The Value in Building Agile Retail Supply Chains
To better compete in the industry, today’s retailers must extend their traditional retail supply chain technologies and build an IT architecture that creates a modern, agile, future-proof retail supply chain.
The retail industry is becoming increasingly competitive. As a result, retailers now face a variety of forces impacting their retail supply chain. These include an increase in distribution channels, a wider choice of suppliers, as well as a shorter product cycle. In addition, retailers must also respond to constant changes in customer demands, industry trends, and economic conditions.
The forces covered are just a few of the challenges impacting retail supply chains across the industry. Often times, traditional retail supply chain technologies are unable to transform retailer’s business operations and processes due to a series of limitations, including the lack of real-time data processing, visibility, and human-readability. As a result, retailers cannot address the above limitations. This puts them at risk, as they are unfit to compete in the industry and may, eventually, lose their share in the market. This begs the question: How do the above challenges constrain traditional retail supply chain technologies, and what solutions can retailers employ to create modern retail supply chains that better equip them for competition in the industry?
Traditional retail supply chains face a wide variety of challenges––from an increase in distribution channels and a shorter product cycle, to an increase in customer demands and shifts in industry trends. These challenges have rendered leading traditional retail supply chain technologies difficult to work with and integrate in today’s digitally disrupted environment. This includes Enterprise Resource Planning (ERP) software, Customer Relationship Management (CRM) software and, most importantly, B2B Electronic Data Interchange (EDI) technologies.
For example, one of the most difficult challenges that retailers face is the increase in customer demand, especially in terms of the products and services they want and the speed at which these are delivered. Today’s customers want what they want, when they want it, and where they want it. This culture of immediacy has transformed the way that retailers produce and deliver products. In fact, customer demands have increased by approximately 24% in the last 15 years.
Increasing customer demands are putting great pressure on retailers, the majority of which are finding it difficult to keep up. Lithium commissioned a poll to target U.S. corporate executives. The poll revealed that 6 in 10 respondents found that it was “somewhat difficult” (50%) or “very difficult” (7%) to meet their customer’s needs. Although meeting these expectations is not easy, successful retailers must be able to create agile retail supply chains in order to fulfill changing customer expectations, deliver new products and experiences; and adjust to changes in the marketplace quickly. Failure to create this agility will lead to customers taking their business to another vendor that can satisfy their demand for new products in a timely manner.
The increase in customer demands is forcing retailers to have shorter product cycles. This has pressured retailers to adjust and readjust their supply chains in order to develop new products and deliver them to the market quickly. Shorter product cycles are further exacerbated by two other challenges: shifts in industry trends and economic conditions. These shifts can have critical ramifications on the retail supply chain, as they can determine demand – or lack thereof – for the latest products as well as when older products should be phased out.
Traditional retail supply chains are also strained by distribution channels and suppliers. Technology and globalization have caused a surge in the number of distribution channels and suppliers available to retailers. Today, retailers can sell their products through various channels, including eCommerce, brochures/catalogues, or sales representatives. In addition, retailers have a wide range of suppliers to choose from––whether it is third-party sellers, value-added resellers, wholesale manufacturers, or franchisers.
The challenges discussed above put immense pressure on traditional retail supply chains. Many retailers are recognizing that their existing B2B/EDI technologies can no longer keep up. These systems, which first appeared in the 1980s, are difficult to work with because they process data in batches, as opposed to the real-time processing that today’s industry necessitates. In addition, B2B/EDI systems cannot provide real-time visibility or responsiveness. They are also difficult to work with because they are not human-readable, only computers can comprehend the data.
Most importantly, B2B systems that transfer EDI messages usually do so through point-to-point system integration. This leads to a fragile system that increases in complexity as the number of endpoints increases. Overall, B2B/EDI technologies are neither agile nor future-proof––preventing retailers from addressing today’s challenges.
To illustrate, imagine a scenario in which a change in customer demand and a shift in economic conditions force a retailer to introduce a new product and remove an outdated product from the market. The retailer must be able to respond to this change quickly by incorporating feedback in real-time and making changes to the production process or the product mix that it offers. Clearly, traditional retail supply chain technologies – B2B/EDI – are incapable of addressing these issues. That said, what can retailers do to better respond to these challenges and thrive in the industry?
Modern Retail Supply Chain Technologies: API-led Connectivity
At one time, B2B/EDI systems fulfilled their purpose. During this time, customer expectations were lower, supply chains were simpler, and there were a limited number of suppliers available; but the world has changed. New challenges are forcing retailers to rethink their existing retail supply chain technologies or risk losing their share in the market. However, despite their drawbacks, B2B/EDI systems are likely here to stay. Still, retailers must add new architectural approaches to these systems in order to insulate them from the new and abstract their limitations. This architectural structure starts with adopting a new approach to integration: API-led connectivity.
API-led connectivity is a methodical approach to integration that connects data to applications through reusable and purposeful modern APIs that are developed for a specific purpose––whether it is to unlock data from systems, compose data into processes, or deliver an experience. Retailers can take an API-led approach to B2B/EDI by creating an application that transforms the systems, applications, devices, and data within the retail supply chain into pluggable, reusable, and composable assets.
In order to better understand the value in taking an API-led connectivity approach to B2B/EDI, it is important to examine this approach alongside the point-to-point approach to B2B/EDI. Take, for example, one customary process: adding a new partner to the retail supply chain. Existing B2B/EDI systems transmit communication data in a siloed manner. If a retailer adds a new partner to its retail supply chain then this process is duplicated in the back-end each time a new partner is added. Because EDI systems use point-to-point integration, these linkages or additions become increasingly complex as a retailer onboards more and more partners to the retail supply chain.
API-led connectivity enables retailers to take an innovative approach to integration that transforms their traditional retail supply chain into a modern one. In the example above, there is some logic that is common across adding partners to the retail supply chain. With API-led connectivity, retailers can decouple the message processes from business processes. This leads to a set of defined single services that can consistently handle all messaging, such that only the business processes have to be adjusted to every new partner. As a result, the next time a retailer needs to add a new partner, the foundation element is already in place. This greatly reduces the onboarding process and leads to a retail supply chain that is modern, agile, future-proof, and operates at a much faster speed than ever before.
There is great value in building a modern, agile retail supply chain through API-led connectivity and MuleSoft can help you start this journey. Take, for example, the experience of one of customers, Redwood Logistics––a company that provides freight and transportation services to mid-market clients.
One of the main challenges that Redwood Logistics faced was the fact that they were slow to deliver against their strategic initiatives. This was largely due to the difficulty in communicating with their partners. Each partner used different EDI messaging and protocols, complicating effective and rapid communication. In order to solve this challenge, Redwood Logistics needed to abstract the complexity of EDI standards.
The company turned to MuleSoft’s Anypoint Platform TM to build an EDI transformation layer, which enabled them to use API-led connectivity to automatically transform data into the format most appropriate for each partner. With MuleSoft, Redwood Logistics was able to access the right resources faster and develop sophisticated data-driven solutions for their clients.
In addition, the reusable API assets that Redwood Logistics created reduced customer onboarding time from 6-9 months to a mere 60 days. Though API-led connectivity, Redwood Logistics was able to extend and improve the functionalities of their existing B2B/EDI systems. According to the CIO of Redwood Logistics, Eric Rempel, “The API-led connectivity that we get from MuleSoft has simplified how we look at our connectivity problems, and more importantly, has helped us focus on how we drive more value to our clients.”
Traditional retail supply chain technologies such as B2B/EDI are unable to address some of the challenges that retailers are facing––from increasing customer demands to changing economic conditions. Still, B2B/EDI systems are not going anywhere. One solution that retailers can employ is to extend some of the functionalities of their existing systems and marry them with an API-led approach to integration.
Learn more about some of the integration solutions that MuleSoft offers to retailers and start your free trial of MuleSoft’s AnypointTM B2B, a platform that helps retailers apply API-led connectivity to B2B/EDI use cases.