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Businesses worldwide are facing ongoing supply chain disruptions caused by global crises and the lasting effects of the pandemic. Many are also dealing with errors when forecasting consumer demand resulting in fluctuations across the supply chain, forcing them to sell goods for a much lower price to clear out overstocked warehouses.
Retailbiz recently spoke to Anaplan vice president of solutions and industries, Evan Quasney about the supply chain landscape and how retailers can overcome these types of challenges.
Anaplan is an enterprise technology enterprise software company focused on bridging the gap between financial planning and decision making, as well as operational planning and decision making. Its customers in the retail space include Kathmandu and Super Retail Group in Australia.
“A lot has changed in the world since it reopened post-pandemic. Businesses are facing incredible inflationary pressures, ongoing delays in product availability, geopolitical conflict, and much more, which introduces increasing volatility to the operating environment,” Quasney said.
“Anaplan helps companies make better decisions between how they support their activities and decisions from an operational perspective – do I have the right people in stores? Am I selling the right products? Am I paying my teams enough? Am I shipping enough in the supply chain? This is then tied back to the health and financial performance of a business. Agility is critical right now and the faster businesses can respond, the more solvent the business will be, and the cashflow more stable.”
When Anaplan starts work with a customer, the main challenge typically revolves around performance relative to a forecast or a plan, according to Quasney.
“Bad forecast accuracy and mismanaged expectations can often be the issue, which has major financial implications if a business is not using the right technology, has the wrong product assortment mix, or customers are going to their competitors,” he said.
“Anaplan helps organisations find the problems and fix them by working out the direct linkage of the benefits of less overtime to run the warehouse, having the right staff on the shop floor, ensuring enough inventory is on hand and all of the cash isn’t being sunk into working capital.”
When asked for his outlook on the future of the supply chain, Quasney first reflected on why retailers are sitting on so much excess inventory right now.
“At the beginning of the pandemic, no one had any forecast history to understand future demand, so businesses overbought and they underbought. More recently, they didn’t anticipate the pace of the world reopening and the scale of consumer excitement,” he said.
“Inventory levels were at historic highs heading into the holiday season and warehouses were overflowing, driving more markdowns well in advance of holiday sales events in August and September. Now it’s about the conversion of working capital back into cash that can be reinvested, so it will be critical to watch how retailers manage available inventory and cash moving forward.
“In light of that, there is a logistics crunch – retailers are using tactics to force customers to click and buy now – and that’s called demand shaping. They are discounting to get it off the books and to minimise logistic bottlenecks because of price pressures and higher costs due to elevated fuel prices globally.”
What does this all mean moving forward? Retailers will be managing cash and aggressively managing expectations on pricing and free shipping more than usual, according to Quasney.
“I believe we’re moving into a time of incredible volatility with regards to inflation, low unemployment, and unseasonably high inventory levels. We’re going to start seeing smarter decisions being made around portfolio rationalisation, and a rebalancing of both portfolios and purchasing behaviour from three plus years ago,” he said.
“Businesses will need a multi-period view combined with far more reliance on external data signals. Courtesy of the IT advancements over the last few years, the organisations that are pulling in external data faster to better understand external market dynamics will be better positioned in terms of managing gross margin targets.”
Quasney, who is based in the United States, recently visited Australia and observed the consumer demands that are putting pressure on retailers, specifically calling out the cultural importance of emission reduction.
“Retailers need to find ways to call out low carbon products and logistic options. There’s going to be a lot of innovation around bringing the importance of ESG into the consumer experience. We’re quickly going to start seeing preference shifts, as consumers make that choice to use a lower carbon option and are happy to wait. They may not pay more, but they will be more patient,” he said.
“Retailers should also explore things like better product bundles to keep driving inventory off the shelves. Similarly, drive higher margins in the process and get back to the velocity retailers are looking for.”
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