In our ongoing commitment to deliver relevant insight into global markets and the supply chain, Logility executives offer key takeaways from NRF 2022 and what they should be considering to address today’s market challenges more meaningfully.
From empty store shelves and unfilled job openings to surging inflation and increasingly organized store theft, retailers and brand owners face a wide range of significant challenges. But these headwinds are also forcing them to reexamine legacy systems, processes, and strategies that have shaped the industry for years.
During NRF 2022: Retail’s Big Show, Logility senior VPs Mike Curtin and Mark Balte shared those key takeaways and insights with an audience of retail executives. And throughout their discussion it became clear that the drive toward more sustainable operations can play a critical role in their overall transformation as resilient businesses.
It’s Time to Think About Sustainability Differently
While the concept of sustainability is not new, its role in the future of retail is. Many companies now use environmental, social and governance (ESG) performance metrics when setting targets for executive pay, which is a clear indicator that sustainability is moving beyond being a brand value. It’s now considered a central boardroom strategy, a crucial part of the business culture, and a visionary mission.
And the timing couldn’t be better. “Approximately 80% of consumers actively seek out brands with strong ESG initiatives, while governments are passing sustainability legislation targeting fashion businesses and supply chains are being revamped to overcome disruption,” shared Balte. “Even investors, stakeholders, and employees are pushing for better ESG performance.”
When Logility speaks with executives in retail and apparel, a critical challenge frequently discussed is getting the industry to collaboratively create and agree on a standard reporting strategy. Retailers may have their own approach and little commonality between them, but they still must address the same ESG pillars and themes (as shown in the figure below).
“Every business discusses key issues such as climate change, controversial sourcing, and tax transparency,” observed Curtin. “However, retailers and brand owners must go even deeper in their conversations and efforts by recognizing their contribution to these issues, considering improvement strategies, and acting in consistently eco-friendly, socially aware, and accountable ways. Their awareness and actions need to extend across every tier of their supply chain ‒ which can be significant for retailers such as Walmart, with 95% of their carbon footprint coming from their supply chain.”
Tackling the full scope of ESG requires continuous measurement and monitoring of the performance of every aspect of the business, including internal operations, the supplier network, third-party resellers, distributors, and logistics providers. Yet, simply reporting outcomes is not enough to drive meaningful transparency and improvement.
Digitalization Reveals ESG Connections
Few retailers have moved beyond novel approaches to sustainability. But as the appeal of sustainable products reaches mainstream consumers, industry brands are increasingly inclined to adopt a digital supply chain platform to scale their ESG capabilities.
The true value of the platform is its digital nature. By capturing data from the entire supply chain, a platform can turn that information into a tool for transparency, risk mitigation, collaboration, and ethical decision-making – a digital twin that serves as a virtual mirror of the physical supply chain operation. Organizations can run multiple what-if analyses of best- and worst-case scenarios and every possibility in between. Enormous complexity can also be quickly modeled to automatically generate and assess hundreds of scenarios to pinpoint opportunities for balancing greater simplicity, efficiency, and speed with environmental and social stewardship and governance.
Furthermore, with embedded artificial intelligence and predictive analytics, a digital supply chain platform can help organizations understand and predict the variability of demand, lead times, and throughput. Extending the collection and analysis of this information across every supplier tier allows businesses to foresee where gaps in capacity may appear, how surging demand impacts supplier and factory capacity, and which strategies can mitigate any risk of losing sales revenue.
A digital supply chain platform also enables organizations to purposefully respond to occurring events, such as late production, scarce raw material, or a ship drifting sideways in a canal. It leverages structured and unstructured data to generate plans based on known variability, ESG rules, and corporate, financial, and service level goals. This information enables decision-makers to establish optimized inventory buffers and allocations and scale orders for specific suppliers.
Best of all, a digital platform is a preventive tool. Retailers can apply advanced algorithms to a rich data set to intelligently orchestrate multi-enterprise processes in a calm, well-informed manner, instead of a chaotic push to react to disruption. In fact, many Logility customers have reduced their decision latency by more than 70% by modeling scenarios, planning strategies, and executing actions ‒ all with a single, integrated platform. And when better decisions are made faster, the more resilient and sustainable supply chains become across all tiers.
Let’s Start a Sustainable Pivot to the Future
A supply chain cannot become resilient against disruption overnight; neither can a sustainability program that ticks all the ESG boxes. But it is essential to understand that retailers must act as soon as possible with transparency and profound impact while expanding their market reach, delivering desirable products, and fueling ongoing growth.
With a platform such as the Logility® Digital Supply Chain Platform, retailers and brand owners can run their businesses profitably by intersecting their product life cycle and business operations with environmental accountability, social ethics, and governance standards. And the brands that adopt this approach as a mindset that governs future strategies and best practices will be the ones that win over customers for life.