McKinsey: Five Ways Retail Supply Chains Can Navigate COVID-19
As the impact of the coronavirus outbreak continues to spread, McKinsey & Company has taken a look at how retailers can help communities and employees alike.
COVID-19 has introduced new operational risks, humanitarian impacts, and more. As the spread continues daily, retailers continue to look for new ways to provide consumers with essential and non-essential goods. Global supply chain networks have taken a much larger hit, with different countries all experiencing different levels of severity.
Supply chains leaders are being forced into making quick decisions to implement transparency-increasing solutions and rapid-response capabilities to mitigate the outbreak’s short-term fallout. Building resilience and returning to the “new normal” will be the next steps for supply chain leaders, but until then, navigating COVID-19 is necessary.
Consumer behaviour and demand has changed significantly since the advent of the outbreak. With more and more people staying home, food, household and personal care products have seen increased demand, whilst apparel and furnishings have seen a decrease. The number of people turning their backs on physical stores for e-commerce has also been rising.
How retailers can respond:
1 - Secure demand - The rising demand for nondiscretionary goods means that retailers have experienced significant stockouts. In response to this, retailers are working with companies across their supplier networks to secure an adequate supply of essential, high-demand products.
The priority is to create fast and reliable supply. Suppliers are simplifying SKU profiles, easing payment terms and widening delivery appointment windows, whilst relaxing on-time, in-full requirements to improve speed.
2 - Redirect inventory - Retailers must cascade the changes being made across purchasing, planning, and inventory management operations. Nondiscretionary goods are being put on the backburner, with high-demand goods the priority. Retailers will have to begin bypassing their inventory-replenishment and allocation algorithms to begin shifting inventory quicker. Staff will also be reassigned as companies drive quicker supply.
3 - Add capacity - Some office workers have been temporarily reassigned to roles within warehouses, such as forklift operating, to support operations where demand has seen a decline. However, employee health has to be the top priority for employers, with preventative COVID-19 measures in place.
Staggered shifts, installed partitions, and opportunities to sanitize equipment have all been implemented across the industry, reducing infection risk whilst ensuring the business continues.
4 - Balance agility and flexibility - Maintaining logistics flexibility is now more important than ever. Bypassing distribution centres and shipping directly to stores is looking to be retailers preferred method to do this. Organisations are also simplifying assortments and packaging to ensure suppliers can make same-SKU full pallet shipments to hub stores or distribution centres.
5 - Deliver reliably - Delivery orders have increased as the number of people isolating and staying home has increased. Widened delivery windows, converting some outlets into “dark stores”, and temporary job shifts from in-store employees to delivery services are all helping businesses meet this increased demand for goods to be delivered to consumers’ doors.
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