Omnichannel: Retail Supply Chains’ Big Challenge

Retailers’ supply chains generally are not optimized to support the new omnichannel environment, particularly with regard to the changing supply needs created by the expansion in mobile and online shopping, according to a recent report in which Pricewaterhousecoopers surveyed 400 retail CEOs.

As such, enhanced efficiency in buyers’ B2B relationships is taking on increased importance as retailers look to keep up with changing consumer and product demands.

The research, commissioned by JDA software, found that, as mobile commerce has grown, shoppers are no longer just going shopping episodically—they are always shopping. But problems arise when the customer experience does not keep up with the demands of increasingly demanding shoppers. And that’s where supply-chain management becomes critical,according to the report “Forbes Insights: Retail’s New Imperative: Supply Chain Optimization As A Growth Strategy.”

“Yesterday, supply chain was important,” Thomas Storck, chief merchandizing officer at German retailer Galeria Kauthof, noted in the report. “Tomorrow, it will be mission critical.” The report’s authors, however, said that “tomorrow” has now arrived.

“Are today’s retail operating models, and their supply chains, positioned to help organizations grow more profitably? The answer has to be no,” the report states. “Only 17% of all CEOs claim that their supply chains are currently optimal.” In fact, on average, the CEOs ranked supply-chain spending near the bottom of their investments, “which suggests that CEOs are still not connecting supply-chain optimization with the ability to successfully grow profit margins,” according to the report.

Omnichannel’s potential impact

Indeed, many CEOs seem to underestimate the impact of the new omnichannel environment, as 34% of those surveyed considered the rise of omnichannel shopping to be an external threat, while only 22% said it would impact their organization, according to the report. That, the report notes, should give cause for concern, as many predict the rise of omnichannel shopping is one of the most fundamental shifts that has occurred in the industry in recent times.

“CEOs who don’t understand omnichannel’s potential impact are in danger of missing the mark when it comes to future strategic planning for their enterprises,” the report notes. “With the new disruptive era of retail upon us, retail chief executives must adopt a new operating model with the supply chain at its heart in order to be responsive and agile enough to deliver a multidimensional shopping experience.”

Some CEOs are getting it, such as Ken C. Hicks, president and CEO of Foot Locker, who noted in the report that omnichannel is the retailer’s fastest-goring sector. “Our Foot Locker supply chain is changing in the face of multichannel shopping,” he said. “We’re making it more responsive and faster. We are looking at new ideas and new ways to distribute goods, to get them not just to the store, but also to the customer.”

Supply-chain review

Commenting on the report ina recent blog post, Narayan Laksham, founder and CEO of Ultriva, a software provider for suppliers, suggested that with margins growing razor thin, companies should take a comprehensive look at their supply chains to reduce inventory and costs, and to streamline productivity.

“The best way to do that is with supply-chain management software that enables execution on actionable items,” he said, suggesting it may start with a supplier portal. “It must be real time, online 24/7, and take all inventory issues into consideration, whether purchased in person at a brick-and-mortar location, or online at 3 a.m.”

In the words of Thomas “Fats” Waller, he added, “Find out what they like, and how they like it, and let ‘em have it just their way.”