Omni Channel Supply Chain Disruption

Large legacy retailers are with the disruption to both their multi channel sales strategies and their supply chain support strategies caused by the omni channel capabilities developed by consumers.  While these large retailers were focused on implementing multi channel purchasing capabilities consumers leapt ahead and developed omni channel shopping and purchasing capabilities that left these retailers struggling to recover. These retailers were working under the assumption that they could control the shopping and purchasing by channel because they have always been in control of the options.  Then the wireless network capabilities improved dramatically which then allowed consumers to develop their own shopping and purchasing practices in a true omni channel capabilities to completely push aside retailer controls.

This consumer paradigm shift has left these retailers in the lurch with a large network of stores and distribution centers that are tuned for specific capabilities while the consumer demands have shifted. Add to this the consumer expectation of two day delivery resulting from the Amazon Prime program and the result is a supply chain strained to the limits to meet the demands.  This is creating a disruption in the supply chain in demands to meet new direct to consumer shipping along with changes to the store replenishment shipping requirements.  At this point retailers are struggling to adjust to reduction in store sales and increases in direct to consumer shipments causing a major disruption in their forecast and replenishment planning along is the transportation model.

Retailers are struggling to support consumer shopping and purchasing demands that have a large impact on their supply chain and especially their transportation and delivery network. Retailers still seem to be working in a supply and demand model that is heavily slanted towards the retail store purchasing and now consumers are shifting to eCommerce purchasing.  This shift is disrupting the existing retail model and retailers must as a result change their retail store model to create a network of small local distribution centers that also house a showroom with retail sales to the consumer as well.  This model addresses the consumer demands in a manner that addresses the supply chain and especially the transportation disruption caused by the change in consumer shopping and purchasing.  

This model supports 1 - 2 day delivery across the retailer’s network through standard parcel delivery rates as a result of changing the retail store utilization.  Retailers will have the ability to ship parcels from their stores via parcel using zone one parcel delivery rates to efficiently delivery at a reasonable rate.  I believe this model can be turned into a category killer for retailers.  I further believe that Amazon realizes this and that is one reason for their expansion into the retail store market.   

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Omni Channel Control Tower

The omni channel retailer requires a means to coordinate and control the flow of inventory across the extended supply chain network to support the changing demands is purchasing and delivery.  The most effective means to support this requirement is through a control tower type of software that can bring all of the disparate parts of the extended supply chain together for viewing and action.  In order to succeed in this market retailers must have an overview of their network in order to more accurately forecast and plan requirements across the channel. This control tower will also provide a means to redirect inventory to locations as required by demand and sales.  This increases inventory efficiencies and also reduces the overstock inventory currently required to overcome market and location sales fluctuations.  

Retailers must come to grips with the new omni channel reality that has been developed and implemented by consumers.  This means that retailers must stop fighting consumer omni channel demands and trying to force them into methods and processes that meet their current model and embrace the change to determine what needs to change to meet the omni channel demands.  This is where the control tower concept will come into play to allow the retailer to view their supply chain from a overview.  This view will allow retailers to make decisions based on their demand chain, the combination of both eCommerce sales and deliveries and retail store sales and deliveries.  

This omni channel control tower will provide an integration layer that will bring information together from disparate systems allowing the retailer to develop new understanding of consumer demands due to the more complete view of the consumer sales demands by delivery channel along with the supply chain capabilities to support the demands.  This will also support the change to the retail store model to increase inventory storage and reduce selling floor space by simplification of the inventory management control across the chain.  The effective omni channel retail model requires an omni channel inventory model in order to adjust to the changing demands of consumers and the omni channel inventory model requires a control tower integration layer to bring together the information from many disparate systems and partners.

It is too great a challenge and there is too little time for retailers to replace their legacy systems in an attempt to support changing consumer demands. The large legacy retailers and especially department store retailers have been struggling to come to grips with the omni channel retail market and have missed opportunities along the way.  These retailers cannot afford to mistep now in revising their omni channel strategy and must focus on redefining the store to support consumer purchase delivery across channels and implement a control tower integration layer to capture and utilize demand and sales information to support the demands.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Omni Channel Impact On The Retail Supply Chain

The retail supply chain has been disrupted by the changes in shopping and purchasing practices of consumers in as a result of the omni channel retail market.  These changes have actually been building over the years now and the consumer purchasing practices have reached a tipping point now where the online purchasing is meeting and surpassing the store purchasing. Retailers have been struggling with this for years now in pushing back on consumer demands and attempting to redirect the consumer demands into practices that are easier to support by the retailer.  Consumers have now incorporated advancing wireless and mobile technology to finally tip the scales on the omni channel purchasing activities.  

While these have been building for years, the final turn over the last year, or two, caused a surprise for the retailer's from which they now must recover.  In the midst of this newest disruption multi-channel retailers must also reconcile their brick and mortar strategy.  Retailers have been focused on a multi-channel market and consumers have developed an omni channel market through their use of wireless and mobile technologies.  All of these changes have a serious impact on the retailer’s extended supply chain and especially the delivery requirements to support an omni channel market.  The delivery aspect changes the focus from the separation of channels as defined and supported by the large legacy retailers to a flattened delivery where consumers can, and will, purchase from any channel at any place and any time.  

The true impact, and key challenge, to the retailers though is the delivery service levels that are demanded by consumers.  In this case Amazon has poisoned the well through the two day delivery model offered through Prime membership.  The standard delivery from Amazon is still better than most legacy brick and mortar retailers and the Prime service was the final straw.  Legacy brick and mortar retailers must improve the delivery service and also encourage consumers to return to the store.  I think that Best Buy has done a good job of creating the omni channel experience in their offerings.  The omni channel market is more conducive though for electronics because of the trial factor involved.  While apparel does require fit, many, if not most, consumers know their size and are comfortable with purchasing online.

Now legacy brick and mortar retailers must modify their store experience to support the omni channel market by reducing the store space for product display, increasing backstock space to support regional order fulfillment to the consumer and also create a store experience that encourages consumers to return to the mall.  Retailers and real estate developers must revise the mall experience to focus on entertainment and even living proximity through conversion of store real estate to living space in condominiums and apartments to encourage consumers to return to the malls. The challenge though for retailers is to eliminate the silos of purchasing and consumer delivery, the retailer that allows purchase in the store and delivery to the home will win the holiday sales challenges in the future.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Legacy Retail Delivery Challenges

Large legacy retailers such as Macy’s or Kohls that became large retailers based in most part on their store network and capabilities have a large challenge now in direct to consumer delivery.  The challenge is not the ability to delivery directly to the consumer, it is the delivery service level.  In my most recent orders I was dumbfounded to be informed my order would arrive in 7 - 10 business days.  This speaks to the profound impact of Amazon Prime on consumer expectations.  This also speaks to the strategy and implementation of the omni channel marketplace support capabilities of these retailers.  The omni channel retail experience requires changes across the supply chain to deliver a cohesive experience across channels and this requires changes to the extended retail supply chain.

From the outside my suspicion is that these retailers are struggling with their supply chain systems and processes to support a cohesive consumer delivery capability, whether from the retail store or eCommerce.  I base this on the direct to consumer timeframe provided to me for my order, I cannot believe that these large retailers take 7 - 10 days to replenish inventory to a store and to provide this type of service level in the direct to consumer delivery is unconscionable.  This displays a strategy of delivery to channels from different distribution centers in order to increase the efficiency of the distribution centers.  Retailers can no longer afford to follow this strategy and survive.  Amazon has blown up the market and changed consumer expectations with the Prime service.  This means that retailers must change their extended supply chain to support standard 2 day delivery to all channels and not just the store.  

Another suspicion of mine is these retailers are struggling with inventory accuracy and control across channels.  The challenge for these large retailers is a combination of legacy systems that do not support omni channel inventory management, inventory control challenges in a large store environment legacy and finally legacy processes and procedures that do not support omni channel requirements.  Simply adding new systems will not resolve these issues.  This requires a redesign of both the store and the processes and procedures in order to address the inventory control challenges.  A redesign of the store to reduce the open stock inventory on the floor and increase the storage will go a long way to addressing these issues and as a result improve the delivery service levels.

The retail market has shifted to a true omni channel market and eCommerce purchasing is increasing while store sales have flattened and decreased.  The legacy retailer supply chain strategy must also change to a true omni channel supply chain in order to meet these needs.  This requires a change in their inventory strategy to follow a multi-echelon inventory location strategy that supports fulfillment of sales from any channel to any channel.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Retail Store In The Supply Chain

The retail store must take a more prominent role in the extended supply chain to support the consumer demands in the omni channel market.  Consumers are driving to create a true omni channel market where channels blend for both shopping and purchasing.  Large retail store chains have an advantage in this market as a result of their chain of stores located conveniently not only for consumer shopping but also within a one day delivery service of probably the majority of their customers.  Retailers would be foolish to eliminate this advantage because of a shift in purchasing from the brick and mortar store to eCommerce.  Shrinking the number of retail stores also shrinks the physical customer base with easy access and real physical reminders of the retailer which will then act as an additional negative force on the retailer sales.

Building the retail store into a value added part of the extended supply chain is relatively simple from an execution perspective and only requires a focus on;

• Expanding storage to increase the inventory back stock to support the eCommerce order fulfillment from the store.
• Increasing the headcount in the store to support improved inventory control and fulfillment activities.
• Expanding parcel services into and out of the store to support the increase velocity of inventory replenishment into and direct to consumer shipments.

The retail store then becomes a showroom that provides a place for consumers to try out and touch product to complete their purchase decision and then supports delivery to the consumer in the manner that is most convenient for the consumer.

The challenge for retailers is the paradigm shift in their strategy to modify the store into a showroom with distribution capabilities and capacity.  The current retail store strategy of providing all product on the store floor to simplify consumer shopping and reduce the headcount required to manage a back stock area is the opposite of requirements in today’s market.  The retail store now must become another fully functional link in the retail extended supply chain to support the changing consumer demands.  This shift in strategy can eliminate the losses anticipated by store liquidation and increase employment which is always good for retail sales.

As a point of comparison reference it is very interesting that Amazon is expanding into the retail brick and mortar store market while many large legacy retailers are planning on shrinking their footprint.  I believe this is because Amazon sees the potential of the brick and mortar presence to support the omni channel consumer demands.  Retailers must now invest in this potential to build an extended supply chain network that can support one day delivery service levels to the majority of customers.  The pieces are all in place and simply require the vision to put them together into a cohesive package.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Retail Store As Omni Channel Center

The large retail department stores must be repurposed into an omni channel center in order to support consumer demands and improve the overall consumer shopping and delivery experience.  This is a major change to the large retailer store strategy to expand inventory storage areas and reduce the sales floor square footage.  Consumers are viewing the retail environment as a true omni channel marketplace and it is time that retailers change their strategy to align with these demands.  This change in retail strategy requires an equally major change in the retailer inventory planning and forecasting strategies as well to take into account the additional demands of increased sales and fulfillment support of eCommerce orders from the stores.  

Retailers are starting to change their interaction with consumers and their store strategy to reduce the number of stores as a result of the store sales decreases.  These actions to reduction the number of stores will lead to a liquidation loss for the retailer along with a reduction in workforce caused by the store closures.  These actions with constrict the store profits and lead to additional rounds of cost cuts to try to address the liquidation costs while at the same time reducing the amount of disposable income consumers could spend in purchasing from the store.  This is a recipe for failure and simply feeds on the downward spiral without an incentive to break the cycle.  

Rather than the ‘normal’ negative reactions to this shift in sales I believe the retailers should re-invent their stores into omni channel centers that provide a hub for shoppers to see, try on and try out products in addition to supporting eCommerce fulfillment from the stores.  This strategy will bring many benefits and positive growth to the retailers and the communities where the stores are located such as:

• Malls and retail outlets remaining open to provide a place for families and consumers to gather for entertainment and shopping.  This benefit presumes that anchor retailers will work with malls to develop an entertainment center include food services to lure consumers to the mall.
• Increase employment to support the multi-purpose activities in the store for eCommerce fulfillment.
• Reduce overall transportation costs while improving direct-to-consumer delivery service time because shipping from retail outlets will allow parcel zone 1 delivery to most households.  
• Potential improvements in inventory management through multi-echelon management which could lead to reductions in overstock costs.

These are important benefits to the retailer and should be taken into account when evaluating methods to address the shift in sales.  The retailer could direct the funds that would have been lost due to store eliminations towards investments in repurposing to an omni channel center.  The retailer should start with a pilot of a few regional stores to provide the data for validation of course prior to a full roll out.  My belief though is that retailers will discover this to be a much more beneficial and lucrative strategy than one  of shrinking in the marketplace.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Reinvention Of The Retail Store

Retailers must reinvent their store channel to support both eCommerce fulfillment and consumer shopping and purchasing, turning the store into a multi-purpose consumer fulfillment center.  This change allows the large retailers to take advantage of their large store network real estate and reduce the loss of liquidating the store real estate due to decreases in store retail sales.  This requires a dramatic change in operations of the store to consolidate the floor space with less inventory available on the floor and also an increase in focus on inventory management, location and fulfillment across channels.   The benefits of this change in strategy and operations though is an increase in inventory utilization, and reduction in overstock and also elimination of the loss resulting from store closures.

Amazon has started to evaluate repurposing malls into large distribution centers to support their growing demands and the large legacy retailers must view their real estate holdings from a different perspective to repurpose and eliminate the loss resulting from closing.  This strategy will allow the retailer to expand and improve their delivery capabilities by providing one day delivery capabilities at the standard rate across an extremely wide range of populations centers.  This improves service levels and reduces delivery costs at the same time.  

The repurposing of the stores requires an increased focus on the inventory control and management within the store and across the network to move inventory to the geographic location that has the greatest needs.  This requires improvements in the inventory control practices within the store and also across the network.  This change in strategy effective requires the store sales space to be treated as a type of pickable location where the inventory can be consumed by the consumer or the store operations to fill a shipment to another store or direct to the consumer.  This can be accomplished by reducing the quantity of merchandise displayed on the store and increasing the display space replenishment cycles.  Another benefit to this strategy is a decrease in out of stock conditions and also a decrease in the out of stock time.  Increased accuracy in inventory will allow the store to identify the potential display out of stock condition while the increase in inventory storage allows a greater quantity of inventory to replenish the display.  Another important aspect is the improved store distribution network allows stores to be replenished by nearby stores in a quicker cycle.

Retailers need to view their store sales challenges through a different perspective in order address the challenges.  This current disruption in the retail brick and mortar store operation can provide large legacy retailers with a supply chain advantage over online competitors by changing the paradigm of their shopping and delivery model.  Retailers have essentially been fighting the shopping and delivery changes demanded by consumers because of their perceived increase in costs.  Taking the entire extended supply chain into consideration shows that a strategic change in shopping and delivery support will increase the retailer’s capability while controlling costs.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Retail Inventory Pipeline

The changes in consumer shopping and purchasing practices are stretching retail inventory pipeline to it’s limit and retailers must change their strategy in order to support the changes.  These change demands require a multi-echelon inventory strategy that senses and responds to inventory demands across channels and and locations.  This strategy next requires changes to the retail inventory pipeline to adjust to the multi-echelon requirements.  These changes to the retail pipeline are key requirements to a successful multi-echelon inventory strategy.  The inventory pipeline starts with the suppliers and ends with the consumer and one of the key changes to the pipeline is increased flexibility demands in consumer delivery capabilities.

The retailer must change their shopping and sales delivery strategy to support a truly omni channel marketplace. This requires a flattening of the channels and the capability to quickly and efficiently move inventory across channels.  We have seen recently the decline in retail brick and mortar sales while the eCommerce sales have increased to compensate for the reduction.  This tells me that consumers have embraced the omni channel market and capabilities to support their own changing lifestyle requirements resulting in reductions in store sales and increases in eCommerce sales.  These changes have placed enormous pressure on retailers to adjust and most retailers seem to be moving in the direction of divesting store real estate to eliminate the cost.

I believe that retailers should turn their store real estate into an advantage by extending omni channel support capabilities throughout the stores.  This requires a couple of key modifications to the store plan:

1. Increase the storage area to allow more product to be stored to support both direct sale in the store and fulfillment of eCommerce orders from the store.
2. Diversify and even increase the number of people working in the store to support the addition of eCommerce fulfillment activities.

Retailers must increase their effectiveness in eCommerce delivery from any outlet to any location in order to survive in the future.  Converting floor sales space to storage space will increase the abilities to more efficiently support both the direct purchase by consumers in the store and the eCommerce fulfillment.  This change also requires an increase to the number of employees to support in order to support increased pressure on speed of delivery to the eCommerce channel.  

The large legacy retailers have a huge advantage from their real estate locations strategically placed close to the consumer.  Retailers can take advantage of this by turning their stores into a combination of direct to consumer distribution centers and store outlets.  Retailers already have a partnership with parcel delivery carriers like UPS and FedEx to support the delivery of stock replenishment to the stores and it would be not problem to add the pickup from stores for consumer delivery  In addition, this strategy would reduce the cost of divesting the real estate and instead turn the cost into an improvement in operations and consumer sales support.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Multi-Echelon Inventory Strategy

The shopping, purchasing and product delivery disruptions are leading to a requirement for retailers to implement an inventory strategy that supports a multi-echelon approach to inventory placement and even inventory levels. This approach must take into account the inventory at all levels and all channels, including the extended supply chain pipeline plans supply to channels.  This requires a transparent inventory management that is updated from all echelon levels of the retail enterprise in order to support the fluctuating demands across channels and geographic regions.  This multi-echelon inventory strategy has become increasingly important as the consumer has been changing their approach to shopping and purchasing across the retail channels.  This will also only increase in importance as the consumers continue to revise their shopping and purchasing practices as new capabilities are developed.

Inventory management has become very complicated and especially for the large legacy multi channel retailers because of the changes in consumer shopping and purchasing.  The velocity of change demanded by the consumer will not slow down and this increases the importance of an inventory strategy that takes into account all locations and channels, including the extended supply chain pipeline, a multi-echelon inventory strategy, so that retailers can flex and direct inventory to the channels and locations required to meet demand.  This strategy creates a truly omni channel retail market that provides the flexibility necessary to adjust and support the quickly changing consumer demands.  This strategy requires inventory transparency across channels and location along with the ability to quickly and efficiently move the inventory across locations to meet fluctuations in consumer demand.  

I view this a culmination of the inventory strategy practices over the years with the addition of a cohesive transportation management practice to provide and support the necessary connections across locations and regions.   Efficient and flexible transportation capabilities are critical to the success of the multi-echelon inventory strategy because of the flexibility required to efficiently support inventory demands across channels and locations.  This means that direct to consumer delivery, store to store delivery, supplier to store, supplier to consumer, supplier to distribution center and distribution center to store or consumer practices must all be supported by the transportation management practice.  This is a lot to expect and I think it makes sense to partner with a provider highly experienced in these practices.

In addition to the transportation retailers must re-evaluate their store strategy to focus on a mix of product display, consumer purchases, shipments to the consumer and then most importantly shipments to other stores.  This must increase the product storage capabilities in the stores which is at odds with the most recent retail practices to eliminate stock rooms and place all inventory on display for purchase.  The current store strategy does not support efficient and accurate inventory tracking and transparency and the multi-echelon inventory strategy requires efficient and accurate inventory tracking across all channels and locations.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Retail Delivery Disruption

Customer delivery practices are being disrupted now as a result of changes in consumers shopping and purchasing practices.  You can view the results of the disruption in the brick and mortar retail outlets by the reductions in sales that have hit these brick and mortar outlets over the last year or so as reported in the retails sales figures by outlet.  The delivery disruption is the natural reaction to the disruption experienced across the retail market where increases are being experienced in eCommerce sales and the brick and mortar sales have dropped.  I think this disruption is less focused on the outlet store market because in my unscientific analysis I did not view a large visible reduction in traffic to the outlet malls.  

Retailers are reacting in different ways to this disruption and unfortunately I believe the reactions may be rooted in legacy assumptions which will not address the true market trend.  In my opinion retailers in general are addressing half of the issue when implementing the order online and pickup in store delivery model.  This model simply does not address the complete challenge of strategical location of inventory to support the changing consumer demands.  Retailers seem to be using this strategic model to try to increase consumer traffic in stores and these retailers should be focus on the business problem.  The business problem is that consumers are simplifying their retail shopping and purchasing to focus on shopping when it best fits with their lifestyle demands.  Consumers are focus on simplification of purchasing to allow time to focus on important family and work considerations.  

The challenge is that many consumers no longer have the time to shop like they did in the past and technology allows them to perform a time shift for these needs to a time that is most convenient to their schedule.   This does not necessarily mean that consumers want to shop online and pick up in the store, except for some specialized market channels such as home improvement.  I believe that consumers are now mashing shopping, purchasing and delivery practices across channels and as a result are further disrupting the retail market.

These disrupting practices require an evaluation of the consumer relationships for retailers in an unbiased manner to identify a strategy to navigate the disruption.  I believe that many retailers are still stuck in pre-conceived beliefs of consumer practices as a result of preconceived ‘laws of retail’ that no longer apply.  Retailers must focus on the consumer clues and not on how the consumer actions fit into existing retail practices.  The standard brick and mortar retail model is broken and retailers must develop a strategy based on this fact or they will simply vanish.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Retail Market Creativity

Navigating the changing demands of consumers in the retail market requires a great deal of creativity in order to piece together a strategy and tactics that support the strategy.  Between consumer demands and use of new and emerging technology by consumers to implement their demands retailers are buffeted by changing shopping and purchasing practices that utilize the new technology.  Retailers cannot rest in their efforts to understand and incorporate new practices to support the changes demanded by consumers.  These changes are cumulative and are continuously incorporating new practices driven by a the demands of the changing consumer lifestyles and supported by the creative use and mashup of technologies.

Technology has opened the door to consumer imagination and creativity to support their lifestyles.  These changes are then cumulative in nature and driven in large part by the imagination of a new generation in the market that has grown up with technology and is comfortable with utilizing technology in social interaction to solve lifestyle challenges.  This has been a conflict then with retail practices to identify and then incorporate changes in the retailer methods and practices to support the demands.  Retailers have struggled with technology and a real estate infrastructure that is not conducive to the flexibility demanded by consumers.  As an example, retailers have focused on price while consumers have been focused on the shopping and purchasing practices that can support their lifestyle demands.

Retailers must focus on defining the problem and then can determine how to solve the problem, this is a best practice in any strategic development; first define the ‘what’ and then define the ‘how’.  This requires creativity to repurpose and extend technology and physical capabilities in order to meet the velocity of changing demands.  In order to encourage the creativity the retailer must first focus on what the consumer is demanding and in my opinion the consumer is demanding simplicity and flexibility in shopping and purchasing to allow them to quickly and efficiently come to a purchase decision and then the delivery requirements can be met separately.  

Consumers are compartmentalizing decisions and practices to allow them to perform more activities in the limited time available and shopping is no different.  Technology allows consumers to compartmentalize the shopping and delivery activities to allow them to complete more value add activities in their limited time.  Delivery of purchases is not a value add activity that consumers need to focus and this is a key factor in the market disruption.  This has now disrupted the retailer brick and mortar strategy because consumers have realized they do not need to spend the time on shopping, purchasing and taking the purchase with them as they would have in the past.  

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Inventory Capacity Planning

Retail omni channel inventory planning and management requires capacity measures to be included in the calculations in order to be able to understand and incorporate the most efficient replenishment strategy.  As a direct result of the disruption experienced in the retail omni channel market, the capacity measurements and formulas have been disrupted as well.  This requires an additional degree of measurement because of the changing factors that are involved in the market disruption and must be considered to accurately plan.  In fact I think the supply chain capacity planning and forecasting is quickly becoming one of the most critical pieces to effectively planning for inventory requirements within the retail supply chain.  

The retail inventory management and control function must react to the market disruption quickly and effectively to limit the impact of positive and negative influences on inventory demand.  Capacity planning used to be relatively straightforward and could be controlled through inventory safety levels at the enterprise level.  In the current retail market the capacity planning and support must be pushed closer to the customer in the delivery channel in order to meet the retailer’s delivery commitments.  This, in turn, increases the complexity and also the risk to inventory capacity planning due to the inventory level under consideration and the spread of quantities across locations.  

These challenges are especially complicated with the larger chains because of the span of locations and the complexity in planning sales across channels.  In this environment capacity planning must be consolidated across all channels which is the easy part really and the difficulty comes from inventory consumption support across channels.  Inventory consumption for large regional and national retailers must be supported across channels, essentially utilizing brick and mortar stores and distribution centers for local consumer delivery.  This strategy allows retailers to move the inventory closer to the consumers purchasing and also allows the retailers to increase the utilization of real estate that has been increasingly under utilized.  

Consumers are increasing online purchases and decreasing their in store purchasing which has caused a drop in store and mall traffic.  This trend is not decreasing and rather than divesting the underutilized real estate retailers can repurpose the stores to provide product show rooms and local distribution capabilities.  This strategy will allow retailers to simplify their inventory capacity management, better utilize real estate, better utilize employees to meet consumer demands.  There are many ways to meet the demands of the market and creativity is the most important factor to meet the changing demands.  This method to react to the changing market allows the retailer to utilize the current resources in a manner that supports the demands of the market and eliminates the cost of divesting resources.  

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Capacity Management

The changes in the retail market drives changes in the supply chain capacity management planning and forecasting as a result of the omni channel purchasing practices.  These purchasing practices are changing the way that inventory must be managed and perhaps more importantly consumers are now continuously changing the manner in which the inventory is consumed.  In addition to the consumption of inventory changes the distribution of this inventory across the geographic locations is also changing.  These are key factors that are challenging retailers in their supply chain capacity management to meet the discontinuous change in the retail market.  

Retailers must change their supply chain capacity management strategy to increase the flexibility and also expand the capabilities to meet the market demands for the ability of consumers to purchase any product at any time and then most importantly to deliver the product to meet the consumer needs in an efficient and timely manner.  This is a much more difficult challenge because it seems that the goal is continuously changing from a supply chain capacity perspective.  The changes to the retail market resulting from the consumer expanded omni channel demands have disrupted the retail market along with the extended supply chain supporting the retail market.  There is no question in my mind that one of the greatest struggles for retailers is to revise their capacity management strategy to meet the changing demands of the consumer.  

It used to be easy for the large national and regional retailers because they could simply expand their growth by expanding the number of stores.  This provided a relatively stable set of requirements for the supply chain capacity management where retailers would distribute product to the stores based on product mix and regional sales.  Now with the expansion of consumer omni channel shopping and purchasing the retailer's store model has been blown up.  You see this with the sales figures by channel along with the impact on the real estate market and malls that are seeing reduced foot traffic and sales.  Consumers have embraced the technology that allows them to shop and purchase on their own schedule and this has changed the retail supply chain requirements along with how capacity is managed across the chain.

Supply chain capacity management must be highly flexible and fluid in order to sense and respond to the consumer demands.  The market is much too volatile now for retailers to wait for the changes, they must change their capacity management strategy to allow inventory to quickly move across channels and delivery points to react to the demand volatility.  In addition to the increased flexibility of the consumption abilities retailers and the supply chain must also recognize and change their capacity demand planning and forecasting strategy and practices to help to flex capacity capabilities to meet the demands.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Changing The Way Supply Chains Work

As a result of the continuously changing demands on the supply chain from retail channels, consumers and suppliers the inventory management systems must also change to meet these demands.  These changes are bigger than simply improving the inventory control systems, software integration and procedures.  These demands require changes in methods, software and also the collaboration improvements across the entire supply chain.  Inventory availability, placement and ability to deliver to meet the consumer demands is a key driving force to changing the way that your supply chain works.  However it is not the only thing changing in how the supply chain works, there are just as must disruption driven by the changing relationship between consumer and retailer driving changes in the supply chain.

Consumer and market demands are changing the retail inventory management requirements in ways that have been difficult for retailers to recognize and adjust to in a timely and effective manner.  The reason for this difficulty is that retailers must take the time to first understand the changes and second to define a strategy to meet these changes and all this must be done while the retail brick and mortar channel is disrupted to the point of serious impact on the survival of many large legacy retailers.  These changes have been a long time coming and have been projected by consumers and retailers have either ignored them, or fought them.  In either case, the market and competition from online retail capabilities in addition to the explosion of technology have converged for consumers to finally implement the changes in purchasing and shopping without the support of the large retailers.    

These changes in both consumer demands and consumer capabilities have come together now to disrupt the retail marketplace and the extended retail supply chain to force a change in the way the supply chain works to support the marketplace.  The changing supply chain demands are now forcing changes in the inventory control systems, software integration and procedures supporting the marketplace to account for the disruption and survive in the future.  Retailers and the inventory control systems and procedures must view consumers as the center of the model and all channels are converging to support this new model.  Consumer demands are driving these changes and retailers must adapt their strategy and inventory control systems to support this model in order to survive.

Unfortunately for the large legacy retailers these changes in the way their supply chain must work comes at a time when they are adjusting to the disruption in the marketplace.  These changes though must be accounted for and addressed in their new strategy in order to support the marketplace.  The changing consumer shopping and purchasing practices are changing and as a result retailers must change their methods, software along with extend collaboration across the entire supply chain, including consumers, in order to meet the demands.  The changes to the way supply chains work are structural and permanent so they will not allow the retailer to simply apply a bandage, this requires major surgery to survive.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supply Chain Convergence Of Demands

The demands of the retailer for product inventory supply and location are beginning to converge with the demands of the customers.  The challenge for the retail extended supply chain is the convergence of demands and expectations from these two distinct customers, retailer and consumer.  These changes require a dramatic increase in flexibility of the functionality along with increased collaboration across the extended supply chain network in order to meet the flexibility demands.  Retailers can no longer view their extended supply chain as a silo that is used simply to supply product as needed.  The extended supply chain can be a competitive advantage for retailers if they increase the collaboration across their supply chain extended partners, consumers and the retailer.

The replenishment demand cycles and requirements have been shifting now for quite some time and with the increase in the omni channel shopping and sales volumes these cycles have converged across the product supply and delivery for both the retail stores and direct to consumer deliveries.  The replenishment to stores and the consumer purchase fulfillment are now very similar and this is further converging to eliminate all differences. What this means is that much of the retail shipments, whether to the retail store or the consumer have the same properties and the same fulfillment cycles.  

These delivery and fulfillment cycles will drive retailer planning and forecasting functions to converge the demand planning for stores and direct to consumer sales and replenish to locations that most efficiently meet these demands.  The Amazon supply chain network provides a good example of these supply fulfillment demands as Amazon has built a network of distribution centers across the country to support the rigorous delivery demands to consumers across the country.  

Omni channel retailers now must get creative in their real estate network to meet these new rigorous fulfillment demands as they converge.  This means that retailers must re-evaluate the store layout and usage to be able to support direct to consumer fulfillment along with in person shopping and purchasing.  I envision this change to drive an expansion of inventory storage at the store and a contraction of show room shopping space.  I also envision an expansion of resources in the store to support the demands of inventory management and control along with consumer order fulfillment direct from the store.  The retail store provides a perfect location to support the converging demands of the retail omni channel marketplace and most importantly since the foot traffic in the stores is deminishing as the eCommerce sales increase this strategy provides a perfect opportunity to repurpose and utilize the real estate to efficiently meet the converging demands.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?