The Business Problem
The concept of omni-channel retail has evolved rapidly over the last few years. Once considered an over-hyped trend, it’s become the new retail paradigm, driven by customer shopping habits that increasingly engage across multiple devices and shopping venues. It’s no longer an option to deliver a consistent and ubiquitous shopping experience across channels; it’s a matter of survival.
While most retailers are aware that omni-channel has become strategic imperative, there is no easy path to support omni-channel fulfillment. In late 2014, JDA Associates conducted a global survey of more than 400 CEOs from the retail and consumer goods industry. The report revealed a troubling discovery: Despite significant investments, only 16 percent of companies in the survey say they can profitably fulfill omni-channel demand today. The report also notes the high cost of fulfilling orders as the leading reason behind the decrease in retailer margins. A full 67 percent of respondents reported that these costs are escalating as they increase their focus on selling across channels.
Point B’s Perspective
At Point B, we recognize that omni-channel fulfillment is one of the greatest challenges facing retailers. It requires a paradigm shift that affects all aspects of the business model, not just some tinkering around the edges of technology and operations. A full-scale change management effort is essential for success.
Truly transformative customer fulfillment demands fresh thinking from leadership, and a new approach. In helping our clients define and execute on omni-channel operations excellence, we find these five “new rules” to be true:
1. Omni-channel fulfillment must move from “cost center” to “value creator.”
Traditionally, supply chain or logistical costs were the driving force in fulfillment strategy. Retailers built a supply chain based on speed or service to stores. Today, in order to ensure customer loyalty and repeat sales, retailer supply chains must shift focus toward how to forecast multichannel demand, share inventory, and deftly handle a significant increase in returns.
2. The priority for fulfillment shifts from “stability” to “flexibility.”
Retailer supply chains have traditionally been able to look inward and establish mechanisms for servicing stores and/or online customers in a repeatable, sustainable way. However, the growing number of mobile customers with new or different expectations for their shopping experience puts pressure on supply chains to develop more flexible methods to support channel trials and tests. Alternatively, store fulfillment centers offer speed to service but increasingly integrate traditional DCs with evolving store operations. There are just two examples of the continual search for optimum cost/service tradeoffs as shopping methods evolve with each new advance in channel technology.
3. Fulfillment systems are the linchpin for performance across channels.
Supply chain systems have become increasingly sophisticated over the last few decades. Increasingly, consumers expect to have full visibility into inventories across channels, driving the development of ever more advanced fulfillment systems. These complicated systems have helped fuel the emergence of logistics as a competitive advantage for leading companies. Demand forecasting also continues to grow in need and complexity, as retailers find that understanding where customers want to buy becomes ever more essential in their efforts to position product in the right place at the right time.
4. Organizational silos should be replaced by a customer-centric network.
Leading companies have already begun to replace siloed practices that tended to focus on step-change improvement in individual functions with their supply chains. Supporting omni-channel fulfillment effectively will require moving to a centralized logistics network that is better organized to respond to customer demand, rather than sku locations in a warehouse. New skill sets are required that can operate above warehousing, transportation, and even demand planning in order to holistically conduct operations across an end-to-end supply chain.
5. Regardless of the channel used for purchase, the customer wants to return anywhere.
One of the greatest challenges of omni-channel support is the handling of returns. The advent of free shipping in the dot-com world has accelerated the need for processes and systems that ensure first-quality product is made available to sell quickly—again, in the right place and across any channel. The ability of supply chains to effectively manage returns has developed into a significant value creation role.
Increasingly, omni-channel acuity is defining the leaders in retail performance. By applying our expertise in omni-channel best practices together with deep operational, technological and organizational experience, Point B helps our clients forge a solution that results in better execution and an improved customer experience.
About Point B
Point B is a management consulting firm that brings deep industry expertise and superior project leadership to help our clients navigate their most challenging change efforts.
We have earned the loyalty of leading retail and consumer products companies by offering an unparalleled commitment to customer satisfaction, and it shows in consistently higher ratings than industry competitors on leading customer satisfaction surveys.