The State of the Retail Supply Chain 2015

The 2014 retail landscape could be characterized as bipolar.

On the positive side, U.S. retail sales were up 3.8% for the year, paced by a 15.4% gain in e-commerce sales over the previous year.

This growth area captured the focus of retail supply chain management (SCM) professionals as they worked diligently to create seamless omnichannel processes.

On the negative side, retail sales were dampened by protracted congestion at West Coast ports. Despite the best efforts of supply chain teams to divert traffic to alternate ports and modes, many retailers ended the year with millions of dollars’ worth of product stuck in transit.

Though the labor problems have been resolved, a return to normal operations will take months to complete.3 In the short run, this situation will continue to divert attention from more productive SCM initiatives.

Despite the periodic challenges created by port issues, transportation capacity and labor shortages, and other disruptors, retail supply chain executives are moving forward with essential investments, infrastructure modifications, and service improvements. Their strategies and initiatives are highlighted in this edition of the State of the Retail Supply Chain (SRSC) Report.

Recap: Fourth Annual Report
The theme of buy anyway, fulfill anywhere was the hot topic of our previous SCRC Report. As consumers marched into the omnichannel world, retail supply chain executives honed strategies to serve customers profitably. The quest for e-commerce market share at any expense was eclipsed by a more realistic effort to balance service and cost. Leading retailers pursued inventory sharing, integrated fulfillment, and technology upgrades to protect margins.

Another interesting storyline was the widespread focus on supply chain talent. As SCM becomes a more strategic focus of retailers, highly capable supply chain professionals are needed to navigate the complex omnichannel environment. Retailers made a conscientious effort to attract, develop, and retain high caliber SCM professionals. Tools such as rotational programs, individual development plans, succession planning are used to prepare future SCM leaders.

The other focal point of the 4th Annual Report was optimizing performance across all channels. Retailers pursued this goal by supplementing traditional KPIs and descriptive tools with more holistic measures and forward-focused methods. The leaders began to lay the groundwork for “big data” capabilities. Their goal? To use predictive and prescriptive analytics to more accurately decipher demand and respond accordingly.

Research Objectives: Fifth Annual Report
The goal of the SRSC Report is to investigate the supply chain practices that directly impact retail organization success. Our fifth annual study addresses issues of great relevance to leaders:

• Supply Chain Strategy: What are the priorities for planning, investment, and integration?
• Last-mile Execution: How successful are retailers at coordinating omnichannel delivery?
• Transportation Agility: How do top retailers manage the constant barrage of obstacles?
• Omnichannel Evolution: What essential SCM attributes separate leaders from the pack?
• On the Horizon - A Look Back and Forward: Where did the RSCM research team hit and miss with its previous annual predictions? What is in store for retail supply chains in 2015 and beyond?

In the pages ahead, we present an in-depth analysis of each question. At select points, we also provide a comparative analysis with research results from the first four SRSC studies.

The results can be used by retailers and their supply chain partners to benchmark their strategies and practices against those of major U.S. retailers.