SUPPLY CHAIN MINDED

Transforming the Supply Chain in an Omnichannel World

Transforming the Supply Chain in an Omnichannel World

Transforming the Supply Chain in an Omnichannel World

CONTRIBUTION BY STEPHEN F. DEANGELIS – FOUNDER, PRESIDENT, & CEO OF ENTERRA SOLUTIONS, LLC

“The rise of the omni-consumer,” asserts Fabrizio Brasca (@FabBrasca), Vice President of Global Logistics at JDA Software, “has changed virtually every aspect of the way retailers and manufacturers conduct their businesses.”[1] The omni-consumer is an individual who uses more than one sales channel on his or her path to purchase. This omnichannel approach to shopping has required manufacturers and retailers to transform almost every aspect of their business model because consumers expect a seamless shopping experience whether shopping online from a desktop or mobile device or in a bricks-and-mortar store. For many companies, the road leading to the omnichannel world has been paved with cobblestones. Giselle Abramovich (@GAbramovich), Senior & Strategic Editor of CMO.com, reports, “Although the term ‘omnichannel’ has become most associated with success in retail and consumer goods, few companies are confident in their omnichannel abilities, according to a new study by Ernst & Young and the Consumer Goods Forum.”[2] Abramovich notes that omnichannel strategies are difficult to implement because they require collaboration both within companies and between companies in order for them to succeed.

Omnichannel shopping

Many people seem to believe that the omnichannel shopping experience is mostly about marketing. Brasca points out, however, that omnichannel operations are more about the supply chain. Corporate executives have apparently come to this conclusion as well. According to Abramovich, one of the key findings of the Ernst & Young/Consumer Goods Forum study was “that 81% of executives believe the supply chain an integral part of any seamless online-offline commerce experience is holding back their omnichannel strategies.” That’s not good news; especially for supply chain professionals.

[blockquote style=”3″]Jon Wood, Vice President at DHL’s Retail (Home & Leisure) Division, writes, “With customers shopping via a range of channels, it is important to provide a flexible and seamless shopping experience regardless of whether the customer visits a store, orders online, over the phone or through an app. The supply chain is integral for retailers to deliver the seamless cross channel experience that consumers expect, and meet ever-changing fluctuations in demand.”[3] He continues:[/blockquote]

[blockquote style=”1″]Delivering on time, ensuring there is good stock availability and taking a consistent approach to delivering a great experience online and in store is important to make sure that the customer’s experience is positive, especially if they have ordered remotely. Cost management is also key in both arenas however, by offering cheaper online deals with free delivery there’s a growing risk of decreasing footfall in stores. In addition, increasingly shorter lead times, i.e., within 60-minute delivery windows, mean that routes to market need to be less complex to meet demand. Consumers can now dictate a dedicated time and place that the retailer is required to meet this to deliver a great customer experience.[/blockquote]

Making routes to market less complex at a time when supply chain complexity is increasing (thanks in part to omnichannel operations) is no easy task; but, as Wood insists, “Getting the supply chain right is crucial.” Lalit Wadhwa of Avnet believes that one way to make supply chains less complex is to segment them. “Supply chain segmentation,” Wadhwa told the editorial staff at SupplyChainBrain, “involves clustering services or capabilities that together are used to meet a specific set of requirements.”[4] He told the SCB staff, “Supply chain segmentation is important for three reasons: It enables companies to meet customer needs at the lowest possible cost; it creates a framework that focuses the entire organization on delivering value to the customer; and it provides an effective way to manage the entire life cycle of a product.” Wadhwa notes that there is no silver bullet or one-size-fits-all approach to supply chain segmentation. “There are multiple methodologies for approaching supply chain segmentation.” He adds, however, “Segmenting the supply chain is easy. Execution is the hard part.”

David R. Bell, a professor of marketing at the Wharton School at the University of Pennsylvania, along with Santiago Gallino, an assistant professor at the Tuck School of Business at Dartmouth College, and Antonio Moreno, an assistant professor at the Kellogg School of Management at Northwestern University, offer up their insights about how retailers can win in an omnichannel world. They write, “The challenge omnichannel retailers face is this: How can retailers provide consumers with information (about what products best suit them) without incurring downside on product fulfillment (delivery of products)? The omnichannel environment presents new challenges and opportunities for both information and product fulfillment.”[5] They conclude, “The best way to navigate the omnichannel environment is to: (1) take a customer perspective and (2) view the activities of the company through the lens of the two core functions of information and fulfillment.” They discuss in detail what they call the “information and fulfillment matrix.” They conclude:

[blockquote style=”1″]Like it or not, customers are omnichannel in their thinking and behavior. Sellers need to be as well. Omnichannel features initially perceived as ‘nice add-ons’ are becoming ‘must-haves.’ The question for sellers is no longer whether to operate an omnichannel strategy, but how to implement it most effectively. Our research underscores that the best sellers will win the omnichannel revolution by working across the permeable boundaries of information and fulfillment, offering the right combination of experiences for the customers that demand them.[/blockquote]

[blockquote style=”2″]Navigating the landscape in an omnichannel world is not easy, but it is a journey that must be taken if manufacturers and retailers are going to survive in the decades ahead.[/blockquote]

Footnotes

[1] Fabrizio Brasca, “The Omni-Consumer and the Future of Transportation,Logistics Viewpoints, 21 June 2012.
[2] Giselle Abramovich, “Omnichannel Must Be A Team Effort Among Marketing, CX, Operations,CMO.com, 24 February 2015.
[3] Jon Wood, “Supply Chain and the multichannel buying experience,Retail Gazette, 26 March 2014.
[4] “Steps to Successful Supply Chain Segmentation,SupplyChainBrain, 13 February 2014.
[5] David R. Bell, Santiago Gallino, and Antonio Moreno, “How to Win in an Omnichannel World,” MIT Sloan Management Review, 16 September 2014.

Stephen F. DeAngelis

About Stephen F. DeAngelis

Stephen DeAngelis is a technology and supply chain entrepreneur and patent holder with over 25 years of experience helping to pioneer the application of advanced cognitive computing technologies and applied mathematics to commercial industries and governmental agencies. He is a former Visiting Scientist at the Mathematical and Computational Sciences Directorate and the Center for Advanced Technology at the Oak Ridge National Laboratory and at the Software Engineering Institute (SEI) at Carnegie Mellon University. He was recognized in December 2006, as one of Esquire magazine’s “Best and Brightest” honorees as “The Innovator.” In 2012, Forbes magazine recognized him as one of the “Top Influencers in Big Data.”

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