The Omni-Channel Supply Chain5.1.16
Why it Matters
The biggest challenge faced by retailers today is how to meet the consumer’s desire for a seamless, consistent buying experience regardless of how or where a purchase gets made.
How do you create the same experience for purchases made in stores, online or via mobile device? How can you ensure the experience is extended after purchase by meeting high expectations for customer service and easy returns?
That’s the omni-channel challenge. Consumers have never been more demanding in terms of the immediacy and level of customization they expect. For retailers it’s no longer a question of if, but how this gets done.
The imperative to create the seamless buying and after-purchase experience has rippled through the retail supply chain. Retailers know they need a new mindset and strategy focused on flexibility, velocity, and cost optimization.
To adapt omni-channel supply chains, they have to remove operating silos that exist between different sales channels. That means looking at ways to gain efficiencies by combining different logistics processes across sales platforms, such as merging warehouse space or fulfillment operations so that they serve both in-store and e-commerce business units.
Location aside, the biggest hurdles typically involve inventory management.
What happens when a retailer is holding stock of specific SKUs for one channel — say, for its brick-and-mortar stores — yet visitors to its website are getting an “out of stock” message for those same goods? Without the right systems and process, it’s a problem that goes undetected, hurts sales and has the potential to erode customer confidence and brand loyalty. The product was there. It just couldn’t be sold.
The right approach requires complete visibility throughout the supply chain.
When is it best to hold back stock for the e-commerce channel or send it to stores? How easy or hard is it to pull stock from the inventory of another channel? How do you track and replenish it? There’s no single approach for all retailers. Clearly, though, the right approach requires technology that enables inventory to flow and be managed across channels to enable complete visibility throughout the supply chain.
To build an omni-channel supply chain, start with IT integration and supply chain visibility – particularly in the areas of inventory management and reverse logistics. A supply chain designed to view and treat customers through the omni-channel prism, and not segmented by channel, is the most important step.
Retailers need to strike the right balance. They need the agility to match the specific needs of a market plus the efficiency to optimize inventory management and control logistics costs. The desire to strike that balance is one reason why some retailers are trying to lower e-commerce delivery costs by encouraging customers to buy online, then pickup purchases in store.
After inventory management, returns are the area most affected by the proliferation of sales channels. In many cases, returns have the largest impact on the customer experience. Consequently, retailers need an omni-channel approach to them. It’s common today for consumers to purchase online, yet return products in store. So the reverse logistics process that retailers use to handle returns presents many of the same inventory management challenges they encounter when they make sales.
An omni-channel approach is the future. It represents the retailer’s greatest opportunity to maximize efficiency, control costs and enhance the customer experience. Companies that recognize the new reality and adapt their supply chains to meet the challenge will be rewarded.
Tips for the Omni-Channel Retailer
- Develop a front-end strategy that maximizes capture by incorporating Search Engine Optimization, rapid-shopping options and a re-designed website.
- Consider outsourcing to a networked supply chain player in order to remove some of your silos.
- Reconsider the impact on your ERP system and engage IT early in order to ensure that your website, order management, fulfillment, Warehouse Management System (WMS) – and your logistics provider’s WMS – are fully integrated from day one.
- Evaluate the impact on your entire supply chain process, including returns and reverse logistics. Remember: shoppers expect free shipping and expect to order multiple SKUs, often planning to return most of them.
For more information about Agility’s retail logistics services click here