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In the complex world of supply chain management, the concept of a “glass pipeline” remains something of a myth. But are economic and political issues, coupled with rapid-fire shifts in consumer demand, making it a business imperative? 
Despite some improvement, the downturn in the global economy and the subsequent emphasis on lowering costs and increasing efficiency have thrust supply chain management further into the retail spotlight.
Incremental changes in ordering, transportation and distribution from the factory to the sales floor are taking place, but soft consumer demand and cutbacks in retail inventories have made mastering supply lines increasingly difficult — few companies have actually achieved true supply chain optimization.
As a result, several questions remain unanswered — specifically, how far along the supply chain continuum is the retail industry, and is sufficient progress being made to meet the challenges retailers will face in the years ahead?
“Visibility of supply chain costs has never been better,” says Mike Griswold, vice president, retail, for Boston-based AMR Research. “When the economy tilted and fuel prices soared, people started drilling into transportation in order to focus on costs and managing freight. Additionally, a lot more trained logistics expertise is coming into retail to help chains adopt best practices from industries like high-tech, where understanding forecasting requires a ‘fast-fashion’ mentality.”
Jon Gold, NRF’s vice president of supply chain and customs policy, foresees ongoing hurdles for retailers as the global economy continues to recover. These include “continued pressure to drive costs out of the supply chain, partnering with transportation providers to achieve success and dealing with new government compliance requirements on everything from the environment to security to product safety,” he says.
In an effort to assist retailers tackling supply chain objectives, NRF recently announced plans to debut a Global Supply Chain Summit next spring. The event is scheduled to be held April 10-12, 2011, in Columbus, Ohio.
IGD, a London-based consultancy, recently conducted an extensive Supply Chain Leaders’ survey. It believes the biggest challenges facing supply chains can be boiled down to three basic factors:
• Improving the responsiveness of the supply chain
• Continued pressure to reduce costs
• Managing demand volatility and variability
The recession has challenged a long-established business practice “of just looking at low prices, buying low cost and creating consumer demand,” says IGD senior analyst Mala Morris. “Business is now under pressure to adapt quickly to changing conditions. The result is that the supply chain is playing a far more strategic role. Increasingly, retailers are focusing on supply chain efficiency to deliver cost savings that will give them a competitive advantage in the marketplace.”
Marshall Fisher, UPS professor of operations and information management at The Wharton School, University of Pennsylvania, puts it this way: There are myriad choices within the supply chain, “but it all comes down to slow and cheap or fast and expensive. You can measure cost, but it’s harder to measure the virtue of speed, so slow and cheap tends to get overweighted.”
While Wal-Mart is frequently cited as the model for an efficient and less costly supply chain, Fisher notes that companies like Gap, Limited Brands and Nike tend to favor cost minimization over speed and flexibility when it comes to supply chain strategy.
More often than not, cost savings has translated into inventory reduction. “This is now seen as an important part of managing working capital and building a lean value chain with improved forecasting and promotional activity,” Fisher says.
