The Revolution of Supply Chain in the New Retail Era

Alan Li June 13, 2018 4 mins read

With the rapid development of Internet and AI technology, the traditional supply chain gradually accomplishes its transformation and upgrading by means of capital investment and technology innovation. Driven by the new retail wave, sound supply chain management is becoming increasingly critical to the progress of an enterprise.

Compared with traditional retail, new retail is a new retail model that relies more on the Internet to upgrade the production, distribution and sales processes of product by virtue of advanced technologies including big data and artificial intelligence (AI), to reshape the industry structure and ecosystem, and to realize the depth integration of online services, offline experience and modern logistics. In this respect, what changes should be made to the supply chain to better adapt to the social development in the era of new retail?

1. The boom of new retail means changes in business models

The last two years has witnessed immense changes in the retail industry, with traditional specialty stores/franchised stores and department stores shrinking at a rapid rate and many traditional retailers and brands such as Belle and Li Ning even shutting up some of their shops. In contrast, there are businesses like MIUI, IKEA and Decathlon, quietly expanding in the "seemingly depressed market". Compared to traditional industry sectors, these surviving businesses share something in common: the optimized integration of business models - compared to the agency and franchise modes, businesses with self/directly operated stores continue to expand.

2.The new retail changes the operating structure of supply chain

In the traditional sense, the supply chain is a chain structure - a single linear model with interlocking links that has a profound impact on the progress of the industry. However, with the rapid development of the Internet, the single-linear chained supply structure can no longer meet the increasingly complex market demands. The network-like supply structure, flexible method of supply, rapid response and joint supply of each network node under the new pattern have significantly improved the supply chain response and coping strategies.

3.With the transformation of new retail, supply chain will provide end-to-end service

People tends to associate supply chain with logistics, transportation and warehousing, and some may classify it into the material procurement in an earlier phase. Nevertheless, the end-to-end macro supply chain we speak of today is not only about purchase or transportation and warehousing. It is rather a closed-loop combination that connects R&D design, procurement, product and consumer terminals. With an efficient market rhythm and database support, end-to-end supply chain services will be an inevitable trend for future development.

4.Flexibility, efficiency and user-friendliness will become very important features of supply chain.

Flexibility is what we call flexible supply chain in which the production line and supply chain system can switch freely between personalized, pilot production and mass production modes with little changes in delivery time and costs. The next is efficiency. As the product life cycle is getting shorter and shorter, responsive shipment and delivery is required so as to capture the market demand. "Fast" is the trend in all industries. And finally, the user-friendliness - the ultimate goal is business intelligence. At present, the data-based management model allows transition through algorithms to achieve products and eventually realize business intelligence.

5.AI takes a very critical role in every link of the entire supply chain.

The diversification of demand imposes greater challenges on enterprises, with traditional supply and data processing models falling far short of the market requirements. When the SKUs managed by enterprises are overloaded, the emergence of artificial intelligence can effectively help us provide efficient and convenient services in the various links of the supply chain such as warehousing and transportation.

At the moment, the nature of business is characterized as "the accurate and rapid satisfaction of demand in order to meet the needs to maximize profits and realize value flow". For supply chain practitioners, there is still a long way to go from favorable collaboration with R&D design to the inventory optimization and integration management. As employees engaged directly in supply chain, we are faced with many challenges no matter how the society develops.

Alan Li's picture
Operations Director | Financial Services, Industrial & Life Science Recruitment
ali@morganmckinley.com