Tesco boss Philip Clarke recently announced a £1 billion investment in his UK operation to revive the retailer’s flagging fortunes. In his interview on Radio 4, he used the phrase ‘retail is detail’, saying how he and his team had ‘walked to floors’ to scrutinise the business to get closer to customers.
If retail is all about detail, then the supply chain is all about visibility. Granted, my ability to coin a catchy phrase isn’t as good as Mr Clarke’s, but bear with me here. If the sharp end of retailing is really about understanding customer needs and instinctively giving them what they want (right down to the colour of the deli counter and how often they’re asked if they need help packing their bags), then the business of getting the right products to store at the right time is even more complex.
While most retailers have got it sussed when it comes to supply chain performance – ensuring the latest flavour of yoghurt or unpronounceable Italian bread is consistently available on the shelves – the corporate armour still reveals the odd chink every now and then.
Take the recent example where M&S was wrong-footed in the first quarter of the year, failing to move quickly enough to pull in stocks of women’s sweaters when demand unexpectedly rocketed. Apparently buyers were surprised by the cold weather we experienced in February and March, having filled the stores with light spring collections. As a result of this planning error, demand for warmer knitwear outstripped supply by a ratio of 3:1. While M&S sold £100,000 worth of knitwear in the first quarter of the year, reports suggest they could have sold up to £300,000 worth of woollies.
Granted, global sourcing of products has no doubt hampered M&S’s ability to react more quickly to unpredicted demand patterns, but I suspect good old fashioned human error played some part in what retail analysts may look back on as the ‘great knitwear famine of 2012’. Joking aside, the serious point here is that slick and robust supply chain planning is not just about warehouse management systems, automation and complex route planning.
While the technology is increasingly a necessary foundation of any sophisticated supply chain operation, we must never forget that open dialogue and sharing of information between departments is still the best way to deliver a seamless service. Sure, the technology provides an efficient platform on which the logistics function sits, but the softer, human side of the equation should never be overlooked. In reality, this ideally sees teams of marketing people, designers, ops managers, buyers and logisticians working together to create a complete view of what products are needed when and where.
In supply chain jargon it’s called sales and operational planning – S&OP. Whatever you want to call it, achieving a solution is all about empire builders climbing down their ivory towers to talk to the people in the next silo. As BT once said many years ago, it’s good to talk!