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Supply chain management systems face omni-channel retail demands while deploying dynamic delivery and fulfillment options.

Supply Chain Management Systems Face Omni-channel Retail DemandsARTICLE

By Karen Lynch

Let’s translate some current retail trends into global supply chain management challenges.

  • Fast fashion = Fast-tracking production.
  • On-demand delivery = Transportation management.
  • 59 types of Oreos1 = Inventory optimization.
  • Free returns = Reverse supply chain.

Consumers today are offered a boundless array of products and proliferating “omnichannel” delivery options – traditional in-store, online/home-delivered and, increasingly, some combination of the two. For example, click-and-collect is a growing trend in 2016. Consumers buying online can choose to pick up their purchases at the store, or collect their groceries at temperature-controlled lockers in train stations or have goods delivered to the trunks of their cars (now being piloted2). Plus, there’s a still-growing list of (often free) delivery options including overnight, same day, same hour, return by mailbox and return to any store – with customers given online visibility into products’ availability and progress along the way.

Omnichannel options for shoppers are becoming less optional for retailers. Six in 10 consumers are prepared to buy elsewhere, if their preferred delivery method is not available from their regular retailer, according to a recent survey by omnichannel retail solutions provider Kibo Software Inc.3 “Digital has reshaped customer behavior and shopping forever,” says a recent report from Deloitte Consulting. “A quick listen to any earnings call will validate that retailers’ investments mirror that recognition and commitment to change.”4

It’s Back to the Drawing Board for Retail’s Supply Chain Management Systems

Planning

Going back to the drawing board is often required of retailers, since legacy planning and budgeting have simply not kept pace with customer behavior, Deloitte says.

Delivery

Today’s trends – especially omnichannel retail – will require more flexibility in the size, services and location of warehousing and fulfillment centers for speedy “last mile” delivery, according to DHL’s Logistics Trend Radar report.5 Data analytics can further accelerate delivery, by predicting regular customers’ purchases.

Digital ecosystem

Investing in digital tools for visibility, coordination and sharing key performance indicators among supply chain tiers can help orchestrate efficient performance. Developing this kind of partnership ecosystem can be key to scaling up global supply chain management, according to a report from Capgemini Consulting and GT Nexus, a cloud supply chain platform.6

Brick and mortar

Opportunities can be reaped in cases where, for instance, in-store pickups lead to more off-the-shelf sales and, “the value of stores is no longer simply the worth of the goods sold in them but the impact they have in encouraging sales online, showcasing the brand and developing top-of-mind-awareness,” according to Ovum, a market research firm.7

De-Stressing Global Supply Chain Management

Competing with the giants of e-commerce can be a costly supply chain challenge for most retailers, and scaling up to a global level becomes even more complex in an omnichannel world. “Supply chains are stressed by advancing digitization, growing demand for speed and new capacity, and fierce competition,” according to the DHL report. Symptoms of this stress can include bloated inventory levels, reduced margins and depleted working capital for new product development, says Rich Becks, General Manager of E2open, a provider of collaborative supply chain solutions.8

A range of solutions to these challenges is emerging. As is happening across all industries, digital innovation is enabling the unbundling and reconfiguration of various parts of supply chain management systems, and offering new alternatives for logistics, payments and other key functions – available from myriad startups as well as established providers.

Many new alternatives for such important tools as transportation management systems are cloud-based, which can lower the cost barriers many mid-sized retailers face in automating the basic challenge of getting their product most economically from point A to point B. Inventory optimization software can likewise provide more control over planning, assortment and replenishment. One cloud offering bundles warehouse management, transportation, business-to-business (B2B) payments processing and inventory management.

Track-and-trace tools are also being updated from bar codes to the Internet of Things, with sensors providing much more information along the continuum from materials to finished products, inventory, picking, packing, shipping and delivery.

Online marketplaces are growing, including on-demand B2B marketplaces that match demand and supply for logistics services, such as renting warehouse space. Another brings together buyers and sellers of products, offering retailers a lower-risk means to rapidly diversify the lines they sell. Especially for smaller businesses, marketplaces established by some of the big e-commerce companies can be options that provide payment and fulfillment services, as well as showcasing a retailer’s products online.

These and other high-tech alternatives are a far cry from the faxing and phoning that 48 percent of survey respondents still report using as their dominant means of interacting with supply chain partners, according to the Capgemini Consulting-GT Nexus report. But change is coming: the same survey shows that 70 percent of retailers and manufacturers have begun digital supply chain transformations (although only five percent are “very satisfied” with their progress).

From High-Tech to Low-Tech Solutions for Supply Chain Management

Lower-tech but nonetheless innovative approaches to managing costs are evident: some retailers are turning warehouses into showrooms or, conversely, turning stores into shipping centers. Other innovations include B2B sharing economy models, for example, as one retailer uses another retailer’s location for in-store pickup. Another sharing model is “coopetition,” in which competitive food companies have been bundling warehousing, co-packing and outbound distribution of some refrigerated products with competitors.

Fast-tracking production, mentioned above in the context of fast fashion, introduces more nimble sourcing by, for example, stockpiling unfinished fabric that can be quickly made into the latest trend, rather than loading up on finished inventory.9 Among other supply chain tactics, “one-touch” pallets use the same packaging for transportation, retail display and storage to reduce handling. Counterintuitively, perhaps, some suggest slowing down less urgent shipments and using the cost savings elsewhere.

The Takeaway

Projections for the 2016 holiday season are now out, with U.S. sales expected to exceed $1 trillion – nearly $100 billion of it happening online.10 Meeting such retail demand is clearly a big challenge. Whatever the calendar or geography, the global supply chain management challenge is also increasingly complex, given omnichannel delivery and other retail trends. Retailers are considering new supply chain management systems that offer an integrated view of all channels and inventory while deploying dynamic delivery and fulfillment options.

Karen Lynch - The Author

The Author

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.

Sources

1. Oreos search results listing, Snackworks, accessed 27 October 2016; http://www.snackworks.com/search/product-results?searchText=Oreo&page=1&searchType=Product.
2. "DHL and Smart Team up for Car Trunk Delivery Pilot", Post & Parcel; http://postandparcel.info/74444/news/dhl-and-smart-team-up-for-car-trunk-delivery-pilot/.
3. The Digitally Demanding Consumer, Kibo Software Inc.; http://pages.kibocommerce.com/rs/kibo/images/The Digitally Demanding Consumer.pdf?mkt_tok=3RkMMJWWfF9wsRonu6%252FKce%252FhmjTEU5z16e4vXqe%252Bh4kz2EFye%252BLIHETpodcMSsVkPa%252BTFAwTG5toziV8R7DNLs1s08wQUhfj
4. The New Digital Divide, Deloitte Consulting; http://dupress.deloitte.com/dup-us-en/industry/retail-distribution/digital-divide-changing-consumer-behavior.html?id=us:2el:3pr:dup3325:awa:dup:091416
5. Logistics Trend Radar, DHL; http://www.dhl.com/content/dam/downloads/g0/about_us/logistics_insights/dhl_logistics_trend_radar_2016.pdf
6. The Current and Future State of Digital Supply Chain Transformation, CapGemini Consulting and GT Nexus; http://mktforms.gtnexus.com/rs/979-MCL-531/images/GTNexus-Digital-Transformation-Report-US-FINAL.pdf
7. The Future of E-commerce: The Road to 2026, Ovum; http://www.criteo.com/media/4094/ovum-the-future-of-e-commerce-the-road-to-2026.pdf
8. "Four Consumer Goods Supply Chain Challenges You Need to Beat", Supply Chain Management; http://www.supplychaindigital.com/supplychainmanagement/3877/Four-consumer-goods-supply-chain-challenges-you-need-to-beat
9. "Fast-Fashion Tricks Are on Display at Department-Store Chains", Wall Street Journal; http://www.wsj.com/articles/fast-fashion-tricks-are-on-display-at-department-store-chains-1475155688
10. "Deloitte forecast: Retail holiday sales to increase 3.6 to 4 percent", Deloitte; http://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/holiday-forecast.html

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