatest room for improvement.

Retailers have a few options for overcoming various challenges during this phase:

  • Invest in shipping software
  • Partner with a 3PL provider
  • Integrate Your Retail Systems

Invest in shipping software

Shipping software assists retailers in importing, organising, and processing online orders for fast and dependable shipping. They help in creating and printing shipping labels, as well as negotiating the best rates with carriers.

Partner with a 3PL provider

A third-party logistics (3PL) provider is a company that assists merchants in managing their supply chain. Warehousing and inventory management, order fulfilment, shipping coordination, exchanges and returns, and other services are included.

Given that most retailers will not specialise in logistics, 3PLs provide a way to outsource part or all of your fulfilment processes. So, it is important to find the right partner that can fulfil your needs all at the right price point.

Integrate Your Retail Systems

Integrating your retail systems empowers you to compete against retailers of all sizes. You have the ability to compete against market players, even if you’re not Amazon, by offering free 2-day shipping and being confident that your products will arrive on time. This will give you more negotiating power with your suppliers if you can perform advanced logistics operations.

Safeguard Your Retail Supply Chain

The supply chain is often completely invisible to the end customer, which is deliberate. All of your efforts to ensure customer choice, availability, reduced costs, and fast delivery result in a quick, satisfying, and effortless customer experience.

By implementing the strategies outlined above, you’ll be well on your way to creating a more resilient supply chain that enables you to maintain inventory levels and boost sales.

We Are Storm5

In the rapidly growing supply chain and logistics space, there will be numerous opportunities for growth for startups and scaleups. Finding the right talent can be a difficult task, but that’s where Storm5’s expert supply chain and logistics recruiters come in. We have the best candidates in the market for positions in Sales and Marketing, Product Management, Data, and Engineering, so don’t hesitate to get in touch with us or submit a vacancy today!

We’ve helped some of the most successful RetailTech startups grow.

— now it’s your turn.