Getting goods from point A to point B in an omnichannel environment has become a daunting challenge for retailers.
They recognize the complexity and are investing to keep pace, but most still rely on outdated tools and ineffective processes to manage the end-to-end value chain, according to JDA Software Group's new study, "JDA Vision 2015 Supply Chain Market Study."
"High performing retailers are integrating their operations to support physical and digital channels and ensuring their brand is provided seamless to their customers," Kevin Iaquinto, JDA's CMO told FierceRetailIT. Retailers in the United Kingdom are leading the changes and have a clear advantage over retailers in other markets, he said.
The executives sampled in JDA's study are taking action to leverage more effective tools and practices to support optimal operations. For example, 58 percent named "integration of a best-in-class S&OP process" as a strategic priority for the next 12 months, while 46 percent of respondents said their strategic priorities included "increasing agility in production planning processes."
"Retailers who invest in the profitable omnichannel fulfillment solutions will gain an advantage in supporting the new consumer demands on getting the products they want and how they want them," Iaquinto said. "Same day shipping is already becoming a viable offer and delivering that service while maintaining profitability will be the key advantage."
The report found three key takeaways for retailers:
1) Supply chain complexity: The retail supply chain is dealing with unprecedented levels of complexity brought on by market globalization and volatility, but most importantly by the demands of omnichannel shoppers. "Supply chains are being stretched farther, yet have to be much more responsive to customer demand. This will require much higher levels of visibility, agility, integration and automation in order to respond," Iaquinto said.
2) The need for customer-centricity: "There is no question that the consumer is now in charge of the buyer-seller relationship. To succeed going forward, retailers must focus on the customer and serving their needs when, where and how they want it." This is a major transformation from the old product and channel focused supply chains that served retail well in the past. Retailers must transform their go-to-market strategies with this customer-centricity in mind. "This will require new ways of sensing demand, planning assortments and floor space, and aligning fulfillment options to customer paths to purchase. It will also require a redefinition of the role of the store in the customer shopping journey," he said.
3) The need for a new focus on business innovation: All of the new complexity and customer-centricity will require retailers to innovate business models that both serve the new customer shopping journey and enable retailers to do so profitably. "So far few retailers have figured out how to deliver on their omnichannel promises profitably, and that is unsustainable. New business models for commerce, stores and supply chain are needed to create sustainable advantage and profits," Iaquinto said.
Among other findings, the report said that supply chain planning and execution must be integrated in more innovative ways to support seamless omnichannel shopping experiences and fulfillment options, he said. When asked about their priorities for optimizing inventory management, the top two responses were "improving service levels" (named as a top three priority by 93 percent) and "moving inventory closer to demand" (cited by 88 percent). However, organizations lack a clear way to measure and improve effectiveness in this area with respondents providing at least 25 different metrics they apply to measure inventory management performance. Most companies are not implementing advanced technology tools in this area, with 59 percent of executives citing "deploying automation" to manage inventory as a key initiative for the future.
The greater frequency and dependence on promotions and new product introductions are making these functions more important to business success, Iaquinto told FierceRetailIT. "Yet today's market volatility makes results harder to predict. This leads to some major misses as the impact of forecasting too much or too little, or positioning inventory in the wrong locations, leads to greater variability and lost opportunities in this volatile environment. More accurate forecasting will allow retailers to narrow the gap between expectations and actual results, thus improving profitability."
Automation is the number one item specified by respondents as their means to speed up their processes and respond faster to changing customer demand, he added. "This can include both material handling automation to help speed up the much higher prevalence of each-picking in omnichannel operations and software automation to make better, faster decisions. Investment and returns will vary widely based on a retailer's current level of automation, their omnichannel maturity and their goals," Iaquinto said.
Transportation is another area where retailers can reduce cost overruns. One approach is to use partners like carriers, brokers and third party logistics companies for their expertise. "Of course, transportation technology can have a major impact on driving down transportation costs and avoiding overruns," he said.
- See the JDA study
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