Supply Chain 24/7
This article originally appeared on Supply Chain 24/7.
Complaints from frustrated customers were mounting at a major US retailer.
More than 20% said they could not find the company’s branded products in shops because items were out of stock.
The problem was that efforts to improve service disrupted the company’s low-cost distribution model.
It had the right infrastructure but lacked the digital tools necessary to increase supply chain reliability.
Moving quickly, the leadership team invested in digital tools to obtain real-time data, shorten replenishment cycle times, optimize deliveries and predict future demand.
As data streamed in from stores the minute shoppers purchased goods, the company rapidly restocked hot-selling items to capture sales that it previously had lost.
The shift cut retail cycle times by 20%, to four days, generating a 0.5% increase in sales.
And that was just the first wave of improvement.
Over the next 24 months, the company aims to reduce the time needed to fill store orders to two days, for a 60% total reduction in retail cycle time.
Companies that integrate digital technologies into their supply chain can quickly improve service levels while cutting costs up to 30%.
Sam Israelit and Peter Hanbury are partners with Bain & Company in the San Francisco office. Rodrigo Mayo is a partner with Bain in the Mexico City office. Thomas Kwasniok is a Bain partner in the firm’s London office.