H&M and Ocado: Supply chain successes and slip ups
Sweden-based H&M’s recent profit dive provides a classic example of a retailer inaccurately forecasting consumer spending, resulting in shrinking profits and piling up inventories.
H&M’s new store concepts along with its logistics system, rolled out in the hope of integrating its online services with its bricks and mortar outlets, succeeded in increasing sales figures. Alas, the budget fashion house did not predict just how vital the supply chain is when it comes to maximizing sales.
Intensive work to correct these problems resulted in extraordinary costs of around SEK 400 million (USD 183 million) in the third quarter, said H&M CEO, Karl-Johan Persson. The situation has now largely been resolved, he claimed, which doesn’t exactly inspire confidence.
The new logistics system is an essential part of its work to make the supply chain faster, more flexible and more efficient, and to continue the integration of stores and online, he added.
However, H&M’s woes highlight the need for accurate forecasting and getting the product mix right. It’s great for retailers to work with marketing to boost new products. But if this isn’t communicated and shared with sales and supply, that’s where the journey ends and the warehouse is left with a surplus of incorrect stock.
This is where a fully digital supply chain will benefit retailers, commanding stronger communication skills and helping teams to liaise as effectively as possible with suppliers and within the business.
Employing predictive analytics gives retailers the tools to understand and predict customer demand to streamline their procurement, and provide better customer experience at the same time. While this will demand a higher level of data analysis, so that employees can take advantage of the data being collected by AI and predictive analytics, it’s worth the investment.
The best way for retailers to meet consumers’ growing list of expectations – while delivering more sales and boosting profits – is to use technology to get ahead.
Contrast a struggling H&M with a buoyant Ocado whose deployment of high tech warehouses has directly led to an increase in sales.
With the roll-out, Ocado has highlighted the benefits of incorporating robots and large-scale automation into the complex world of grocery.
Consumers now expect to order and receive items in a matter of hours, something that has recently extended beyond Amazon orders and into weekly grocery shops.
Automation, when rolled out efficiently, can help boost e-commerce sales by providing consumers with what they want, when they want it.
Retailers both online and on High Streets are under constant pressure to keep up with this growing customer demand.
What Ocado has done especially well is balance the use of both humans and machines in its operations. By retaining workers for ‘intelligent’ jobs – such as sales and business strategy – and deploying robots to do manual work like picking and packing, it has not only streamlined but also enhanced its supply chain. Watch and learn, H&M.