While technology and good processes can help optimize the flow of supplies and inventory for all types of industries, they are especially important for managing the complex networks necessary for retail stores and brands. Retail businesses that once relied on traditional supply management methods now recognize the need for diversification, data-driven decision-making, and advanced technology to stay resilient and adaptable.  

This article shares techniques and tools retail supply chain professionals can use to deliver consistent results for their internal and customer-facing procurement needs.

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What is retail supply chain management?

Retail supply chain management means managing the end-to-end flow of goods and services through a retail outlet. It encompasses various activities and processes, such as: 

• Sourcing
• Purchasing
• Inventory management
• Transportation
• Warehousing
• Vendor management
• Customer service

Retail supply chain management coordinates these processes to meet market needs while minimizing inventory costs and reducing stocking issues. By optimizing the supply chain, those in the retail industry ensure their operations maintain high standards.

5 Common retail supply chain management challenges

Retail brands face unique challenges in supply chain management. Although retail can have healthy profit margins, unaddressed issues can affect bottom-line performance and customer satisfaction. 

From the volatility of global markets and fluctuating consumer demands to the complexities of logistics and inventory control, retail supply chain obstacles require strategic planning and agile responses.

A retail business that plans for the following common challenges fares better in the changing supply landscape:

1. Maintaining demand forecasting accuracy: Predicting demand can be challenging, leading to out-of-stock items that require replacements or substitutions. Keeping an eye on product levels with accurate, forward-looking analytics helps prevent stocking shortages.
2. Managing supplier relationships: Strong vendor partnerships are the new standard for keeping orders on schedule and ensuring high-quality service and products—but poor communication and data visibility can get in the way. Developing an effective supplier management program ensures service remains competitive.
3. Ensuring logistics efficiency: Managing the cost and reliability of transporting goods from suppliers and distribution centers to in-store settings can be challenging, especially for brands with multiple locations. The right technology and supplier agreements can ease the costs and burdens of planning across an organization.
4. Integrating technology: Lack of visibility is the silent killer of budgets and processes. With so many vendors and orders moving through organizations, it’s important to integrate technology to manage the entire supply chain. The right tools can help brands solve operational efficiency and visibility challenges.
5. Managing indirect spend: Retail brands require a steady source of internal-use materials and products to keep operations running smoothly. Managing indirect spend supply levels and tracking open purchase order activity helps improve cash optimization and financial performance.

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The echoes of COVID-19 on the retail supply chain

In the years since the pandemic, the retail supply chain landscape has worked hard to adapt. While the peak of production disruptions, price increases, and economic shifts has subsided, the potential for disruptions lingers. 

• The pandemic brought about better visibility and flexibility across the supply chain network, leading to greater adoption of artificial intelligence (AI), machine learning (ML), and blockchain technology. These advancements can enhance forecasting accuracy, improve inventory management, and ensure transparency between buyers and suppliers.
• Diversification continues to influence supply chain decisions, with procurement teams moving away from relying on a single source or region for their products and materials. By diversifying their networks, suppliers and brands reduce vulnerability to regional disruptions caused by public health concerns, geopolitical tensions, or natural disasters.

Retail procurement professionals are using the lessons learned since 2020 to remain agile and cost-efficient in the face of change. Automating processes and building resilience into your procurement plan can help your brand react to fluctuations in any supply chain environment.ntinue to adjust their approach to supply chain management and the changing global landscape.

7 Ways to improve retail supply chain management

With the right practices and tools, companies can improve operational efficiency, sustainability, and profitability. Streamlining processes, reducing waste, and optimizing logistics can enhance outcomes and customer experiences. 

Consider integrating the following practices into your management program to improve procurement and spend management results:

1. Leverage AI capabilities: Use technology to source high-quality supplies, predict demand more accurately, optimize inventory levels, and improve supply chain visibility.

2. Diversify the supplier base: Avoid reliance on a single supplier or region by diversifying sources of goods and services. This reduces risk and improves resilience against disruptions.

3. Invest in sustainability: Focus on ethical sourcing, reducing carbon footprint, and adopting circular economy models to meet consumer expectations while reducing waste and inefficiencies.

4. Enhance collaboration: Employ technology to improve productivity and adaptability. The right tools can help foster better communication with distributors and third-party logistics providers.

5. Adopt flexible logistics solutions: Use a mix of transportation modes and warehousing solutions to quickly adjust to changing demands and supply chain challenges.

6. Develop a risk management program: Identify potential risks or fluctuations through scenario planning. Develop a strong supply chain strategy to mitigate issues, including contingency planning for critical supply chain components.

7. Monitor supply chain performance: Continuously assess the effectiveness of supply chain practices and be willing to adapt strategies as new challenges emerge.

What kind of retail supply chain data should you collect?

Procurement and supply chain management generate a wealth of data organizations can use to improve performance. However, deciding what’s most relevant can be difficult when so much raw data is available. By focusing on the following metrics and key performance indicators (KPIs), you can better understand your organization's retail supply chain. 

Inventory levels

This number helps fulfillment teams track the quantity of each product available in warehouses and stores, ensuring you can meet customer expectations without overstocking.

• KPI to watch: Inventory turnover rate, which measures how often inventory is sold and replaced over a certain period

Supplier performance

This metric helps you monitor your suppliers' reliability, quality, and order fulfillment speed to maintain smooth supply chain operations.

• KPI to watch: Supplier defect rate and lead times, which consider the percentage of items that arrive with issues and the average time it takes a supplier to fulfill an order

Customer demand forecasting

This number helps sales teams contextualize past sales data and market trends to accurately predict and meet customer demand. 

• KPI to watch: Forecast accuracy, which compares projected sales to actual sales

Shipping and logistics efficiency

This metric helps freight teams evaluate the efficiency of transportation modes, routes, and logistics partners to deliver products according to contractually agreed-upon timeframes. 

• KPI to watch: On-time delivery rate, which measures the percentage of orders a supplier delivers as contracted

Return management efficiency

This helps product management assess the effectiveness of its return processes and policies. While high return rates can significantly impact profitability, difficult returns processes may reduce customer satisfaction or brand loyalty.

• KPI to watch: Rate of return, measured against sales and average return resolution time

Cost control metrics

This metric helps finance teams keep track of all costs associated with supply chain operations, including procurement, production, storage, and distribution costs.

• KPI to watch: Total supply chain management costs, measured as a percentage of revenue

Keeping tabs on the above metrics helps retailers make better decisions regarding optimizing performance, enhancing customer satisfaction, and improving overall market position.

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Common retail supply chain tools and services

A strong tech stack is the best defense against supply chain obstacles and costly cash leaks. Top-rated software solutions can help ensure efficient operations. 

Warehouse management systems (WMS) automate warehouse operations—including picking, packing, shipping, and receiving—to enhance efficiency and accuracy. Epicor Prophet 21 offers a robust mid-market solution with a full suite of features to help retail brands manage returns, shipping, POs, receiving, and more.

Transportation management systems (TMS) facilitate planning, execution, and optimization of the physical movement of incoming and outgoing goods. G2 reviewers recommend Descartes Aljex for midmarket users looking for solid load optimization, tracking, carrier selection, and real-time in-transit visibility.

Customer relationship management (CRM) systems help manage customer interactions, feedback, and service requests to improve satisfaction and loyalty. Reviewers love Salesforce Sales Cloud for most market sectors due to its comprehensive dashboarding, forecasting, campaign and email management, lead management, and workflow capabilities. 

Financial planning and budgeting software assists in allocating financial resources effectively across the supply chain to avoid over- or underinvestment in inventory. G2 users love Vena for midmarket financial planning and analysis tools that balance the needs of midsize companies with price competitiveness not available via enterprise providers.

Sustainability tracking tools monitor the environmental impact of supply chain activities to support eco-friendly practices and compliance with regulations. G2 recommends mid-market favorite Greenly for features like ratings and investment reporting, emissions tracking, compliance management, and strong integration with other vital tools. 

Procurement management platforms help companies organize and streamline purchasing for supply and inventory needs. Through a well-designed platform like Order.co, retail brands can empower their locations to order independently while maintaining budgetary control, simplifying order tracking, streamlining payment processes, and providing easy and accurate spend analysis. 

The retail supply chain of tomorrow: What to expect

2025 will prove to be a transformative year for retail supply. Climate impacts, consumer pricing concerns, and changing geopolitical relationships will be at the forefront of decisions for buyers, suppliers, and consumers alike. 

• Expect to see increased AI adoption in supply chain management. Honeywell reports that 80% of retailers expect to increase their AI capabilities this year. As these technologies improve and evolve, those who invest in AI for data-driven management, forecasting, and risk reduction will see better business outcomes and increased competitive advantage. 
• Sustainability and resource management will play a more significant role in consumer sentiment and commercial planning. Enhanced transparency and agility throughout the supply chain will serve customers’ increasing desire to trace the origin and journey of the products they purchase. Domestic weather events and their associated interruptions will continue to impact purchasing decisions. 
• Shifts in global political conditions and the potential for future trade and tariff adjustments will influence spending and sourcing decisions. Suppliers may consider changes to their production vendors to optimize product and shipping costs and mitigate pricing impacts. Near-shoring and other forms of supply-side risk management will gain higher priority.

How Order.co can eliminate common retail supply chain challenges

Retailers face the same challenges in getting the right supplies to run their businesses as they do in procuring inventory. Suppliers that produce bags, printer paper, packaging materials, display products, and other key supplies face similar headwinds to those producing wholesale products for retailers. 

Order.co alleviates the supply constraints and visibility concerns that make it difficult for retailers to budget for and procure goods in the indirect spend category. With spend management and procurement automation software, they can get what they need to run every location and replace stockout items without falling victim to purchase price variances or inferior product substitutions. 

The platform offers many features to make procurement and spend management easier and more cost-efficient, including: 

• Curated catalogs of preferred vendor products, with easy substitutions for back-ordered items
• Self-serve order capabilities that allow all locations to get what they need while taking advantage of volume discounts and consistent product availability
• Reporting and analysis tools to help finance teams see budget performance and cash optimization across procurement operations 
• Automated AP processes that eliminate time-consuming and error-prone tasks such as manual purchase order management 
• Automated payments and invoice consolidation that streamline the payment process to just a few clicks per month

If better retail supply chain management and indirect spend control are priorities for your retail brand, schedule a demo of Order.co today.

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