Digital Transformation Thoughts

 

Digital transformation requires significant support from the C-Suite to ensure success.  Initiative must be lead and encouraged by C-Suite and especially CEO.  Key to remember is this is a huge change management program that will change the way the company and organization works.  This makes it critically important for CEO to display, publicly and privately, support for the program.  

C-Suite must provide resources, people and funding, to ensure success.  This must not be a 'skunk works' initiative because of the signigicance and requirement for the entire organization to be aligned and moving together.  There is a great deal of work to be done and there will be changes, and risks, along the way that must be addressed and these can only really be addressed with the support of senior management.  

This is a long-term program that requires continued support and focus in order to succeed.  This will require a robust plan and management focus in order to succeed.  This is not an program that can, or should, be delivered as a big-bang.  Digital Transformation is a discovery process that will re-invent your business and as such requires experimentation and trial and error practices to validate the tools and processes involved in the transformation. The transformation will succeed by following a continuous improvement model of PDCA (Plan, Do, Check, Act) that supports experimentation and quick adjustments to ensure the feedback is incorporated quickly.

Digital transformation will require a transition to new processes, capabilities and software, some of which will be invented as part of the transformation.  This is a significant business and market disruption program that will grow and solidify as a result of waves of change and disruption.  This requires a tool that can support quick prototype experimentation to validate concepts.  This is where Robotic Process Automation (RPA) tools come into play for a significant role in the success of your program.

RPA tools provide a means to build new connections and process across multiple platforms and technology to eliminate non-value add processes and procedures.  Digital transformation is essentially the most significant Lean program that the market will take on and this requires high level encouragement and support for the business and organization to embrace.  RPA tools can provide the bridge from current business as usual to Digital Transformation.

Next big question is how can you initiate this program to increase the likelihood of success?  How can a strong and experienced supply chain consulting partner help you to build the plan that can help to ensure success?

Tom Brouillette

Contact: tbrouillette@ncspartners.com

@ncspartners

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Tom Brouillette discusses supply chain trends and provides strategic business & technology advice to his followers and companies.

Effective Inventory Mangement

Inventory management is one of the pillars of a successful retail business and especially critical in the highly competitive eCommerce marketplace. While this statement would seem to go without saying, in the real world, effective inventory management can be very to achieve because of all of the moving parts. Effective inventory management requires first a focus on the basics; attention to detail, strong process management and determination especially when supporting controls and investigations.

Effective inventory management requires execution of complex global inventory management strategies, along with collaboration across internal and external partners that all come together to support the inventory management processes and procedures that support the highly volatile business demands. A focus on inventory management and control is required to support the extended global supply chain that is now key to the retail marketplace.

Inventory management provides the foundation of tools, process and procedures required to succeed in the global retail marketplace. It may not be a flashy capability but it is a base requirement to support the flashy side of retail . Bad inventory decisions can kill an organization’s profitability and wreak havoc on the supply chain. Developing and implementing inventory management controls as part of a seamless global logistics program doesn't just happen overnight. The successful inventory management program will be based on the following building blocks:


Collaboration program across the entire extended supply chain


Logistics planning, forecasting and analysis accuracy through robust sales and operations planning


Cycle counts to eliminate physical inventory


Product count program based on velocity and product demand to ensure availability for high demand product (A, B, C velocity usage)


How often do you analyze the velocity?


Inventory turn management that includes continuous review:


How do you improve inventory turn?


How do kits and co-pack products impact inventory and inventory turn


Inventory stocking practices in a multi DC network


Advanced Analytics supporting forecasting and planning

Inventory planning and forecasting provides an important feature and support in an effective continuous improvement process guiding inventory management practices in the global market. The accuracy of the planning and forecasting are enhanced by the volume of data available from the extended supply chain partners and requires a robust set of tools to perform the analysis. This begins with a focus on implementing and maintaining the fundamentals of inventory management and controls including robust programs starting with manufacturing planning, through cycle count procedures to ensure accuracy through inventory performance analytics supporting forecasting and planning.

Technology adds value to the continuous improvement process by providing a framework that integrates the data available from the from planning and forecasting with the process execution data to improve the ability to sense and respond in a continuous manner. Technology has become an integral partner in these activities to provide the connectivity required for the extended supply chain partners create knowledge from the vast amounts of data that are available. A robust continuous improvement program allows the supply chain partners to sense and respond to the changing inventory control demands that are increasing in both velocity and impact on the supply chain success,





Technology and collaboration has reached the point now where inventory management and control can fully utilize and take advantage of the volume of data to increase the effectiveness of the continuous improvement procedures and data volume support should not be considered a limiting factor. Big data capabilities provide the opportunity for each of the partners in the extended supply chain to both share and utilize data that would not have been imagined even three years ago and by the same token the capabilities of three years from now will be light years ahead. The focus of the supply chain partners must be on starting the continuous inventory management process and to develop the collaborative processes and procedures that will encourage experimentation and improvements.

Velocity of Failure

The twin to the velocity of change is the velocity of failure and these two opposite actions are closely related and end up driving each other in increasing discontinuous cycles. These are increasingly related and a failure to meet the velocity of change will surely increase the velocity of failure but meeting the velocity of change can also increase failure as well. The challenge in meeting these demands is the knowledge of insight and direction of the change. The challenge to obtaining the knowledge is the data collection and analytics required to collect and develop the knowledge from the data. There is really no way around this challenge because the velocity and types of change will surely overrun any retailer that ignores the challenge. What we should have learned from Amazon is that change is iterative and very much a trial and error process and this must be embraced in order to succeed in change.




This is no time to wait for the change to be identified by the industry to react and implement the change. The level and also types of change will interact and react in ways that create all new changes and the only thing that really can be predicted is that the rate of change will only increase, bringing with it an increased velocity of failure. This can be extremely intimidating for large retailers because they are not generally equipped for high velocity change and this is not their general practice. They are just coming out of a long time practice of generally waiting for the change to stabilize before responding. This practice no longer works because of the velocity of change and this is a great example of how the velocity of change increases the velocity of failure.




In order to avoid, or at least respond and change to the changes that will drive failure retailers must not only become more nimble and open to executing change and they must become increase their knowledge of the factors driving change, they must focus on the factors that will allow them to sense and respond to change. The most important aspect is the improved ability to sense the changes and then the analytics to understand how to respond. The sense practice becomes the early warning of direction and types but the most important aspect is the analytics to understand how and when to respond. The velocity of change and most importantly, the velocity and volume of data available in the marketplace has dramatically increased the velocity of failure and as the volume of data increases both the velocity of change and failure increases. Retailers, and truly all partners in the marketplace, must focus on the data and the analytics in order to sense and respond appropriately to the change.




There is an even greater change that is disrupting the marketplace now; the change that is important today can be the failure of tomorrow. This is probably the greatest marketplace disruption factor. Amazon is probably the best example of the velocity of change and change experiments to understand the marketplace. Amazon is continuously implementing change as a means to experiment and better understand the market and also the potential. Google is another example from the technology and retail sector that has focused on experimentation to meet and create the marketplace. These practices should be mimicked by others to ensure their success and most importantly reaction and change to avert failure.

Supply Chain Multi Sourcing

The velocity of change is impacting all aspects of the marketplace from customer relationships to partner relationships to the manufacturing relationships and everything between. Retailers in the fashion industry seem to be the first to recognize and many of them have reacted to the changes to implement the fast fashion market segment. I find this as a great initial example of the results of the velocity of change in the marketplace and believe this will be the model for many of the aspects of the changes. The collaborative supply chain is providing the tools and the network to support the changes and the partners are expanding their experiments into all aspects of the collaborative network to improve their ability to meet the demands. The next step from a sourcing perspective is the expansion of the multi sourcing practice to develop manufacturing partners locally to meet spikes in demand and support end of life cycle demand to reduce overstock.




We have reached the point now in the retail marketplace where the specialty service providers are expanding in the services and even products they offer to support the specialty demands. This includes the local manufacturing of products in the marketplace. These collaborative practices in the extended supply chain along with the growth in capabilities of data analytics provide the tools now for retailers and manufacturers to improve planning and forecasting so demand to a point where the majority of retailers can improve their abilities to support the consumer demands. These capabilities now provide the framework for any retailer to utilize to their advantage.




There is no way to go back and the supply chain partners including manufacturers, transportation and retailers must accept and embrace the change. I see technology manufacturers embracing the global manufacturing and marketplace along with home products. These have all blazed the trail of this model and going forward the collaborative supply chain network will provide the support necessary to link and communicate in this global model. I envision this model to grow and expand as the market demands change and grow to require the global model to meet the demands. The multi sourcing model provides the framework to support the changing demands.




Just as the retail marketplace changed with the growth and expansion of the collaborative and social tools integration with the sales and shopping, these same tools and practices will expand into the sourcing and manufacturing realm to support the consumer demands more efficiently bringing with them a quickening and shortening of the product life cycle. The result of the collaborative supply chain growth and expansion will spread through the forecasting, planning and manufacturing practices in the supply chain. As this multi sourcing model expands the through the collaborative marketplace the results will change the way that consumer demands are met, increasing the flexibility to meet the spikes more efficiently to increase sales and opportunities.

Artificial Intelligence Improving Logistics

Over the last few years there has been a great deal of interest and development in the area of artificial intelligence (AI) and the potential to improve the supply chain and logistics. There is an immense amount of data available across the supply chain from a combination of Internet of Things (IoT) devices connected directly to supply chain partners and the partners across the supply chain network. In addition to the data produced internally to the supply chain there is now also an immense amount of data available from external customers to the supply chain partners though the direct interaction with in the supply chain through through partner portals and direct interactions through integration points with supply chain external customers. The Internet and online interactions provide this data and supply chain partners would be foolish not to use this data to improve their logistics capabilities.





The challenge though for the supply chain has been two fold, how to utilize the data and what data to collect for the analysis and use of the data. Artificial intelligence starts with the collection of data for analysis and this is an important starting point. There is no way early on in the journey to determine what data will be important because the analysis must be performed first to understand the foundation and the potential. The intelligence part of the analysis also requires a great deal of information in order to validate the the hypothesis and then to determine direction based on the intelligence. Starting with the data then you can see why it is so important to collect everything because the intelligence part of the equation will generally require additional data from the same periods to confirm and validate direction.





It is important to collect all data then because you cannot tell what may be important for the analysis and then determining direction. The good news here though is that storage is cheap and the technology to analyze vast amounts of data has been improved through the improvements in technology. These two points have probably done more for the growth and development of artificial intelligence than any other developments over the last few years. These improvements in technology allow the supply chain to refine and redirect logistics activities and practices based on facts and data rather than hunches and hopes. Combine these two technologies with the growth of the Internet of Things capabilities and technologies and the potential for improvements is almost overwhelming.





These capabilities bring improvements and opportunities in automation including warehouse location and slotting, drones and robotics to improve efficiencies and reduce costs. These are not the only areas of improvement to the achieved through artificial intelligence. There will be improvements in volumes, inbound and outbound, forecasts for instance, that will bring dramatic change to the supply chain as the extended partners in the supply chain, especially manufacturers and transportation providers as the revise their processes to incorporate the analytics into their plans and procedures. The warehouse operation though will also be dramatically impacted as artificial intelligence brings the analytics to the equation that allows the operation to understand and immediately adjust labor forecasts to changes in the operation during the date based on near real time events. Artificial intelligence is just another force bringing transformation to the supply chain and the supply chain must start with a baseline of continuous improvements in the flexibility and continuous change practices in order to meet the transformations.

3PL Growth Potential

Third party logistics providers have been on a growth path since the recession starting with growth in knowledge and capabilities through acquisition of talent during the downturn in the market.  This was a long journey for the leading providers and required a great deal of belt tightening in order for them to survive, however, I believe that it was worth the effort for both the survivors and the market as a whole.  It took some vision and patience to see the potential and the leaders in the third party logistics market are now reaping the benefits of their struggles. The market has changed dramatically through both the services offered by the providers and also the changes to the market that these providers have enabled, from dramatic consumer delivery changes to the tracking and traceability capabilities the market is a better place now as a result of the leaders in the third party logistics providers marketplace.

Now though the real change will be delivered to the market through these providers as they mature and the technology really takes off.  I expect there to be dramatic growth in capabilities and market share for these providers. The key to the growth and expansion really comes down to the demands of the consumer and changes in the consumer collaboration and interaction as consumers combine social technology along with new network and service capabilities to support their lifestyles.

Think about it, every advancement in technology and market capabilities has been driven by consumers over the last 15 years at a minimum.  The market is becoming more segmented at the same time as it is becoming more collaborative. This means that third party logistics providers will succeed or fail based on their abilities to shape the supply chain capabilities to meet the consumer demands.  There is no longer a basis for the large legacy retailers to support their supply chain needs, in fact, these needs would be best suited to be support by a network of collaborative partners, including third party logistics providers, to develop the tools and technologies that will bring the market forward.  There is no longer an opportunity for larger retailers, manufacturers or service providers to control the market outright and demand abeyance.

The future holds a continued growth of 3PL providers an a withering of supply chain capabilities by retailers and manufacturers because they will not be able to compete based services and cost.  The market will be taken over by third party logistics providers and probably Amazon, but I consider Amazon to be a type of third party logistics provider. The future market requires specialization and collaboration capabilities and also services to support the growth and velocity of change.  These are exciting times for third party logistics providers and they must take advantage of the opportunities and think big. There will be great opportunities in the market and these opportunities require a great deal of imagination and also collaboration to be in the position to leverage the change.   

Consumer Mass Customization Support

Product customization has been supported in the retail environment for a very long time and now the retail omni market tools and capabilities expand and enhance these capabilities to a level that will allow imaginative manufacturers and retailers to partner for all new levels of customization.  I see these opportunities and potential to expand as one more very important means to improve the efficiency of product lifecycle and replenishment while simplifying the sales and delivery of goods and services to support changing consumer lifecycle demands. The cycle of demand and change velocity has been increasing almost exponentially over the past couple of years to the point where it is hard to keep up with the velocity of change.  The expansion of mass customization provides a method and means for manufacturers and retailers to keep up with the change.

It is only a matter of time now before manufacturers develop the means to efficiently provide mass customization services for most products.  This next round of retail change will very likely be led by manufacturers through enhanced collaboration with retailers and especially with enhanced direct interaction with consumers.  The danger for retailers now is that manufacturers will edge out the consumer relationship through direct interaction and engagement in producing the customized product. Manufacturers have the tools to interact directly with consumers in a new sales channel for manufacturers that allows the manufacturer to interact directly with consumers to collaborate directly in product development activities.  The next logical step for the manufacturer is the expansion of the consumer relationship for the direct sales of their products.

Many manufacturers already provide a sales channel outlet for consumers to shop and purchase products and customized products offered by the manufacturer. This is where retailers need to focus in this next wave; support the consumer interaction and consumer relationship to promote these mass customization offerings.  Retailers can run the real risk of being edged out by manufacturers and leading omni market mass retailers like Amazon and Alibaba if they do not focus on enhanced consumer relationships and collaboration.

Retailers currently have a distinct advantage as far as the consumer relationship is concerned but this advantage has been diminished over the years by the expansion of technology and the ability to interact directly with the all partners in the supply chain.  This direct interaction has enhanced the ability of retailers to quickly react to support demands such as enhanced delivery services. The technology though can also be the means of the retailer downfall if the retailer does not focus on the consumer relationship and collaboration.  Retailers have always excelled at the consumer relationship aspect of the retail market through human interaction and personalized direct relationship management. This is in the process though, of being turned upside down as a result of technology and the consumer embrace of this technology.

The challenge for many retailers now is developing the practices and procedures to support the enhanced collaboration to support the necessary interaction, planning and execution capabilities to deliver on the mass customization demands of the market.  Retailers must now add enhanced relationship development and management and enhanced collaboration practices with other partners supporting the market in order to maintain a significant place in the market. Consumers will flow to the most efficient shopping, purchasing and delivery methods and retailers must provide the glue that connects the partners in the extended retail supply chain.

Retail Omni Market Product Customization

Production customization, or more accurately, product mass customization is a capability that was waiting for the tools to be put into place in order to delivery on the promise.  Now in the retail omni market these tools are gaining critical mass to support the opportunity to expand into this area and be very successful. This is also a capability that would take off with the consumer market although it would need to start with the types of products that best fit the mass customization model to succeed at first.  Another capability that really goes hand in hand with the mass customization capability is just in time manufacturing. Both of these capabilities bring important benefits in inventory forecasting, management and overstock reductions to the retailer and these can off set any change in the manufacturing and delivery process incurred through the mass customization.

Both just in time manufacturing and mass customization products start with a base par-complete product and when the consumer completes an order the product can be finished and then shipped to either the retail outlet or directly to the customer.   A very straightforward example of the process can be found in apparel and trousers where the length of the inseam can be customized for each customer. The retailer would stock trousers by waist size and unfinished length hems and when the consumer places the order the specific length of the inseam would be requested by the consumer and the hemming would be completed after the order has been placed for delivery to the customer.  This delivers a great deal of benefits to both the consumer and the retailers for instance the retailer can forecast by waist size and simplify the forecast and reduce overstock, while the consumer can select specific lengths and even different length by leg to produce a trouser that is customized to their fit eliminating the need for a tailor.

This functionality requires increased collaboration and coordination with manufacturing and the supply chain partners to coordinate the final steps of the manufacturing along with the delivery to the consumer.   This will also be improved through the use of increased data modeling and analytics to understand both the consumer demand actuals and potential along with the analytics to tune and improve the customization and the delivery of the products.  This will greatly benefit from the improved collaboration tools and especially from the improved data collection and analytics when combined with improved collaboration across all partners supporting the consumer shopping and purchasing market.  The tools developed to date and the potential of improved tools and collaboration made possible by the retail omni market combine to put these new capabilities in reach form both a functional perspective and and execution perspective.

The questions now are how and when will mass customization be expanded in the retail omni and who will be the first to deliver these capabilities to the mass market for an expansion of products.  Mass customization is available for many products already that are mostly related to personalization. The opportunity waiting is for the first retailer to make this capability available for more products.  The only thing holding this capability from mass distribution is imagination to identify products that can benefit. My bet is on Amazon as the next big game changer to the retail market.

3PL Omni Market Support

Leaders in the 3PL market realized the transformation coming as a result of the retail transformation to the omni market structure and, more importantly, the impact to the market from the discontinuous changes demanded by consumers.  The impact and resulting transformation to support the retail omni market has spread across industries to drive transformation into all of the industry and practices supporting the retail omni market. This transformation is and the effects of the retail omni market are most outwardly visible in the parcel and last mile delivery to the consumer.  The consumer lifestyle demands for delivery of purchases is most impacted in this area and has driven, at least initially, the greatest transformation. This transformation crosses through not only the delivery services and also includes the tracking and scheduling of these services along with the communications and directive input from consumers to schedule and coordinate the final delivery.

These carriers and third party logistics providers have really been going through similar struggles to meet consumer lifestyle demands as the major retailers.  This has crossed over how and where product is stored along with the delivery methods and new services developed to date to improve flexibility and extend capabilities.  These delivery services started with the simple parcel tracking notifications to the addition of direct communication to coordinate delivery, to the redirection of delivery and now to parcel drop boxes where the consumer parcel can be dropped near the delivery address for the consumer to pick up based on their schedule.  These are a brief litany of the types of changes that are the initial manifestation of the transformation driven into the delivery market and the transformation is really just gaining steam.

The 3PL market supporting retail and eCommerce has been driven into a similar type of transformation from two directions really; both the demands of the retailer and the requirements of the last mile delivery services.  The leaders in the 3PL market embraced the transformation and have developed a flexible strategy and selection of services that can support the delivery coordination demands in an efficient and cost effective manner with the intent to provide the type of strategic services that most retailers struggle with to implement.  3PL providers are prepared and capable to efficiently outsource inventory management to provide a structure that can support two day delivery at zone 1 pricing for all major metropolitan areas.

This type of investment for most retailers is insurmountable and would leave them at a strategic disadvantage.  The 3PL provider brings a great deal of value to the omni market support to allow small and mid-sized retailers compete cost effectively with the large retailers.  The 3PL providers have carved out an important niche in supporting the retail omni market demands and the benefit there is that retailers can focus on the consumer relationship and product development and outsource the supply chain and logistics to experts that focus on these capabilities.  Retailers can no longer afford to support the demands of supply chain and logistics and this provides a great opportunity to partner with a 3PL that is focused on innovation and supporting the retail transformation.

3PL Market Transformation

Just as the retail marketplace is going through a transformation in the way the retailer interacts with the consumer and the challenge of changing consumer demands, the 3PL marketplace is going through a similar transformation to react and support the product delivery requirements to meet both retailer and consumer demands while juggling labor, carrier and physical challenges especially in the last mile delivery.  The leaders in the 3PL marketplace have recognized the challenge and are focused on meeting these challenges now because they see the future of the marketplace and the opportunity available for these leaders that are able to sense and respond to the changes in a manner that supports their customers. The leaders in the 3PL market are transforming or disrupting the industry to provide a wide array of services based on demand just as the retail leaders such as Amazon transformed the retail experience.  

I believe the transformation and the ensuing growth of importance and influence of third party logistics providers started with the recession when retail and other organizations shed supply chain expertise in an effort to reduce costs and survive.  Many of these experts found a place with third party logistics providers and this allowed the the 3PL industry to expand and support new opportunities that developed as a result of the recession and need for organizations to reduce costs. Initially the focus on the 3PL services was cost savings, a way for organizations to eliminate costly investments in real estate and replace with charges based on demand and complexity of activities.  This provided a means for the 3PL customer to reduce long term costs which was important during the recession and the aftermath.

Leaders in the 3PL industry took the long term view to develop strategies to cement their partnerships with their customers to provide industry leading services and strategic capabilities to their partners based on their supply chain expertise and the demands and future vision of the industry demands.  These leaders took stock of their existing capabilities to how to improve and expand to meet the strategic future demands and set about to develop and acquire these capabilities. This has paid off for these 3PL leaders that invested in the future and these capabilities are now aligned with the demands in the retail market from consumers to support their lifestyles.  Now these providers are consolidating and developing new capabilities to support a flexible and cost effective services to support distributed inventory management to provide consumer delivery capabilities that would require significant investment and time for retailers to develop themselves.

Leaders in the 3PL industry realized early that their skillset and also physical distribution center networks would provide  strategic advantage that would support the retail omni market demands and they focused on developing the capabilities to provide cost effective support to their partners.  These leaders have transformed the 3PL market with these services and I expect this to be just the beginning. We can look to the future with new consolidation of products and services to extend the capabilities of the 3PL leaders to strengthen and extend their positions.  I see this to be the beginning of an increase in the 3PL market resulting from more and more retailers using a 3PL to support their supply chain and logistics.

Role Of 3PL in Omni Market Retail

Retailers have a difficult challenge between meeting the continuously changing shopping and purchasing demands from customers and meeting the changing demands and capabilities from their extended supply chain and especially changing parcel delivery capabilities.  This is where a third party logistics provider can help to meet the delivery and store replenishment demands with a flexible network of distribution centers across the key geographic and population locations ready to meet the consumer demands for fast delivery without the requirement for the retailer to invest in real estate and labor to support these demands. The 3PL can provide these capabilities and most importantly flexibility tot meet the changing demands in a cost efficient and timely manner.  

A 3PL with a network of distribution centers can provide quickly provide shared capacity in locations that can allow the retailer to meet two day delivery demands across the country without upgrading service.  This in itself can be a compelling financial benefit to the retailers and then add to this ability to flex services such as customization and even store replenishment to the mix and it becomes compelling argument.  The flexibility alone provided by 3PL capabilities allows the retailers to quickly offer new services without a costly investment and at a cost effective charge because these retailers not only take advantage of the 3PL capabilities but they can also take advantage of the favorable transportation rates that the most 3PLs can obtain through volume shipping.  This is no small benefit in itself and then you add to the the cost of maintenance and support of software plus the costs of real estate and building maintenance and not to mention equipment maintenance and you will pretty quickly reach a compelling reason.

The reality of the landscape and capabilities now is that many of the midsize to large retailers have been focused on the consumer face and meeting the changing consumer demands in shopping and purchasing to maintain their place in the market and they have focused mainly on cost savings that can be generated by their internal supply chain.  During this same time 3PL providers have been focused on improving their efficiencies by investing in software and automation along with the distribution center network in many cases. These investments by the 3PL are necessary for the 3PL to maintain their place in the market and meet their customer demands.

By this point you should also see the similarities between the retailer and the 3PL markets, they are both focused on meeting their changing customer demands and investing to meet these demands.  This is now a good place for the retailer to seriously explore a partnership with a 3PL to provide the supply chain services to meet their delivery needs and allow the retailer to focus on consumer demands.  The demands are changing quickly across the retail market in consumer shopping, purchasing and delivery so retailers would do well to focus on the activities and capabilities that differentiate them in the market and outsource the things, such as consumer delivery logistics, to a partner that specializes in those activities.  The point here is that both the retailer and the 3PL can partner to benefit from each other’s specialties.

Omni Market Supply Chain

The retail supply chain takes on an increased level of importance to support the retail omni market demands the market place and the velocity of these changes.  The supply chain provides the foundation for supporting the revisions to shopping and purchasing through increased flexibility in services and capabilities. The critical focus for the supply chain in this support is the flexibility to quickly and efficiently react to the changing demands in supporting the procurement and delivery on products to the consumer.  Since a key factor driving the retail omni market is related to consumer demands to support changes in shopping and purchasing the supply chain provides the foundation to support these demands and this in turn means that the supply chain must increase flexibility and the spectrum of capabilities to support these demands.

One of the market demands that I see as driving the changes are revisions to the product life cycle and these revisions to the consumer demands will require increased flexibility in the entire supply chain to support the changes to the product life cycle.  These consumer demands produce a discontinuous product life cycle that must be tracked closely to understand and react and then the reaction time to adjust will be dramatically shorter. The requirements on the market place and the supply chain are similar and very swift in the omni market as a result of the velocity of change supported by technology.  The market place no longer allows much time for retailers to review, understand and then react to the changes demanded by consumers.

The discontinuous change demands from consumers on the retail omni market require a robust continuous improvement and collaboration practices across the entire supply chain.  The change cycle though is a continuous cycle without time to take a breath. These changes and especially the velocity and nature of the changes require the retailers and their entire chain to be engaged in a continuous analysis and forecasting of the changes. This requires increased collaboration across the entire supply chain from supplier to end customers.  

It seems to me that the nature, especially the discontinuous nature of the changes, are driving reduced and similar discontinuous change cycles in both services and product life cycle.  This type of market place requires a higher level of collaboration and increased engagement from the supply chain to reduce the time to react to changes. This shortened change demand cycle, in turn, requires a shortened procurement cycle to react to react to the changes in consumer demands.  These changes in consumer demands, especially including shopping and purchasing demands, also requires increase flexibility in the omni market practices and capabilities to allow the retailers to react. This all results in a highly flexible and reactionary omni market that is disrupting the success of the large legacy retailers.

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?

Retailer Showrooming

The most interesting reaction to the changing retail omni channel market that I have seen recently is the embrace of showrooming by some retailers.  This is interesting because it wasn’t so long ago that all retailers were fighting the practice.  Retailers are now seeing the benefits to their inventory management, consumer satisfaction and forecasting that results from the practice.  This change results from retailer recognition of the consumer demands and more importantly the recognition of consumer control of their shopping and purchasing.  This beginning of acceptance for showrooming shows a distinct change in strategy of retailers to these market demands and their recognition of the acceptance of the impact of the Internet on consumer shopping and purchasing practices.

Showrooming is an extension of the Internet and eCommerce shopping in the brick and mortar shopping space.  This recognizes the impact of the Internet on the retail marketplace and creates the outlets for and physical extension for virtual shopping.  Consumers view shopping and purchasing is a social interaction while the product delivery is the physical outcome of this social activity and sometimes the physical purchase in the brick and mortar outlet and the effort of carrying the purchases can dampen the social experience.  This physical outcome does not need to be tied to the shopping though and the introduction and encouragement of showrooming will result in increased shopping time which also results in increased sales for retailers.

Showrooming provides the means for retailers to improve inventory availability for the purchase because it allows for the consumer demand to be filled from a regional distribution center for more efficient fulfillment.  Another major benefit to the retailer is the ability to test product demand in markets without a large inventory investment.  This provides increased flexibility in managing inventory availability by allowing retailers to easily focus the delivery of the purchase based on consumer demand and not the inventory available in the store at the time.  I believe this will improve the accuracy of forecasting and planning because it allows the retailers to understand the consumer demand and lost sales due to inventory not available.  This increased accuracy and regional delivery will allow for increased flexibility to deliver to the demand and this in turn will result in reductions in overstock and liquidation inventory.  

This is a big step in retail culture that really expands the horizon of possibilities for both retailers and consumers. It allows retailers to define and support a standard business process for purchase and delivery that can be executed from any channel creating a true omni channel experience.  We need to define a new phrase or acronym for this next wave in retail that describes the experience.  The challenge for retailers is to maintain and increase the momentum in this direction and consumers will not be patient with setbacks.  I look forward to these changes, they are exciting times to be a consumer and experiment with the capabilities.

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 Industry Forecasting Efficiencies

Retailers are encountering significant challenges to their business model driven by consumer changing demands and retailers must accept the new reality that they (the retailers) are no longer in control of the consumer shopping and purchasing practices.  This new reality requires a serious evaluation of the consumer demands against the current retailer capabilities to define and prioritize initiatives to meet the changing new reality.  This is where inventory planning and forecasting should take a very high priority in the sequence of strategic initiatives.  Inventory planning and forecasting provides the bedrock foundation for retailers to meet the consumer challenges in a flexible and robust manner that meets the changing consumer demands and also, and equally important, provides a strategic direction for retailers to redesign and implement a delivery network that also supports the changing consumer demands.

Consumers are increasing demands on shopping and purchasing in an omni channel market where retailers support the ability to shop in one channel and purchase in another channel.  This foundational demand of consumers can be difficult if retailers do not change their view of both inventory and sales forecasting and planning practices to embrace this omnipresent view of inventory and sales.  This change is the foundation to build the retailer sales and delivery network and while it changes the business process dramatically it also simplifies this business process by treating the channel as a outlet rather than a separate business process.  This change allows retailers to view their inventory planning and forecasting procedures from a channel demand to a brand demand and this both simplifies and improves efficiencies of inventory consumption.

Retailers should first define the business process in the basic functional view without regard to the channel and then each channel outlet must be defined as a method to access the process and not a process based on the outlet.  This is not an easy task and requires a foundational redesign of the retail interaction with consumers.  This is critical however to meet the velocity and volume of change in the retail market driven now by consumers.  

Retailers can then use this change in their inventory model to drive changes into their brick and mortar store strategy to support the changing consumer demands for omni channel shopping and purchasing.  These retailers will be able to use the foundational inventory planning and forecasting redesign as a base for building a flexible and robust retail business model that supports the continuous change that is demanded by the consumer.  Retailers must build a model that supports and encourages change from the consumer to build the long term relationship with consumers that will drive their success.  There can be no turning back now and the response of the large retailers must not shrink to eliminate bandwidth, they must change the model in order to embrace and encourage the change.

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 Purchase

The omni channel purchase process is probably the critical link in the consumer relationship battle that is being fought by the large legacy retailers for the favor of consumer shopping and purchasing.  The convenience of true omni channel purchasing cannot be beat and this is also the most difficult aspect for the large legacy retailers to deliver.  Consumers now demand cohesive offers and support across the retail fulfillment channels to meet their needs at the time of the purchase, these are truly opportunistic shopping and purchasing activities that must be met at a moment’s notice in a manner that supports the consumer need at the time of decision.  This includes all of the input consumers receive from their mobile devices as they are shopping whether online or in a store.  The mobile input to shopping decisions is a continuous stream of comparisons and suggestions when the consumer allows location based communications.

I know that in my shopping and purchasing practices that I am drawn to the opportunity at the time I am shopping and based on input from all channels, in other words I am continuously reviewing cross-channel options for purchasing and utilizing the retail store as a showroom for my shopping and decision finalization.  Millennials are even more technically aware and plugged into the opportunities available through mobile and wireless technologies.  This is not however an age bias because seniors are also highly capable from a technology basis and even more drawn to the simplicity and opportunities to eliminate trips and lugging purchases available via the online channel.  

This is a cultural as well as a technology challenge for the large legacy retailers to overcome because traditionally these retailers have traditionally focused on the brick and mortar store channel to draw customers and the size of the chain to drive cost savings from their size to provide volume discounts that are then passed to consumers.  The technology challenge is the changes required to support the true omni channel requirements, beginning with the inventory challenge and finishing with the purchase.   The challenge really starts with the assignment of the sale to the channel and this first hurdle really slowed the large retailer acceptance and also ability to take advantage of the opportunities.

These retailers must look at the purchase supporting across channels and the shopping supports the purchase.  There will be some products that lend themselves to the physical shopping environment and some that lend themselves to the online shopping environment.  Retailers must embrace these differences and not limit the purchase to the channel where the shopping is executed.  This seems to be the continuous major challenge for large legacy retailers and this challenge seems to be related to the culture of the brick and mortar vs online shopping practices.  This is the change required to support a true omni channel purchase and when this is embraced by these retailers they will be able to then focus on the advantages that a large network of stores and warehouses present to supporting consumer 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?

Retail Shopping Frustrations

The changes in the retail market are just as much a consumer reaction to their frustrations with brick and mortar shopping as they are embrace of new technologies.  Consumers have reacted to their frustrations with shopping and purchasing by building their own virtual retail market where they can shop and purchase while interacting with friends and family in a virtual shopping experience that allows them to meet their lifestyle needs efficiently and effectively.  Amazon and other eCommerce retailers have taken advantage of these frustrations to expand their reach and disrupt the retail market as a result.  Some retailers have realized their challenge and are now scrambling to react and adjust to the new and changing consumer demands with some success.

Amazon is a great example of a retailer that has recognized the frustration and provides a robust alternative that embraces consumer choice and collaboration.  Amazon has made the online shopping experience personal and has focused on developing the relationship with consumers to develop a bond and expectation of value for the consumer.  Amazon has been able to create a two way conversation with the consumer that legacy brick and mortar retailers have be eliminating for years and this is the secret sauce for Amazon and other online retailers.  

Small local retailers have not really suffered during this disruption and I believe this is because these small local retailers focus on the relationship with the consumer, they personalize the experience and consumers react positively.  Contrast this to the large legacy retailers of a pure focus on price without the personal consumer relationship and you can see that consumer reaction to leave in droves for the eCommerce marketplace where price is a competitive advantage.

Large retailers must change their focus to improving the shopping experience and giving consumers a reason to come to the store again.  These retailers cannot change traffic jams but they can change parking challenges through a focus on experience getting to the store as an example.  Large retailers have spent years focused on cost reductions in the store and this has resulted in reducing the attraction for consumers to go to the store.  Large retailers must now focus on the omni channel shopping and purchasing capabilities in the store and the consumer experience when in the store.  In my opinion, these retailers should reduce the square footage of product display in the store, increase the space for product backroom storage to support direct to consumer shipping to support the omni channel shopping and purchasing demands of the consumer.  

The last addition for these large retailers is to produce product events in the store as a means to attract the consumer to spend more time in the store.  When I was young we used to go to the mall and the large retailers for the entertainment just as much as the purchase.  As a result of the product demos and other entertainment options people spent more time in these stores and purchased more.  Omni channel shopping and purchasing allow the retailer to redirect their spending into areas in the store that will produce greater value and greater sales.   

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 Fulfillment Efficiencies

One of the benefits that can be realized in the omni channel retail market is improved efficiencies in fulfillment, both to the end customer and also the brick and mortar stores.  This was not one of the original objectives or probably even one of the original potential opportunity identified by retailers however the changing consumer demands in developing and omni channel marketplace provided this opportunity for retailers to flatten and standardize their fulfillment practices across channels to gain dramatic efficiencies.  These efficiencies will provide long term improvements in both the fulfillment costs and delivery efficiencies due to the expansion of fulfillment across the entire retail network of brick and mortar stores, distribution centers and supplier drop ship programs.

Retailers must take a broad view of options and opportunities in order to increase the fulfillment efficiencies and increase both services and savings.  Retailers must view the fulfillment demands not only across channels but also across delivery demands.  This requires a paradigm shift in how retail stores and distribution centers are viewed in the omni channel marketplace.  The fulfillment demands and comparisons between store replenishment and customer direct delivery are converging and this means that retailers must view the fulfillment not from a channel but from the process required to support the business and consumer fulfillment demands.  

The fulfillment demands require that retailers expand the functionality supported in brick and mortar stores to include direct to consumer fulfillment.  The fulfillment demands require that retailers finally revise their inventory view and management practices to support sales across all delivery methods from one pool of inventory.  Retailers can greatly improve their delivery service levels and transportation costs by expanding capabilities in the stores to include direct to consumer shipments from the store.  This simple practice will reduce overall transportation costs and service levels because the spectrum of zone one deliveries will expand as well to reduce the overall transportation costs.

These are not difficult changes, in fact these changes should be accepted and a recognition of the new reality that consumers are creating to support their own lifestyles.  Retailers now must view and identify methods to support consumer demands rather than attempting to bend consumers to the processes and methods that simplify the retailer’s practices.  Consumers will no longer accept limitations from retailers because there are too many options and competitors vying for sales.  Large retailers must change their fulfillment methods to meet these demands and the resulting changes can be implemented to improve both inventory management  and also improve fulfillment efficiencies and 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?

Situational Collaboration

Collaboration is critical to the success of retailers in this new retail marketplace including collaboration across the entire extended supply chain along with the end consumer.  Consumer collaboration is a difficult objective for retailers to attain because consumers can be a very fickle group as far as interaction and collaboration are concerned.  In the retail marketplace consumer collaboration is based on situational requirements and specific needs at the moment.  The consumer must be courted and encouraged every day to react and interact with the retailer.  Consumer interaction and engagement has been raised to an artform by Amazon, based on their practice of continuously engaging with the consumer through suggestions and questions.  I believe the secret to consumer collaboration is the engagement activities that encourages reaction and engagement from consumers.  

Retailers have been engaged with suppliers and carriers for collaboration and interaction for quite some time now and all of the retail partners have certainly realized the benefits resulting from robust collaboration.  The consumer, though, has been a difficult nut to crack for most retailers and the reason for this, I believe, is that consumers must have a reason to engage and react.  There are many reasons for this but I think the most prevalent reason is that consumers simply do not generally engage without a reason.  This is difficult especially for the large legacy retailers because these retailers only engage consumers electronically via rewards programs and email programs.  These large retailers must learn the virtual customer interaction portion of customer relationships and relationship development to encourage a two way interaction and communication.

This is where the large legacy retailers can learn from outlets such as Amazon and Google in ways to engage and interest consumers to participate.  This consumer engagement practice is where Amazon and Google really stand out.  It is well know that Amazon has perfected consumer engagement from a retail and consumer perspective and Google has perfected the engagement from a situational perspective to provide reactions and ratings.  Google has really stepped up their game in consumer reaction and engagement to improve their maps and also suggestions for locations on the map.  Google has really extended the situational consumer collaboration through a combination of their short surveys that pay for response, their tracking of travels and then their requests for reviews and questions related to the places you travel and spend time.  

Large legacy retailers need to learn from these practices to engage consumers and these retailers need to develop these new programs as part of their redefinition of the retail marketplace model.  Retailers have the opportunity to create a new consumer experience but they must take important steps now to first survive in the market and second to create a niche in the 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?