Achieving resiliency via data visibility in supply chain

By Rosemary DeAragon, Global Head of Retail & CPG, Snowflake

Following the pandemic, raw material and labour shortages have continued to disrupt supply chains worldwide, making inventory management particularly challenging for retailers and consumer packaged goods (CPG) customers. Yet, these challenges can be turned into opportunities in 2023 if businesses can tap into the requisite agility and pivot supply chains to meet consumers where they are. Flexibility is key as it allows swifter response to ever-changing consumer behaviour.

But that hinges on being able to count on real-time, accurate data and total visibility over the supply chain. Having this end-to-end capability equips companies with the necessary efficiency that can allow for personalisation and manufacturing products to order, instead of building huge inventories.

To optimise inventory management so that consumers will find what they want in the right place at the right time, retailers should develop three data capabilities: a full view of supply chain data, data collaboration among partners, and advanced analytics.

Gain a full view of supply chain data
End-to-end visibility into the supply chain is key to optimising inventory. Precise SKU tracking across the supply chain can inform decisions on inventory ordering, storing, and selling. This requires eliminating silos between data systems and creating a single, governed source of information. According to McKinsey, “companies with real-time visibility have been able to react to disruption much more quickly, make fact-based decisions, and minimise the negative impact on their supply chains—or even gain a competitive advantage.”

The problem is that most retail supply chains are tracked and governed through multiple, often disconnected data systems managed by different teams. These silos make end-to-end visibility difficult, creating stale data that forces retailers and suppliers to deal with overstocks or out-of-stocks. A centralised system that connects data systems and enables insights across the entire supply chain can create better data transparency and enable faster problem resolution. In fact, McKinsey says this approach “typically improves fill rate by 10% and reduces excess inventory by more than 30%.”

Increase Data Collaboration Among Supply Chain Partners
Knowing what inventory to produce or purchase, when to restock or sell, and what price to pay for raw materials or products requires constant back-and-forth communication between retailers, suppliers, and shipping partners. Retailers and suppliers must collaborate on purchase orders, making adjustments on each end. Inventory is sent back and forth with carriers as it goes out and gets returned. The data-sharing opportunities in the supply chain are endless.

However, traditional methods of data sharing, which involve copying or moving data among the multiple entities and systems in a supply chain network, become complex and time-consuming and present security risks. According to Deloitte, “Fragmentation is among the biggest hurdles across the global movement of goods today. A lack of horizontal connectivity across providers, cargo owners, and end customers makes coordination difficult, contributing to systemic industry inefficiency.” Companies need a way to exchange and collaborate on data in a simple, timely, and secure manner.

Integrate Advanced Data Analytics to Predict Demand
Third-party data and advanced analytics can enable inventory managers to reach deeper insights and make better decisions. In today’s ever-changing market, organisations need third-party signals that help them quickly identify when sudden macroeconomic shifts are about to occur and get in front of spikes in demand. Concurrently, advanced analytics can provide granular and timely insights that will help them predict demand to optimize inventory levels.

The key to making machine learning forecasting algorithms helpful is feeding them with data—not only seamless data streams from your internal systems but also data from second and third parties. Second parties include suppliers, fulfillment partners, and data service partners. Third parties include virtually everyone outside of this network. Information such as supplier inventories, point-of-sale transactions, and weather patterns can improve the analytics so you can make better inventory decisions. But incorporating external data for advanced analytics traditionally involves cumbersome ETL procedures that are costly and timely. Retailers must choose a better way to access and incorporate external data for deeper insights.

The use of technology will enable retail organisations to increase resilience in a supply chain: gaining full visibility into the supply chain with a single source of truth, driving supply chain collaboration with partners, and providing the foundation for accurate analysis. By adopting some of the tips listed above, companies can begin to embark on their digital transformation journey, giving them an edge to emerge winners.