Retail supply chains need redesigns to keep pace with growth, says expert

Retailers rarely discover a supply chain crisis all at once. More often, the trouble begins quietly: stock builds up, warehouse costs creep higher, orders start arriving late or wrong, and transport bills drift beyond plan. By the time those symptoms are visible, the underlying issue is usually not one broken process but a business that has outgrown the operating model that once made it successful.

That is the view of Peter Jones, managing director and founder of Prological Con...

sulting, who told Inside Retail’s Amie Larter on the Retail Untangled podcast that many fast-growing retailers keep trying to patch old systems instead of redesigning them.

A business, he said, can thrive when it is small because speed, instinct and informal knowledge compensate for the absence of structure. But those same qualities can become liabilities once scale sets in. Growth brings more products, more channels, more customer expectations and more pressure on fulfilment, making a once-flexible setup fragile.

Jones argues that the warning signs usually show up first in the numbers watched by finance and operations teams. Rising inventory, labour and freight costs are often the first clues. So too are increasing customer service complaints, especially where orders are split, delayed or sent incorrectly. Those issues may look like isolated failures, but they often point to deeper weaknesses in stock accuracy, warehouse design or decision-making.

He described one Sydney retailer that had moved from a small warehouse to a much larger site after rapid expansion from a start-up into a national chain and online business with turnover of about $45 million a year. The company’s incoming chief financial officer suspected the operation was under strain and brought in Jones to assess it. What he found, he said, was a workplace where stock was scattered everywhere, people relied heavily on memory to find goods, and even basic movements within the building took too long because the layout had become unmanageable.

The operation, Jones said, had reached its ceiling. It could not support further growth in that form. The retailer eventually moved into a bigger warehouse within six months, and the result was not just a tidier site but a business that could meet online service promises again. According to Jones, the CFO later reported that performance had improved beyond forecast because the move had removed a bottleneck that was dragging on the wider business.

His broader point is that retail supply chains are not something a company finishes and then leaves alone. There is no perfect version in which inventory is always in exactly the right place at the right time and at the lowest possible cost. Real-world retail, he says, is about balancing trade-offs: demand forecasting, lead times, store locations, freight costs, warehousing capacity and customer expectations all have to work together.

That complexity is only increasing. Industry advisers have pointed to recurring problems across retail supply chains, including weak end-to-end visibility, inventory errors, labour shortages, supplier rigidity, fragmented data and rising cyber risk. Deloitte has argued that the issue is often less about the supply chain in isolation than about disconnected functions elsewhere in the business. Other industry commentary has made a similar point: growth tends to expose execution weaknesses before it exposes demand problems.

For Jones, the answer is not to chase perfection. Retailers should instead focus on progress, accepting that every model involves compromise and that the right compromise today may not be the right one tomorrow. Automation, he said, has become essential because businesses that still rely entirely on labour will struggle to match competitors that are using technology to process orders faster and at lower cost.

The deeper lesson is that successful retailers need to recognise when their business has changed shape. What works for an ant will not work for an elephant. Once a company reaches that stage, the challenge is no longer to keep adding patches. It is to build an operation that is strong enough for the scale it has reached.

Source: Noah Wire Services