Omni-channel Supply Chains and Retail’s Future

Stephen DeAngelis

November 7, 2016

“The growth of internet-enabled commerce, mobile devices and social networks has led companies to be more digitally driven since the turn of the century,” writes Nipun Mundoor and Dinesh Natarajan, consultants with OPS Rules. “The symbiotic interaction of mobile devices, cloud services and big data analytics is allowing companies to adopt the omni-channel: a multichannel approach to sales that seeks to provide the customer with a seamless shopping experience whether the customer is shopping online from a desktop or mobile device, by telephone or in a brick and mortar store.”[1] For most of us, the term “turn of the century” more readily conjures images of the early 20th century than the more recent turn of the 21st century. The latest turn of the century seems too close in time to deserve such an archaic reference. Omni-channel operations are so new manufacturers and retailers are still struggling to master them.

 

Omni-channel is the Beginning of a Revolution

 

“It’s probably safe to say that many retail supply chain executives haven’t been sleeping well of late,” writes Toby Gooley. “Ask any of them ‘What keeps you up at night?’ and they’re almost certain to respond with two words: omnichannel commerce.”[2] Analysts from the O Alliance believe omni-channel operations are only the beginning of a retail revolution. They insist omni-channel strategies are too company-centric and that the real revolution involves companies becoming more customer-centric. Andrea Weiss (@theoalliancellc), O Alliance founder, explains, “Customer-facing tools such as smartphones, tablets, and in-store kiosks have become mission critical to the shopping experience, yet most retailers still have not integrated these tools into a cohesive system that creates circular commerce. While omnichannel was about giving shoppers a single view of a brand across all touch points, the customer-centric model is about giving the brand a single view of the shopper, understanding who she is, what she wants, and how she behaves at all times.”[3] O Alliance analysts surveyed leading retailers and concluded, “Nearly 70 percent of retailers are still struggling to evolve from an omnichannel model to one that truly puts the customer front and center.”[3]

 

In Omni-channel, Customers Rule

 

Omni-channel operations by their very nature are customer-centric. Gooley observes, “Consumers’ demands for instantaneous, flawless online service — not to mention the ability to order, take delivery, and return merchandise however, wherever, and whenever they like — have created numerous challenges for retail supply chains and those who manage them.” John Sell (@JohnSell2), Vice President of Retail and Transportation Operations at MD Logistics, agrees with Gooley and underscores the fact that customer-centric operations significantly impact supply chains. “With the introduction of online (e) and mobile (m) commerce,” he writes, “consumers are now more comfortable than ever making purchases from any place, at any time, on virtually any device. This shift in consumer behavior has changed how goods and products flow through the supply chain to the end user. As a result, supply chain partners are now required to respond to not only the needs of brick-and-mortar stores, but also to e-commerce and m-commerce customer demands.”[3] In other words, the customer rules in the omni-channel world. Tom King, a supply chain and logistics consultant with LTD Management, adds, “E-commerce is the new retailing, regardless of a company’s industry or business. It is very different from selling in stores; it is very different from production and shipping orders. Companies must sell via multi-channels, namely multiple touch points with customers. E-commerce is very different as to order sizes, mix, shipping preparation, and delivery requirements. Online sales have moved past just having a website and shipping orders. Customers want their orders delivered quickly after placing them; immediacy delivering orders within 48 hours, or less is the expectation.”[4]

 

Big Data Analytics in the Omni-channel World

 

Clearly, one of the greatest challenges facing manufacturers and retailers in the omni-channel world is order fulfillment — and order fulfillment begins with inventory. Brian Quigley, Director of Client Services at TotalTrax, observes, “The demands of omni-channel fulfillment combined with a rising number of stock-keeping units are raising the importance of inventory management. … Warehouses and distribution centers that cannot swiftly fill orders for multiple channels while also keeping costs low will struggle to stay competitive. “[6] He believes one of the essential elements for achieving better order fulfillment is real-time data capture (i.e., knowing where goods are at any moment). Data capture, however, is only part of the solution. The real value comes when data is analyzed and can provide either automated decisions or actionable insights to decision makers. Because omni-channel operations are complex, companies need a system that can deal with that complexity. I predict that cognitive computing systems will eventually be the systems around which most omni-channel operations will be built. As an Accenture technology vision states, cognitive computing will provide the “ultimate long-term solution” for many business challenges.[7]

 

Lora Cecere (@lcecere), founder of Supply Chain Insights, believes companies could be doing a lot better when it comes to data analysis. “Data has never been more available,” she writes, “yet we do not think about the mapping of master data for the moments of truth end-to-end from the consumer back to the supplier.”[8] She notes there are “Five Moments of Truth for the Shopper” in the omni-channel environment. Data analytics can help companies understand and properly react to each of those moments, which are when:

 

  • Shopping lists are put together
  • Merchandise is actually in the basket (either real or virtual)
  • Customer is ready to checkout
  • Products are in use
  • The product’s usefulness is over (i.e., its sustainable impact)

 

Cecere writes, “To capitalize on the opportunities, we need to holistically redefine supply chain strategies to deliver on the five moments of truth for the shopper in omnichannel. I believe that we have not delivered on this promise. … To do this, the master data and processes of the supply chain needs to be seamless for items, attributes, availability, and promotional offers.”

 

Summary

 

Ron Brooks, Vice President of Strategic Analytics and Data Science at CBIG Consulting, sums up today’s retail situation this way: “Today’s customers expect to conduct a transaction on a PC or tablet, check their order on a mobile phone, verify a price in a store, also on a mobile phone, or contact a friendly, knowledgeable service rep who uses guided script technology to quickly navigate customers through issues.”[9] He concludes, “For those and other customer-centric features it’s time to graduate to the Omni-Channel Way.” As I noted above, omni-channel operations need to be customer-centric (or, as Lora Cecere likes to say, companies need to redefine their supply chains from the outside-in).

 

Footnotes
[1] Nipun Mundoor and Dinesh Natarajan, “Omni-channel and supply chain strategy,” OPS Rules Blog, 25 September 2015.
[2] Toby Gooley, “Responding to the retail revolution,” DC Velocity, 10 February 2016.
[3] The O Alliance, “Accent May Be on Omnichannel, But Achieving Customer Centricity Remains Difficult, Study Says,” SupplyChainBrain, 8 February 2016.
[4] John Sell, “How Omni-Channel Commerce Is Changing Traditional Supply Chains,” Inbound Logistics, March 2015.
[5] Tom King, “New Supply Chain Management for Omnichannel,” Supply Chain Minded, January 2016.
[6] Brian Quigley, “Why you need real-time data capture to meet omni-channel demand,” Fleet Management & Forklift Safety Blog, 8 March 2016.
[7] “From Digitally Disrupted to Digital Disrupter,” Accenture, 2014.
[8] Lora Cecere, “Omnichannel? Really?” LinkedIn, 9 August 2016.
[9] Ron Brooks, “Creating an Omni-Channel Strategy with Marketing Analytics,” Information Management, 5 October 2016.