Five Essentials for Optimizing the Omni-channel Supply Chain

July 7, 2017

The retail industry is in the throes of long-term disruption as delivering omni-channel excellence becomes the new imperative. Today’s consumers are moving more of their shopping away from brick-and-mortar retail establishments to online, mobile, mail order, telephonic, and self-service sales channels. As retailers manage stock-keeping units (SKUs) to address changing consumer preferences  and intensifying competition, unforeseen supply chain disruptions are resulting in excessive inventory, backorders, complex third-party arrangements, shipping delays, etc. – all combining to negatively impact the customer experience, sales, and shareholder value. The increasingly global, yet complicated supply chain network is leading to a daunting challenge – that of optimizing supply chains to support omni-channel experiences.

Here are five essentials to optimize retail supply chains in an omni-channel world:

#1 Break the silos – focus on internal supply chain alignment:

What customers expect from an omni-channel experience is the ability to seamlessly transact, regardless of the point of sale and device. An organization can only deliver on that promise when it treats supply chain as an end-to-end function integrated with other organizational departments and not as a separate unit. Internal supply chain alignment is critical to ensure all your departments – from procurement to sales – are working towards a common objective, – not in diametrically different directions or at cross-purposes with each other.  Amazon is a great example of horizontal supply chain management that extends from east to west, not north to south – meaning, every department approaches the supply chain collectively. The company’s amazing supply chain optimization strategy has catapulted it to the exalted status of the ‘new logistics giant worldwide’ – at par with the UPS, FedEx, and DHLs of the logistics industry.

Onmichannel

#2 Bolster technology to compete and succeed across channels:

m-Commerce is on its way to surpassing e-Commerce. By the end of 2017, over two billion mobile phone or tablet users are expected to make mobile commerce transactions.  As customers’ access to products and services becomes wider and easier, retailers need to bridge the technology shortcomings of their supply chains to deliver on the promise of faster, smoother delivery, returns, and exchange. Key technological initiatives must include:

  • Automated data capture and item tracking, using Bluetooth technologies such as RFID tags, handheld device scanners, etc.
  • Real-time inventory management and control using IoT, Big Data, and modeling systems that enable retailers to simulate scenarios based on predicted trends and patterns. Companies can then move/withdraw inventory in areas where either higher/lower demand is expected.
  • CRM tools that enable integration across all systems – transportation, billing, warehouse management, and customer service.

#3 Optimize and compress internal lead times:

This may seem simple but few companies actually put this strategy into practice. It could start with compressing internal planning cycles, automating and standardizing repetitive processes, and expediting order-to-release processes.  H&M, a leading global retailer, leverages a mix of smart manufacturing techniques, digital technologies, and data-driven design and production methodologies to optimize internal lead times by 15-20%. This allows the company to quickly restock trending items across its stores.

#4 Collaborate with suppliers, wholesalers or other retailers to share inventory:

Every market player in the retail value chain has a clear mandate to succeed in the omni-channel environment – to shorten time-to-market, at the lowest possible cost. This means no one wants to invest in too much inventory or build the infrastructure required for an extensive distribution center (DC) network. That’s why smart companies have begun to collaborate to push inventory closer to the market, even if they don’t have a core direct-to-consumer businesses. The benefits of doing this are manifold – firms that share inventory can offer a broader product portfolio to customers without having to worry about stocking issues, replenish products faster, enable quick delivery, returns and exchange, and access a far wider consumer base overall.  Europe’s biggest online fashion retailer, Zalando has collaborated with Adidas Group under a new initiative titled Zalando Partner Program. The two companies have connected their warehouses through a software system to offer customers access to a wider assortment of products and same-day free deliveries.

#5 Invest in transport optimization:

Omni channel supply chains require more decentralized transport networks as they typically involve more partners and services. Sticking to the planned delivery schedule and optimizing vehicle utilization cannot be achieved without real time view of traffic information and the ability to make quick route modifications, as and when necessary. United Parcel Service (UPS), one of the world’s leading logistics provider leverages On-Road Integrated Optimization and Navigation (ORION) technology to guide its drivers to the shortest possible route, so they can deliver packages on time, despite unfavorable traffic or weather conditions in the delivery area.  

Adopt a new organizational mind-set to drive omni-channel success

While 75% of businesses today recognize omni-channel solutions are critical enablers of success, 49% of them are yet to invest in an omni-channel supply chain.  That’s because it’s harder than it looks on the surface. Overhauling your supply chain to meet omni-channel expectations requires an innovative mindset across the organization. This requires organizations to display a willingness to try new ideas, make room for mistakes, implement next-generation technologies, and most importantly – be prepared for change.