The Digital Path to Purchase Requires Mastery of Omnichannel Capabilities

Stephen DeAngelis

November 5, 2014

“Very few companies – a mere five percent – believe they are ‘advanced’ when it comes to omnichannel capabilities,” a press release from SPS Commerce states, “and between 35 percent and 40 percent believe they’re lagging, according to the third annual Retail Insight report from SPS Commerce.” [“Only 5 Percent of Retail Industry Has Fully Executed an Omnichannel Strategy, Survey Finds,” SupplyChainBrain, 16 October 2014] The release continues, “Across the board, the research findings confirm the cross-functional challenges retailers, suppliers and logistics firms face as they build omnichannel capabilities into their operations. The report also underscores the critical role fulfillment excellence plays in meeting consumer expectations for rapid delivery and flexible returns.” Peter Zaballos (@peterzaballos), vice president of marketing and product at SPS Commerce, added:

“This survey clearly lays out the fundamental reshaping of the business processes and technology required in today’s retail environment. The report underscores the complex challenge of developing omnichannel retail success, while also affirming the future direction of the retail industry.”

Zaballos makes two important points. First, mastering the digital path to purchase and omnichannel operations is a tough challenge; and, second, it has to be done if a retailer wants to survive. It’s time for retailers to roll up their sleeves and get to work. One of the things that makes the challenge difficult is that both supplier-facing and consumer-facing strategies and capabilities need to be developed. A survey conducted by PricewaterhouseCoopers involving 400 retail CEOs concluded, “Retailers’ supply chains generally are not optimized to support the new omnichannel environment, particularly with regard to the changing supply needs created by the expansion in mobile and online shopping.” [“Omnichannel: Retail Supply Chains’ Big Challenge,” PYMNTS.com, 8 August 2014] The report goes to note that many CEOs seem to be in denial about the importance of the digital path to purchase and omnichannel operations. The article states:

“Many CEOs seem to underestimate the impact of the new omnichannel environment, as 34% of those surveyed considered the rise of omnichannel shopping to be an external threat, while only 22% said it would impact their organization, according to the report. That, the report notes, should give cause for concern, as many predict the rise of omnichannel shopping is one of the most fundamental shifts that has occurred in the industry in recent times.”

It’s no wonder that the SPS Commerce study found so few companies ready to excel.

 

Supplier-facing Strategies and Capabilities

 

According to Ann Grackin (@AnnGrackin), CEO of Chainlink Research, managing omnichannel operations requires improvements in: warehouse management; source tagging and B2B transactions; and transportation. [“A Current View of the Retail Supply Chain,” Chainlink Research, 11 December 2012] To improve, each of those activities requires greater visibility. Andrew Kirkwood insists that first thing that companies need to do is foster greater visibility into their supply chains. “As markets continue to remain tough,” he states, “companies are turning to more efficient means of supply chain execution to deliver competitive advantage. This is a complex task as well ordered execution relies on the integration of a whole raft of supporting systems within the organization and along the chain – including those of suppliers and partners – to deliver the required results. Visibility is the key word that has come to sum up this bringing together of data, a prerequisite for making more informed and intelligent decisions on how to deploy resources and execute fulfilment.” [“Integrating to execute, Logistics & Supply Chain, 1 September 2011] The article adds, “Retailers, in particular, are facing much higher levels of complexity as they look to manage their supply chains across multiple channels.”

 

Greg Cronin, executive vice president of Intelligrated, and Nyle Morris, vice president of sales at Knighted, insist that the higher level of complexity brought about by omnichannel operations amounts to a paradigm shift in fulfillment strategies that require much greater integration. [“Omnichannel Fulfillment Requires Integrated Solutions That Go Beyond Traditional WMS,” SupplyChainBrain, 17 April 2014] Cronin insists that this greater complexity means that artificial intelligence systems are required to provide the required visibility and integration (i.e., “more automation is needed to monitor the automation”). What he is really looking for is a cognitive computing system. “You need a brain to look into the automation and see how it is performing, and to adapt to what is going on,” says Cronin. “Say a conveyor line breaks down or a priority order comes across. You need artificial intelligence inside the software that can adapt to changing conditions and adjust work flows so that both the equipment and labor work smoothly and productively.” Morris adds, “If you look at the market today, there is a real separation between software to control warehouse automation and warehouse management systems. Retailers have to figure out how to use these applications together, so we are trying to integrate these products in a way that allows managers to make decisions that move product through a facility in the most efficient and cost effective manner.”

 

Consumer-facing Strategies and Capabilities

 

While the supplier-facing side of omnichannel operations is mostly focused on fulfillment, the consumer-facing side is focused on sales and the consumer’s digital path to purchase. The staff at Consumer Goods Technology (CGT) reports, “During a recent web seminar, titled ‘Automating the Digital Path to Purchase’, Lora Cecere, founder, Supply Chain Insights, and Michael Quinn, general manager of Business Development and Innovation, Retail Solutions Inc. (RSi) discussed this new marketing paradigm and business imperative: Digital listening, digital acting and business automation.” [“Tips to Automate Digital Path to Purchase,” CGT, 15 October 2014] Cecere (@lcecere) and Quinn concluded, “Omnichannel is redefining the shopper experience – and along with that – the role of every player in the value chain. Power has shifted to the shopper, which is enhanced by the evolution of digital technology. Build processes outside-in to embrace test and learn strategies.” Quinn added:

“We’re spending $13 billion today on digital advertising. The goal of that is to stimulate sales. We have great demand signals, we have great vehicles, but they are in siloes, they are not integrated, they are not being brought together to help us build our businesses. We believe that’s one of the most important things that we can work on as leaders in this space.”

The same cognitive computing systems for which Cronin is looking can be used to address the challenges raised by Cecere and Quinn. As they conclude, “Internal siloes need to break down to allow companies to drive the true meaning of ‘digital path to purchase’. That requires a holistic, cross-functional approach. And the initiative needs a visionary/innovative leader – not found in traditional IT, marketing or supply chain roles.”

 

Conclusion

 

In the SPS Commerce release, Paula Rosenblum (@paula_rosenblum), managing partner at Retail Systems Research (RSR), stated, “Omnichannel is about profitably building the next generation of consumer experience, and execution is apparently harder than the ecosystem expected it to be. Retailers, suppliers and logistics providers need to move quickly to satisfy a consumer who has a seemingly endless array of choices and not a lot of patience. While everyone is heads-down, particularly in figuring out the supply chain side of the omnichannel equation, no one should lose sight of the consumer.” That’s a great summation of the challenges and vision that retailers are facing in today’s increasingly omnichannel world. Implementing strategies that include cognitive computing systems to help manage supply chain and marketing complexity is going to be essential in the years ahead.