Excerpt from roundtable during Tango’s virtual retail summit The Next Normal for Retail Location Strategy on May 19, 2020.
Operations in a COVID-19 World
Shai Verma – Partner, Retail Technology, Deloitte:
“For supply chain specifically, it’s in one part as simple as this: China, the world’s factory for a lot of the products that are sold throughout the North American retail network has been disrupted. We don’t know the full extent of that disruption. There’s a game being played to some extent in terms of the transparency of what the impact is within China’s ability to deliver against orders. But the fact that China has been disrupted means that the global supply chain is going to be impacted. And therefore, those retailers that I was mentioning earlier, those essential services that depend to some extent on product coming from the Far East, you don’t know whether that product is going to make it to North American shores and into the North American retail environment. So, there’s a high degree of uncertainty associated with that.
“For those retailers where their stores have been closed for a long time, inventory has gone stale – and not just necessarily from a food and beverage point of view or from a perishable’s perspective – but that inventory may or may not be able to be sold at full market value and you’re going to have to rethink what kind of discounting and price adjustments you’re going to have to make once those stores are reopened. So, from a supply chain perspective, the impact is extremely significant. Those companies that had made forward buying decisions and that inventory was already in transit, so to speak, you’re now carrying inventory that for a much longer period of time than you otherwise would have had to. The silver lining is in some of the commitments you’ve made as retailers to Chinese manufacturing facilities because they, perhaps not being able to meet those requirements, that inventory is not in transit, and therefore you’re not going to be stuck with that level of inventory.
“In terms of what you can do right now in dealing with your partners, and to what Shannon was saying, the level of collaboration needs to increase. One of the panaceas in supply chain for any business has been collaborative supply chain planning, where you’re working with your vendors, your distributors, your transportation partners to provide the supply chain visibility across the chain to know what you need, where you need it, how much of that product that you need in this specific node in the supply chain. This is the opportunity to be having those types of conversations with your partners.
“This is the first global pandemic that we’ve seen since the Spanish flu, but it’s not going to be the last disruption in the marketplace that we have to deal with and to try and understand how our businesses are going to respond to what’s been happening or what will happen in the market. So, this is an opportunity to be rethinking those things, taking lessons from what you’re experiencing right now and making sure that those things are the things you design your business strategy to avoid going forward where you can. That’s a very important thing that I’m certainly speaking to my clients about, which is, this isn’t the last one you’re going to see. It may be the last one of this global nature, but it’s certainly not the last disruption, and unfortunately our businesses are going to have to learn to respond. You have to restructure contracts, you have to lean on your relationships, and you have to build agility into your supply chain going forward. Those are the things that I think you really need to be thinking about.
“In terms of the store, our point of view really boils down to this: you’re not going to have the same store network that you had going into this. If you had 300 stores or 500 scores or larger, you’re probably not going to have that same network reopen in the immediate future. You’re going to be thinking about which stores were most profitable, how can I cover off my catchment area with a minimal amount of investment going forward, and there is going to have to be a tipping point that you realize that this is the number of stores that we’re going to have in our network going forward. That’s one thing that’s part of that new normal that we’re all going to have to accept. The store network that you had going into COVID is not necessarily the environment that you’re going to have coming out of COVID.
“As you do reopen stores, there’s really three elements that you need to think about. One is the store itself, second is the associates, and then the third and the most important is the customer, and you need to start building strategies around all of them to go forward.”
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