Video: Efficient supply chains start with the right assortment

Julian Miller explains why category based clustering creates supply chains that are much better able to respond to critical events in the market

The COVID-19 pandemic has certainly provided a wake-up call to retailers and suppliers to review their current systems and supporting technology in order to react effectively and efficiently to abnormal market demand.

But where should you focus your efforts first? I’ve put together this short video blog on why getting your assortment right through intelligent store clustering is key to driving efficiencies in your supply chain.

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    So during the COVID pandemic, we’ve obviously seen a lot of pressure on retailers. One of the things that’s really highlighted is supply chains struggling to cope with the level of demand. And there’s lots of things we can do to help that through better forecasting and replenishment and using AI to predict the demand in different stores more accurately, can really help get the right products to the right stores at the right time. I think retailers are starting to understand this and they’re understandably investing in these areas. But an important consideration as part of this process is actually the assortment and getting the assortment right.

    We can make the supply chain much more efficient by predicting the demand more accurately, but let’s imagine you’ve got a category that has 200 items in it. Well if you could service that category and you could satisfy the customers with 150 items instead of 200, then actually there’s a huge efficiency gain to be made there. You can make the supply chain much leaner and much more agile, and much more able to react in extreme times. And really that starts with the assortment. Now in an ideal situation from a customer perspective, what you would do is you’d have a unique assortment for each store that represents the needs of the customers shopping in those stores. The problem of course is when you have a unique assortment in each store, is that you potentially have a lot of items going through the supply chain because there might be lots of differences between the stores and overall you have a lot of items you have to worry about from a logistics perspective and a warehouse point of view. Actually that’s not a good thing for the supply chain at all.

    What’s the solution to this? The solution is actually effective category-based clustering. And what that means is, that if we can find the stores that have commonality in shopper behaviour and shopper demand, and we can cluster them together uniquely for different categories, and then we can create assortments for each of those clusters, we can significantly reduce the number of items that are travelling through the supply chain in totality. And straight away, there’s a huge efficiency gain which makes those supply chains much more able to react when they’re put under pressure.

    So as we see waves of the COVID pandemic over the next weeks and months, if retailers act now and they make their supply chains more efficient and they do that by using techniques like category based clustering and they get the right assortment in there, then we’ll see supply chains that are much better able to weather the storm of the next weeks and months.