There’s been a lot of rhetoric over the last two years about the “supply chain of the future.” But we can’t afford to still keep talking about it and doing things the way they have been done the last 10 years. It’s undeniable that we are in a new age – speed and the ability to rapidly adapt to change are essential for retailers to survive.
The retail supply chain has experienced much disruption and change, and perhaps one of the most critical examples is the recent impact of the COVID-19 pandemic. It fundamentally changed the context for supply chains and woke the retail industry up to the need for quicker adoption of modernized processes and technology to fuel efficiency and agility. At the center of the pandemic, disruption was the necessary process to support click and collect grocery shopping as an imperative for not only convenience, but health and safety.
E-commerce is another perfect example. We’ve been talking about e-commerce for years, it’s been steadily growing, and the last major disruption on the topic was around Amazon’s acquisition of Whole Foods. So, with so much discussion on the subject, why weren’t retailers better prepared? Why haven’t they instilled better processes to support e-commerce strategies?
Let’s take a look at some of the current situations impacting e-commerce:
Retailers recognize demand issues and their impact on omnichannel
As mature as supply chains have become, they are still challenged with the fundamental understanding of demand predictions and inventory visibility. In a benchmark report from RSR Research released in Q1 2020, Designing new ways to satisfy Demand, retailer’s cite ‘knowing & reacting to consumer demand & cross channel forecasts’ as a top business challenge.
The report shows us that, even before COVID-19, retailers recognized that it is essential to understand customer demand and needs across all channels. How can you successfully meet the needs of your consumers if you don’t know which methods of purchase will be driving inventory and where and when orders are to be fulfilled? Too many retailers today simply cannot understand the total channel picture.
For example: How much inventory is needed in the store? How much for online orders? How do I reconcile the two? And which method will consumers chose for fulfillment -home delivery, locker pick up, curbside, etc.? Add to these questions the need to forecast and plan, at the store level, in-store picking and enabling associates to efficiently and accurately execute orders.
Omnichannel touches every area of the supply chain
To truly be omnichannel fluid, retailers’ technology and processes need to support all channels. This starts with the visibility to demand across all channels for perfect order management. Next, it requires fulfillment engines that can dynamically understand available-to-promise inventory to execute that fulfillment. Finally, it requires efficient operations for execution out of the DC into the consumer’s hands.
Technology & process disconnects
The Order Fulfillment and Click & Collect space is less mature compared to other processes like Demand Planning. Currently, fulfillment solutions on the market are complex and time-consuming to implement and, typically, the more mature offerings cater to fashion retailers. FMCG retail requires processes and toolkits to support highly sensitive, low-margin, highly-complex products such as fresh items. This was even more evident during COVID-19.
Many vendors on the market support pieces of fulfillment, but don’t have deep expertise in fresh nor do they support a holistic view that connects fulfillment decisions to order execution to the operational activities at the warehouse and/or store. The complexities of fulfilling consumers’ needs, at the least cost method, depends on fully connected systems across the entire process. As an example, a retailer may have a homegrown click and collect solution, two differing inventory management systems and forecasting/ordering solutions from different vendors. Feeding all of these systems to one order fulfillment engine is very complex. The end result of all this disconnection or very loose connection is that many retailers are highly dissatisfied with implementations in this area.
Click & Collect fulfillment tied to store operations
Labor and productivity are a huge issue for retailers when it comes to executing at a store level. Let’s focus on click and collect fulfillment and store operations. Are they connected? Most often not as most retailers are using different tools and when it comes to store operations and multiple devices to operate different activities, which is very laborious.
Store picking per associate per order is costly. A good fulfillment engine enables store associates to pick multiple orders at once improving overhead costs and meeting customer demands. As we saw during COVID-19, rudimentary picking methods were unable to scale for e-commerce order volumes. If picking, as well as in-store operations, were on one mobile platform, connecting inventory visibility to tasks, store associates would be able to execute those tasks quickly, efficiently and at the least cost. Layering in other technologies, like automated picking algorithms with voice directed guidance, at the store level provides a low-touch competitive advantage.
Digital supply chains – Retailers must move the needle on maturity to get there.
Where do you rank in your transformation and maturity journey? Are you ahead or behind of the curve? Investing in a holistic technology provides a more strategic view and vision, but many companies just aren’t there.
“Technology provider respondents stated that 65% of their retail customers are between a Stage2 and a Stage 3 maturity, despite the many pressures on retailers to support the complexities ofunified commerce.”
Gartner Market Guide for Retail Forecasting and Replenishment Solutions
Retailer’s strategies need to change to encompass a synchronous end-to-end orchestration that can solve business problems.
The blend of physical and digital has no doubt recently experienced massive conflicts. Online and physical realms are changing and there are predictions for increases over the next 3 years for upward swings of 20% online. This is just part of a retailers’ adaptation strategy and a key piece to become as agile as possible. Having processes and solutions in place to foster quicker execution and profitable gains will be essential for this space.
For effective Omnichannel operations, there are three key areas retailers need to focus on:
- Overcoming Inhibitors to agile response to massive disruption
- Lowering fulfillment costs and improving shelf availability
- Empowering Store associates for in-store order execution
Learn more about the key factors that retailers need for success in omnichannel order fulfillment in our viewpoint paper, Omnichannel Imperative: Meeting the need of a new consumer.