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The retail supply chain is arguably one of the most susceptible industry supply chains to disruption. It should come as no surprise that the retail supply chain is under a considerable amount of pressure to innovate to keep up with shifting consumer demand. The ever-evolving, always surprising consumer coupled with the Amazon effect have made it very challenging for retail players to predict and prepare for where or when the next trend may occur.
It's safe to assume that all industry players knew that the retail industry would eventually move online; however, no one predicted the over night launch that was accelerated at the onset of the global pandemic. According to McKinsey, 10 years of e-commerce adoption was compressed into three months. In response, many retailers adopted an omnichannel approach which refers to have a brand presence and transacting across multiple channels like social, e-commerce, brick-and-mortar, etc.
“Learning how to digitize, adapt and integrate online-offline behaviors to overcome physical world limitations are all lessons embodied by New Retail,” wrote Andrew Lipsman for Insider Intelligence.
Managing the rapid pace of industry change paired with organizational responsiveness is one of the most important and necessary things a modern day retailer can prioritize. Traditionally, the retail supply chain is notorious for its lack of visibility due to silos of information stuck within each supply chain function. These silos create a bottleneck in communication further preventing operational efficiency. Retailers are under constant pressure to deliver a razor-thin profit margin. According to an article on Investopedia's website, the average profit margin for retail is typically from 0.5 to 3.5%. While increasing profit margins sounds reasonable, it can be quite the task considering the variety of options consumers have online to choose from; making it very simple to compare prices and opt for the most affordable choice.
Omni-channel strategies, operational inefficiencies, and tight profit margins coupled with increasing overhead, operations, and materials costs make for an undesirable cash position. Access to capital has become crucial. Cash flow and working capital management remain imperative for timely and informed decision making. With supply chain finance, retailers have access a flexible use of funds to keep the supply chain moving and operations growing. These funds can be used in a variety of ways like to fund innovation initiatives, to improve supplier relationships, to optimize working capital management, etc. SCF provides Buyers and Sellers with easy access to liquidity and a solution to improve the working capital position for both parties making it a win-win.
To learn more about our unique, client-tailored supply chain finance solutions, please contact us at info@traderiverfinance.com