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?