Supply Chain Spotlight: How Retailers Made the Most of Prime Day

Welcome to the ninth issue of Global Value Chain Chronicle. In every edition, I answer one question from a reader. This month’s question comes from Dave:

“What does the Biden administration’s report on the 100-day supply chain review mean? What actions should I expect the administration to take in the coming years?”

Thanks, Dave – Great question. The measures outlined in the White House’s report represent a new era in supply chain policymaking. The Biden Administration is throwing the full weight of federal funding behind reshoring and will aim to play a more direct role in reshaping U.S. supply chains. As the types of manufacturing that President Biden wants to bring back to the U.S. generally require significant capital investments to relocate, I expect that it will take 3-5 years before we will be able to fully measure the impact of the policies on global supply chains. For now, manufacturers should review the White House’s report to determine which incentives they could qualify for and factor them into their supply chain planning. Continue to look out for further updates from the White House or supply chain task force, as I expect that this is only the beginning of the Biden Administration’s push to incentivize reshoring.

Have a question that you’d like to ask? Submit your own by following this link, or email me directly at [email protected]

?Last month, I highlighted findings from BDO’s 2021 Industry 4.0 Survey to contextualize manufacturers’ digital goals for improving customer experience. In this month’s issue, I’ll focus on how the retail industry navigated sustained supply chain disruptions during one of the most profitable events of the year.

According to Adobe Analytics’ 2021 Digital Economy Index, U.S. online retail sales totaled more than $11 billion during Amazon Prime Day 2021, a two day event of discounted deals for Prime members. The annual event spurred significant growth in revenue for both non-Amazon retailers offering competing deals on their own sites and those that sell through the platform, even surpassing 2020’s Prime Day transactions by 6.1%. Though positive reports, these numbers can’t be accounted for without the context of the global pandemic. Amazon cited deals would vary by country, and there were gaps upwards of 15%, which likely came as a result of the industry continuing to navigate supply chain disruptions caused by COVID-19. With one product, the JBL GO 2 speaker, Reuters found discounted prices of 6% for U.S. consumers, but varying deals between 20% and 32% for consumers across Europe, showing the domino effect of supply chain sustainability on consumer costs.

While Prime Day arrived in time to meet lifted pandemic-related restrictions on businesses in the U.S., unlike other industries, retailers haven’t had a chance to fully recover from the pandemic-recession of 2020. Many retail businesses are still facing challenges with supply chain visibility, inventory levels and ever-growing consumer demand. Furthermore, retailers have been limited in buying inventory to stock their shelves due to shortages of critical materials needed to make product, including semiconductors and textiles. Availability of shipping containers and air freight capacity are also strained, leading to longer delays in delivery of product to both distribution centers and consumers. And while employment rates have partially returned under remote and hybrid work models, retailers that rely on in-person services must reorient their workforce to align with digital strategic initiatives.

Having persisted for more than the past year, these challenges were no surprise to the retail industry. In fact, many retailers made an effort to stock up on inventory well in-advance of Prime Day, as the annual event has traditionally been a top revenue driver for e-commerce and generated record-level sales. But still, supply chain disruptions led to products quickly running out of stock. So, what can retailers do to alleviate continued supply chain disruption and capitalize on increased demand?

Retailers will need to digitize their supply chain to reduce lead time for customer orders, streamline logistics and manage inventories. They’ll also need to mature their data analytics capabilities to uncover new areas for business opportunity and ensure in-demand products are stocked and customers receive orders on time. Failure to do so can trickle down to customers who don’t have patience for friction.

Driving operational efficiencies and prioritizing a connected supply chain can help retailers react more quickly to changes in consumer demand. To that end, retailers who’ve been able to secure the necessary capital and company buy-in have adopted digital solutions, including real-time order tracking (55%), connected inventory management systems (52%) and warehouse management system applications (47%), according to a BDO report. These solutions are intended to address consumers’ expectations for seamless omnichannel experiences. Implemented successfully, they can also support data-informed insights on supply chain transparency and better-connected logistics.

However, technology won’t run itself. While digital investments are crucial, it’s important to also prioritize workforce training and employee buy-in on digital initiatives. As technology transforms the landscape, the backbone of retailers will be their data and the talent they employ.

Despite the challenges involved with supply chains, Prime Day was deemed a success for many retailers. But to unlock new growth potential throughout the year, it’s imperative that retailers invest in their supply chains as a function of their entire business—not just a back-end function. With the right omnichannel solutions, retailers can support a 360° delivery on supply chain needs and consumer expectations.

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