Later this week, we’re going to be publishing another brand-new benchmark report. It will be titled The Quest For A Resilient And Agile Supply Network, and here’s why we think it is so important: in the wake of all the product availability issues that have plagued retailers, “the supply chain” has become a breakfast table conversation for consumers. Now in 2023, supply chains remain fragile, and retailers have expressed concerns bordering on alarm that legacy supply chains cannot support the growth in their businesses. They are also concerned about the disruptive nature of direct-to-consumer (D2C) shopping and fulfillment, and suspect that all the variable costs associated with supporting new consumer shopping behaviors are undermining profitability.

In response to these concerns, agility (the ability to quickly adjust to changes in demand) and resiliency (the ability to respond to supply chain shocks) have become boardroom issues, even while challenges on the consumer side are still being addressed.

Elevating conversations about the supply chain to the boardroom has been several years in the making. Why is it so hard to address? The answer is straightforward: in our 2019-20 study on the supply chain, retailers identified “real time visibility across the supply chain” as a key driver of supply chain performance. But visibility into supply chains remains one of the biggest operational issues facing supply chain managers today. That gets in the way of addressing issues associated with improving supply chain agility and resilience, both for retailers and suppliers.

Dave Anderson, Managing General Partner at Supply Chain Ventures (a venture capital company specializing in AI-enabled supply chain software & ecommerce logistics investing) recently put it this way:

“War, disease, and politics will continue to drive reconfiguration, reshoring and automation in global supply chains… However, end-to end visibility remains an illusion for most supply chains — there are still plenty of dark holes in the data.” 

New demands are also being put on the ecosystem that weren’t top of mind at the height of the pandemic. Sustainability is rapidly becoming a consumer issue that affects retailers, manufacturers, and shippers. Sustainability is a broad subject that encompasses everything from ethical sourcing of raw materials and social responsibility regarding factory labor, to environmentally conscious manufacturing processes and reducing the carbon footprint associated with bringing products to market, and all the way to product end-of-life recycling.

Chains vs. Networks

All these considerations can impact supply chain planning and execution, and they raise the question, is now the time for business leaders to consider a fundamental redesign and retooling of supply chains? Part of that challenge is that supply chains need to evolve into networks. What’s the difference? Both strategies are intended to align supply and demand, but chains are linear whereas networks are a grid of interconnected components, chains are closed while networks are open, and chains are rigid while networks are adaptive.

As the saying goes, a chain is only as strong as its weakest link. But networks offer alternative paths to the desired outcome; when one link fails, another link in the network can be utilized. As the Internet itself has demonstrated, agility and resiliency are more easily achieved with networks.

The new study suggests that retailers are taking a stepwise approach towards modernizing the supply side of their businesses. For now, retailers are focused on improvements that can be made to existing supply chains. However, RSR believes those chains will need to be re-imagined as networks to be sufficiently agile and resilient to meet the needs of the business.

New Expectations On The Consumer Side

There is little doubt that new consumer expectations are triggering big changes in retailers’ operational processes. Retailers’ response to changing consumer expectations has created a ripple effect throughout operations and even with supplier relationships. The store is now highlighted as a customer order fulfillment location. And for those orders which cannot be fulfilled in the stores, DC’s are being asked to handle customer order fulfillment. Almost one-half of the retailers in that participated in the new study are even enabling vendor D2C order fulfillment, completely bypassing the traditional supply chain.

Tactics vs. Strategy

While agility and resiliency may be boardroom issues, the push for greater flexibility is being driven by ever-rising consumer expectations. With sustainability also rapidly becoming a consumer issue, over-performing “Retail Winners” very clearly see the need to make tactical improvements to the supply side of their businesses.

But retailers across the spectrum aren’t addressing the bigger strategic issue, that their supply chains – even with all the improvements that retailers are envisioning – will not be sufficiently agile or resilient to sustain the business going forward. Retailers need to start thinking about strategies that can help them to mitigate the effects that climate change and the environment, raw materials scarcity, geopolitics and war, tariffs and regulation, the availability of labor, technology, and consumer expectations, have on where and how they will source products in the future.

Editor’s Note: RSR’s newest benchmark report, The Quest For A Resilient And Agile Supply Network, will be available later this week. All registered members of the RSR community will receive notification as soon as it publishes.