Not too long-ago, consumers were enjoying a strong labour market, rising wages, and were funding more purchases with the money they saved during the pandemic. Today however, consumers face high rents, rising house prices, and higher costs of goods. With dwindling savings and a shaky job market, consumers are cutting back on discretionary spending.
This trend is impacting retailers, with 64% of retail executives expecting fewer purchases from 2024-2025. Statistics Canada recently reported that retail sales were down 0.8%, and retail e-commerce sales in particular were down 3.6% in May, 2024 compared to the previous month.
In addition to shifting consumer spending behaviors, retailers are also facing fluctuating markets, rising inflation, supply chain disruptions, and increased operational costs. These economic changes bring both challenges and opportunities. During recessions, many companies increase prices or discontinue products to maintain profit margins, but these actions can harm brand reputation and customer loyalty. Instead, focusing on priorities and long-term strategies is crucial.
As retailers look to cut costs, they turn to their supply chain to drive efficiencies. A reliable 3PL can assist with providing efficient pick and pack processes, strategic planning, data-driven insights, optimized inventory management, and automation technology.
In this article we’ve gathered seven ways retailers can enhance their resilience and adaptability during economic fluctuations with the right 3PL partnership and strategies.
1. Demand Forecasting and Inventory Management
When facing an economic downturn, one of the biggest supply chain threats is a decline in order demand and sales. It is imperative to accurately predict demand and minimize excess inventory to help reduce storage and holding costs and improve cash flow. Any funds saved can then be redirected to critical areas like marketing and innovation. Additionally, accurate forecasting and efficient inventory management ensures products are available when customers need them, preventing stockouts and backorders, thus enhancing customer satisfaction and loyalty.
An experienced 3PL can assist with the complexities of demand forecasting, including using advanced tools that leverage historical sales data and market trends. They can also help implement strategies such as just-in-time (JIT) inventory systems that align orders with real-time demand to minimize excess stock. Robust tracking systems like RFID or barcoding also provide real-time visibility of stock levels.
Accurate demand forecasting and inventory management lead to better production planning, risk mitigation, and strategic decision-making, ultimately contributing to cost efficiency, operational effectiveness, and business success during challenging times.
2. Optimized Order Management
Optimized order management offers significant advantages for a retailer during challenging economic times by streamlining operations, optimizing inventory allocation, and providing processes that help capture more sales.
Working with a 3PL such as SCI can help you stay competitive with a seamless order management process that intelligently manages orders from inception to fulfillment. When an order is placed, SCI’s order management system (OMS) technology determines which fulfillment center is best positioned to fulfill the customer’s order and dispatches the order from there. This automation helps streamline your operations, minimize manual errors, reduce shipping costs, and gets your products into the hands of your customers faster.
With SCI’s OMS you can also efficiently allocate inventory based on real-time demand, maximizing stock availability, and minimizing out-of-stock situations, ensuring products are available when customers want them, and you can always capture the sale.
Additionally, ‘endless aisle’ capabilities allow customers to browse and order products that are not available in-store or pick up items in-store that are sold out online, ensuring that sales are always captured, and customer satisfaction is maintained. It also enables you to drive more sales through cross-channel selling and minimize inventory holding costs by capturing sales on incoming stock.
3. Save on Duty and Tariff Costs by Leveraging the Section 321 Exemption
U.S. e-commerce retailers can save on their import duty and tariff costs by leveraging the Section 321 exemption. Section 321 is a provision of the Trade Facilitation and Trade Enforcement Act that allows small shipments to enter the U.S. duty-free. This offers direct-to-consumer e-commerce retailers an opportunity to reduce their cost per unit through waived or refunded import duties on items that enter Canada bound for U.S. recipients. Ultimately this process offers retailers the same delivery services, costs, and transit times as a USA based fulfilment company with the added benefit of eliminating 100% of the import duty cost.
By consolidating distribution in strategic centers in Canada, retailers can also maximize orders by servicing both the U.S. and Canadian markets from a single location. Additionally, by creating a strategic North American fulfillment model, retailers can reduce their inventory carrying costs and turn products faster, while driving down supply chain costs.
SCI has in-depth knowledge of the U.S. and Canadian supply chain industry, and relationships with top US carriers to help you develop a streamlined cross-border strategy. Our team supports you with strategic planning for your southbound fulfillment so your brand can take advantage of the Section 321 exemption and reduce or eliminate your import duty and tariff costs. When experiencing lower sales volumes, Section 321 fulfillment is an effective way to save money and maximize revenue.
4. Flexible and Scalable Infrastructure
Having a flexible and scalable infrastructure is essential for adjusting to fluctuating demand, but this can be difficult for retailers to manage on their own. Partnering with a 3PL provider can be your competitive advantage and give you access to sophisticated systems, technology, warehouses, and transportation networks that expand and contract with your business. A robust 3PL can help companies adjust their storage and distribution capacity in line with fluctuating inventory levels and seasonal variations, ensuring operational and cost efficiency. Scalable infrastructure also supports expansion into new markets and adapts to changes in product lines without significant delays or financial strain. Additionally, it enhances supply chain resilience by accommodating sudden peaks and valleys in demand or disruptions, thereby maintaining customer satisfaction through timely deliveries.
Optimized Warehouse Utilization
Optimizing warehouse layout and processes for flexibility involves designing adaptable storage solutions, implementing efficient picking systems, and using advanced technologies like automation and robotics. These strategies allow for quick adjustments in response to changing demands, and the efficiencies created can also reduce fulfillment costs. Agile logistics solutions, such as dynamic routing and real-time tracking, enable businesses to handle fluctuations in order volumes seamlessly, ensuring timely delivery and customer satisfaction.
5. Embrace Automation
As mentioned above, an important component of scalable infrastructure is the implementation of automation technology. Supply chain automation refers to the use of technology and automated systems to optimize various processes within the supply chain. It involves integrating software, robotics, artificial intelligence, and machine learning to automate tasks that were traditionally performed manually. By automating repetitive and time-consuming tasks you can mitigate risks, maximize production capacity, increase productivity, and optimize operations to save on supply chain costs.
Automation Software
Software tools and automated systems can improve customer demand forecasting, inventory allocation, and supply chain visibility. With up-to-date inventory and order statuses, companies can reduce delays and shortages across the supply chain.
Robotic Technology
Robotics such as collaborative robots can improve accuracy, productivity, and safety, while efficiently managing labour costs. Goods-to-person automations can offset increasing market costs for warehouse space through significant cubic storage density. It also enables high pick accuracy through system driven inventory and pick sortation and enables greater efficiency for picking within high-SKU e-commerce operations. Box-on-demand solutions can benefit your overall throughput capability and reduce packaging sizes which ultimately reduces transportation and material costs.
Partnering with a 3PL such as SCI allows you access their suite of automation technologies without costly capital investment. Tap into our ready-to-deploy suite of integrated industry-leading solutions including collaborative robots, box-on-demand, goods-to-person, and automated sortation.
Your business could benefit from the following automation efficiencies seen at SCI:
- 2X increase in pick rate utilizing Cobots (collaborative robots)
- 3-4X increase in pack rate leveraging end of line right size packaging
- 99% + inventory and ship accuracy with visual aids guiding associates to pick and pack
- 75% less space used than traditional warehouses using Goods-to-Person automation
6. Business Intelligence Insights
Data is incredibly powerful if you know how to leverage it. In the face of economic challenges, retailers should use advanced technology such as Business Intelligence tools to improve their end-to-end supply chain visibility, optimize their operations, and use the insights to drive their business forward.
Retailers should consider partnering with a 3PL such as SCI who has already invested in advanced business intelligence technology. SCI’s SaaS BI product provides on-demand reporting and insights on your key business metrics. With our easy-to-use and intuitive tool, you get up-to-date performance measurements so you can see precisely how well your fulfillment operations are being executed; from order to delivery. You’ll see quantifiable data on your key success indicators that help you understand how well your business is functioning. Additionally, by analyzing this data you can identify trends and inefficiencies, such as bottle-necks in your fulfillment operations, so you can subsequently improve your processes.
Solutions that offer up-to-date visibility into supply chain operations promote faster response times, data-driven decision-making, and better customer satisfaction, which can help you weather the challenges of a fluctuating economy.
7. Focus on Being Customer-Centric
In tough economic times, consumers are more selective about their spending. Retailers that prioritize customer needs and provide exceptional service can build stronger relationships, increasing the likelihood of repeat business. Trusted companies financially outperform their peers and customers who trust a brand are 88% more likely to buy again.
To build trust, retailers can improve customer experience by working with reliable 3PL providers, ensuring efficient fulfillment, timely deliveries, and maintaining optimal inventory levels. Effective order management ensures a seamless shopping experience, fostering trust and encouraging repeat business.
Additionally, a customer-centric approach helps retailers understand and respond to changing consumer preferences. By incorporating customer feedback, retailers can tailor products, pricing, and marketing to meet specific needs, enhancing satisfaction and competitiveness. Focusing on customer-centricity can lead to increased retention, positive word-of-mouth, and sustained revenue, providing a buffer against economic downturns.
Conclusion
During challenging economic times, to stay profitable and maintain customer loyalty, it is important for retailers to strategically adjust their operations. Partnering with Third-Party Logistics (3PL) providers can help retailers become more resilient and adaptable so they can not only survive economic volatility but also seize new opportunities.
SCI’s expertise in demand forecasting, optimized order management, and cross-border fulfillment can help streamline your operations and reduce costs. With flexible and scalable infrastructure, cutting-edge automation, and insightful business intelligence, we help you stay competitive and customer-centric.
Contact SCI today and let’s build a resilient future together.
