The widespread use of multi-channel is, by all means, increasing expectations for speed and convenience services. As a result, retailers must reconsider updating their Supply Chain, once intended for a single-channel world.
Multi-channel boundaries are at the same time confusing and delighting to consumers because of their broad range of options, such as ordering online with in-store pickup, constant and variety of inventory, or free return across all channels, to mention a few. The outbreak of smart-phones is making shopping easier using all kinds of platforms and devices for instant shopping. On-line at the top of all this.
Year after year, Amazon has been setting the bar higher for this transformation, as it has broken off with shopping store paradigms, positioning a new industrial service through the proposals of a lower price, an extensive variety of products, and service. Three value propositions difficult and expensive to reach by others. How is Amazon doing it?
a) By building the business mainly around Online services.
b) By the use of Multi-channel platforms.
c) By optimising inventory control - tracking and tracing it, through Amazon's advanced application, reducing inventory by 1-2 days.
d) By improving speed and convenience services.
e) By a same-day delivery.
f) By expanding networks of self-service lockers.
g) Lots of Distribution Centres (DCs) to cover personal customer order across vast geography.
h) By reducing multi-channel retailers’ cost of Online sales from suppliers using Amazon freight networks, saving shipping charges.
i) Factory-gate pricing/direct supplier pickup.
j) Efficient outbound fulfilment.
k) Favourable contracts with shippers (making them cheaper due to high volume.)
l) Efficient use of shipping capacity due to an advanced order-management system.
Amazon’s Online outstanding performance brings as a result that the regular multi-channel retailer faces huge challenges and cost disadvantage to accomplish this transformation.
So, how the Retail Supply Chain of the future will change?
Today’s Retail Supply Chain needs to pass over some Legacy practices which lead to a weak inventory pool and fulfilment processes. A Retail Supply transformation is essential to restructure their networks to be closer to customers, and rethink new capabilities centred on some crucial point:
Retailers will need to supply a whole package of services to make the shopping experience more accordingly to the demands for cost, convenience, and variety in a multi-channel environment, to leverage equitability, delivery times and margins.
Retailers will need a shared view of their SC to identify at any time, what is available at each point and channel, and then route it to the customer in the cheapest and fastest possible way, by combining distribution assets between Online and Retail.
Retailers will need to add latest competencies to existing DCs.
The retailer will need both a selling and fulfilment role when the DCs network cannot meet speed cost-effectively, and to repurpose underperforming sites.
Deeper integration across retailers’ operations will need to become single inventory pool with planning and organisation that operate cross-channels and functions.
Retailers will need to share inventory across their Online and Retail networks.
Retailers must restructure business processes and metrics, adopting uniform standards for shipping and sharing credit for sales between Online and in-store operations.
“Ship to” will multiply, with the outdated store-display shelf, an in-store customer picks up counter, and delivery to the customer's door, DC ties up to a hub, and the smallest centre that sends products to another DC.
There will be hundreds of multi-channel options for fulfilling a single eCommerce demand.
Retailers will need to count on agile processes to quickly optimise the fulfilment of orders already set up on business rules.
Flexibility in inventory management will let retailers to test demand for a product in the Online channel before distributing it to traditional stores.
Multiples SC pathways will emerge, ranging from slower-moving-volume commodity goods to “fast fashion” (air freighting, selective local sourcing or high-margin categories.)
Retailers will be pushed to different roles, to coordinating the frequent SC interactions of a web of suppliers, partners, and shoppers.
Retailers can share the high cost and responsibility of last-mile with Logistics partners who have all the infrastructure needed.
Retailers will need to restructure their networks to be closer to customers. Customer proximity is a crucial factor in determining optimal ship locations.
How your organisation can evolve to world-class Retail Supply Chain?
1) Project your multi-channel business high and broad, and scope it into the future. Balance your strategies, customer needs, and potential competitor actions, and stand firm.
2) Assess current multi-channel offer, and project it to where you want it to be (additional DC space, automation to improve speed or new store processes to manage returns.)
3) Annalise ideal SC structures that most use the current network and capabilities, to find solutions (the number and location of DCs demanded, how to operate fulfilment from stores, and how much of Online inventory should be integrated.)
4) Look at qualitative factors such as SC costs (including transport to DCs, working-major requirements, speed to customer satisfaction, flexibility), and the capabilities needed.
5) Determine the point at which your company needs to move ahead.
SUMMING UP: It makes imperative to transform our Retail Supply Chain, as multi-channel and eCommerce will soon be the in-progress form of Retail. Retailers have to re-engineer Supply Chain capabilities to compete in this new world. Those taking the challenge will gain for sure this transformation.
Dave Food
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