Retailers Pursue Multichannel Strategies for their Supply Chains

March 12, 2012
Retailers and supply chain executives are feeling a heightened urgency to shift from cost cutting to growth, as they focus on the importance of distributed order management.

Retailers and supply chain management executives are feeling a heightened urgency to shift from cost cutting to growth, according to a recent report from the Retail Industry Leaders Association (RILA) and Auburn University.

The most significant takeaway from the report centers on the importance of multichannel operations, including fulfillment of dot-com, mobile and tablet orders. The report states that electronic ecommerce sales have grown by more than 15% to $35.3 billion versus an overall sales growth of 4.1% versus the previous year. With predictions that e-commerce sales will grow 10% annually, multichannel has become something of a game changer for retailers, the report states. It has also added a new layer of fulfillment complexity that retail SCM executives must manage.

Over 85% of survey participants indicate that direct consumer fulfillment is a top priority for them and that it is imperative to create a seamless customer experience regardless of the fulfillment channel, order size, origin, or delivery requirement.

“Consumer expectations are changing, and as a result, retail business models are changing,” says Casey Chroust, executive vice president of retail operations with RILA. “Traditionally retailers have used separate operational models to move goods and fulfill orders. Now those models need to be merged so that companies can continue to deliver the products consumers want across any channel without losing efficiency or adding cost. This requires advanced integration and innovation and working closely with suppliers and service providers while utilizing technology.”

The report highlights the various multichannel challenges facing retailers, including: variation in shipment size, order filling processes and delivery methods as well as the inconsistent SKU assortment of multichannel retailers. Less than 18% of the retailers surveyed offer the same SKUs across channels.

When it comes to solutions to the multichannel challenge, the report explored the various technologies that SCM executives are looking at to meet their multi-channel needs. With the complex challenges facing supply chain leaders, utilizing the right technology can mean the difference between mastering multi-channel and succumbing to it.

“The real challenge for today’s multichannel retailer is to become channel agnostic and fulfill demand effectively regardless of order type or origin,” says Brian Gibson, professor of supply chain management at Auburn University. “As sales volume grows in nontraditional channels, achievement of technology integration, operational flexibility and process visibility will separate the leaders from the pack. These capabilities provide the fulfillment agility, accuracy and cost efficiency needed for multichannel success.”

Experts are recommending distributed order management (DOM) software as a common-sense response to retailers’ multi-channel needs, the report notes. DOM allows retailers the ability to capture, manage and optimize orders regardless of origin-computer, retailer store, kiosk, or mobile phone. After the order capture, the DOM system identifies the fulfillment facility or channel that will best serve the customer and the retailer.

While not a silver bullet, DOM offers promise for cross-chain visibility, integration and service improvement. Analysis from the report concludes that full utilization of DOM across all fulfillment processes earns the greats cost reductions. DOM also allows customers to shop across all channels with the ability to make returns at any location regardless of where the order was fulfilled.

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