The COVID-19 pandemic is one of the most significant disruptions that global supply chains have ever faced. A majority of business leaders says that COVID-19 has negatively impacted their supply, demand, and logistics. In light of these widespread troubles, retail supply chains will undoubtedly shift in 2021.
The pandemic has revealed where supply chains are unreliable or inefficient. Retailers struggling to recover from COVID-19-related losses will quickly address these areas to become more profitable and resilient.
These five trends are some of the most significant that will emerge or rise across retailers in 2021.
1. IoT-Driven Visibility
COVID-19’s effect on different areas was rarely predictable, as localized outbreaks and government actions led to unexpected shutdowns. This disruption led to widespread stock shortages, shipping delays, and disappointed customers. Supply chains will likely increase their IoT adoption to avoid similar problems this year.
A 2020 study revealed that 51% of supply chains recognize a need for further investment in digital technologies like the IoT. IoT tracking can provide real-time visibility, which retailers need now. This instantly-accessible data can help companies anticipate delays and respond appropriately, mitigating their impact.
2. AI-Based Optimization
Increased IoT adoption isn’t the only tech-centric trend coming to retail supply chains in 2021. Visibility is crucial, but retailers must forecast disruptions, which can be challenging by traditional means. Many will turn to AI to analyze their data and provide a path to improvement.
AI analysis can predict potential delays earlier and more accurately than people, giving retailers time to adjust. Similar programs can also find inefficiencies or vulnerabilities within a supply chain’s operations. Companies can then optimize their workflows, enabling more resilience and faster recovery.
3. Local Sourcing
The pandemic has impacted international supply chains more than most. For example, trans-Pacific import rates have risen to record highs amid COVID-19-related disruptions. Given these rising costs and the likelihood of delays, retailers will likely favor local sources in 2021.
When stock doesn’t have to travel across borders, retailers can restock or fulfill orders faster and more affordably. While production costs may be higher, the savings from logistics will likely be enough to convince retailers to make the switch to localization. Shorter supply chains will enable more flexibility, helping companies cope with any further disruptions.
4. Distributed Sourcing
Not only will retailers localize their sources, but they’ll also rely on a more distributed network. The lean business model quickly fell apart during the pandemic as supply chains with no redundancies struggled to fulfill demand. Using a distributed web of sources and logistics centers, retailers can ensure disruptions in one location don’t impact the entire supply chain.
More streamlined supply chains may have saved retailers money previously, but COVID-19 has shown how unreliable they are. It may take some time for this distribution trend to take full effect, but companies will start moving that way in 2021.
5. Fulfilling Online Orders In-Store
Amid the pandemic, unconventional business models proved to be some of the most effective. Target’s practice of fulfilling e-commerce orders through its physical stores showed remarkable success. The retailer fulfilled more than 75% of its digital sales in-store, leading to a 30% reduction in digital fulfillment costs.
As physical locations faced limited capacities, some retailers realized their roles could change. Transforming the storefront into an extension of the supply chain helps support omnichannel initiatives and reduces costs. More businesses will adopt this hybrid approach to e-commerce as its successes become more evident.
COVID-19 Will Have Lasting Effects on Supply Chains
As vaccines roll out, there seems to be an end to the pandemic in sight. Even after COVID-19 fades, its influence will linger. Retailers won’t quickly forget the disruptions and losses they faced from being unequipped to handle an emergency.
These five trends will make retail supply chains more profitable and resilient. While they may mean disruptions in the short term, they’ll help prevent disasters in the future.
Credit: Devin Partida is a retail writer and blogger. You can read more posts from Devin at ReHack.com, where she is the Editor-in-Chief.