I interviewed Mick Jones who discussed OMNI Channel.

 

 

 

 

 

 

My Background

 

My name is Mick Jones, and I am the Vice President for Global Logistics and Supply Chain Strategy for Lenovo. I have spent the last 8 years in Lenovo in a number of roles - managing the $1Bn Global Logistics and Sourcing network operations, managing the end to end supply chain operations from procure to pay, setting and leading supply chain strategy, developing Supply Chain Analytics and developing the physical network and processes to help enable some of that growth and the fundamental changes in demand that we are seeing from our supply chains. For the last 18 months I have been the business leader for the acquisition and integration of the IBM X86 business supply chain.

 

Prior to that I worked at a senior level in DHL, Danzas and Exel leading the development and operation of new products, creating large global customer solutions, leading the development of business sectors and developing joined up thinking globally across Freight, Transport and Final Mile operations

 

For those of you that don’t know Lenovo – we are the biggest PC maker in the world and the third biggest maker of PC+ devices – that’s PC, Server, Mobile and Cloud. For the last 2 years we have been the fastest growing PC organisation in the world. In 5 years we have trebled our size – it has been an absolute blast!

 

What Drives you / What makes you tick?

 

What drives me and continues to drive me is the way that the supply chain and ALL of the elements and players in the supply chain are accelerating towards change – some willingly and some not so – and are having to face up to some VERY different panorama’s in the very near future. This is going to be an amazing few years for supply chain and I am fascinated by the way that some of the key changes will impact the players. To me Omni Channel is the result of one of those key changes – the changing consumer.

 

OK so what is OMNI Channel?

 

So I wanted to talk to you about Omni Channel Retailing – though we should be calling it Omni Channel Supply Chain – as it ‘belongs to’ all of us in the value chain!

 

Imagine this! You want a new pair of Nike’s so visit your favourite retailer’s website. As you enter the site, it drops cookies on your browser. Next thing you know, you’re seeing a television ad promoting deals available via the retailer’s mobile app. And before you know it, you are accessing information on your mobile device and then visiting the brick-and-mortar store. As you wander through the store, in-store systems recognise you, andyour mobile guides you to the correct part of the store to suit your preferences, offers you personal ‘deals’, you look up products online and perhaps even scan a QR code in search of a deal. That is the world that we are stepping into – the world of the omni-channel consumer!

 

In my day we would say that’s all very ‘Star Trek’ … now days the Youth just shrugs its shoulders and carries on …. Oh, how dreams have forged into reality!

 

My real interest came from a recent panel I was on in Amsterdam that included a Retailer, a 3PL and myself – a manufacturer – to talk about the progress and the status of Omni Channel. The discussion became quite – I think you might call it ‘lively’ – as we discussed the impact of Omni Channel on the end to end supply chain – with each member of the team defending the impact of the approach on their specific ‘link’ in the supply chain.

 

Let me try and start by defining Omni Channel – it is difficult – it means many different things to different organisations – but let me have a go.

 

Omni channel represents an operational state – that principally manifests itself at the retailer / consumer interface - where organisations offer a seamless experience for buying products regardless of the channel or the device they are using – consumers engage with the seller in a physical store, on a website or mobile app, through a catalogue or through social media. They can do that via a phone, a tablet, a laptop, a desk top TV or a smart TV. In its purest form it represents true consistency and continuity in customer experience across the entire front line of the retailer. It’s real lineage comes through multi-channel retailing, via cross channel retailing. Look up the Latin words for the three – Omni or Omnus means ‘all or universal’, Multi or Multus means ‘many’, and Cross or Crux means to ‘go across’.

 

If that confuses you – I read this on a blog recently:

 

‘(Omni Channel)..BOTTOM LINE: The Customer wants what they want when they want it. They want it where they want it and at a price they want to buy it at. They want to buy it through any medium and delivered to any place. If you don't have it in stock then you had better make sure it gets to their house tomorrow morning (or this afternoon) ...... or they will go and buy it from Amazon .... Who WILL have it .... WITH free shipping…’.

 

That is a great description - it shows the complexity of the omni-channel revolution and it shows the competitiveness of the market that we are moving into! It also shows the impact that Amazon as a leader is having on the market place – where Amazon go others will (have to?) follow!

 

So why is Omni-Channel so Important to Retailers and to the Supply Chain?

 

So what are we ALL suddenly, inevitably and relentlessly moving down this Omni Channel track?

 

The growth of the internet, mobile technology and social media has created increasingly fragmented sales channels, and an even more fragmented supply chain

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Until recently bricks and mortar retailers have responded to this by developing a multi-channel approach to retailing – operational and supply chain operations running separately for each channel.

 

HOWEVER ‘Tech Savvy’ consumers are now demanding a seamless and integrated customer experience across all available shipping channels with a consistent brand experience – they expect more and they are pretty vociferous about it on Social Media. That means that that those that want to compete need to are having to fundamentally change the way that their businesses are managed – systems integration, changes to operational models and integration of replenishment and other fulfilment flows of product  …. And complete customer centricity and a knowledge that one bad twitter experience can go viral in minutes!

 

So firstly I would say that there has been a touch of good old fashioned technology driven Democracy in the value chain – it happens every now and then– where the consumer is driving the response and not just dealing with outputs that retailers want to provide! If you want to interact with these consumers at a time and place and on an interface of their choice, then you have no choice.

 

Secondly online is where the customers now spend their time ‘hanging out’: I read a recent poll that outlined that 84% of consumers couldn't go a single day without their mobile device and 76% have access to more than one digitally connected device!

 

Then there are the new shopping habits - same set of poll results as above: 29% of US Internet users would buy everything online today if they could and 48% of all purchases in 2014 will be impacted by the web - either purchased online or researched online prior to buying in-store

 

In a recent LCP report that identified why retailers are moving down the omni-channel path, the explanation was that principally it is in response to a need to ‘simply compete’ (remember my earlier comment – where Amazon go others have to follow).

 

Of course there has to be a positive reason that counters pure survival! So there is sales growth through ease of consumer interaction and the ability to personalise and enhance customer service. In the past retailers have increased sales opportunities by moving into new geographical markets or products – now they are down the same on the electronic frontline.

 

Add to that the fact that the leaders in this market are developing increased margins on their operations by improving availability, reducing markdowns and extending ranges.

 

So that obviously gives a number of challenges to the supply chain – what are the key challenges that we all face?

 

We have talked about that change in the model – the way that consumers are changing their behaviour and driving ‘difference’ - the way that the likes of Amazon are driving competition to react and respond to their sprint forwards. Big changes and big challenges for all of us in the supply chain!

 

If I refer back to that recent panel that I sat on – the one in Amsterdam with a 3PL, a Retailer and a Manufacturer!Our discussions really focussed on whether in this inexorable move towards Omni Channel we were opening Pandora’s box.

 

If you know your Greek Mythology once opened Pandora’s Box can’t be closed, and it lets lose chaos and complexity on an unsuspecting world.

 

First let me say that I am not a Luddite – I accept the changes that are happening to us – they are inevitable and they are a natural phenomenon – but the industry has to get together as a whole and look at the implications and impacts that come from these mega-shifts along the entire chain. Typically we are not good at this – major disruptors – like Amazon – come along and change things for ever and we spend our time arguing about the way forwards, protecting our margins and passing the buck, and the cost, to someone else further up or down the chain, not solving the problem that we all have.

 

Speed has been seen to be important to the Consumer – the time between order and successful delivery. The consumer demands shorter and shorter lead times from the retailer. That is often driven by what the disruptive market leaders are offering not what the consumers are requesting. Lower lead time mean that more inventory is needed close to the point of sale, later configuration and finishing of products, smaller loads and hence lower vehicle fill (and an impact on sustainability of the chain). With 65% of the global GDP soon to be sitting in Cities, operational capability is needed in more urban areas – and the likes of Amazon need to set up their eerily named ‘Dark Stores’ to hold inventory, enable 2 hour delivery and take returns in major cities. As we move towards same day delivery the e-comm retailers start to compete directly with the bricks & mortars retailers like Walmart, and omni-channel takes yet another strange twist!

 

Traditionally organisations have been able to use a number of methods to shape demand at the consumer end. By offering next day or two hour delivery, omni-channel organisations are creating a scenario where the consumer no longer sees a value judgement in whether they require products quickly or not. So suddenly the ability to manage demand and hence manage flows within a fixed capacity disappears, and operational pressures drive operational costs upwards.

 

Our mega-connected consumers are getting more choice – offer one consumer adelivery during the advert break in 'Game of Thrones' and via Social Media that becomes the norm for you and then for all of your competitors! We end up being forced to offer infinite choice to consumers and creating earlier and earlier cut off times for orders - normally at no extra cost (that’s the other thing that Social Media slowly erodes!).

 

We therefore build enormous complexity into our supply chains but struggle to pass that cost on to the rest of the chain! Try putting the lid back on that! Just imagine the Bullwhip impact of speed and choice on the rest of the upstream chain – omni ‘infects’ components, manufacturers, re-sellers and Logistics providers - as they attempt to cope with cost, speed, inventory implications – probably with little cost passed on from the consumer end of the chain.

 

And all of our supply chains are like sealed systems – you add complexity and performance at one end and the cost impact of that has to go somewhere – like a balloon – you squeeze one end and the air has to go somewhere, and typically the impact of that re-positioning is a cost that occurs somewhere else in the value chain. And the granularity of the deliveries means that the cost is rising everywhere.

 

There are some chinks of light that show that the major disruptors are having to find other avenues to charge the cost onto the consumer. Go into the major player’s web sites and you will see a number of things happening:

 

  1. Next Day Cut Off times are becoming earlier and earlier – indeed Amazon manages it’s cut-off times based on demand and availability.
  2. Delivery charges are creeping up – minimum spends have been introduced and minimum spend thresholds have been raising over the last 12 months
  3. The free next day delivery for a fixed annual fee option (Prime is one example) has been increasing dramatically – in some cases it has nearly doubled in price.
  4. Some sites now feature ‘No Rush’ options – where you get a future discount based on NOT accepting next day delivery.

 

So what do we need to do about it?

 

Giving the consumer the levels of choice that we are now doing certainly ups the ante. The dominance of social media in marketing and consumer expectation means that one failure to meet these enhanced expectations becomes critical.

 

So somehow the players in this arena have to make sure that their backend capabilities align with their front end offering. Large parts of the back-end are typically outsourced. In some cases that is driving the larger retailers in the omni channel market to develop their own in-house capabilities. A pretty poor commentary on the existing available service provider capabilities.

 

Choice and the impact of next day is forcing us to look carefully at where we hold our inventory and how much and how accessible that is to the big centres of population. Cities become the battleground – Uber type models for transport start to have a say – City Logistics propositions become key once again.

 

Our networks need to become more agile and more flexible – optimisation of the network will become a bi-annual process not a 5 yearly one – investments will need to pay back in less than 12 months.

 

Speed of fulfilment and the increasing range sizes demanded, will force us all to look carefully and critically at our forecasting and demand strategies, and the ways in which we allocate orders. We need to increasingly rely on big data and analytics to give us improved forecasting and the ability to make more informed decisions.

 

The growth of 3D printing might give us some respite whilst significantly changing the spare parts supply chains. Certainly we will all have to brush off the old concepts of near sourcing, late postponement and Configure to Order downstream in the chain and closer to the customer (I am sure that some clever consultant will give these new names and start selling them back to us).

 

The Internet of Things will give us more intelligent demand sensing if we are to believe all we are told, but it’s down side is the 1000 times increase in the data that we are expected to handle. Certainly we will be expected to offer improved, more granular, more dynamic and probably intelligent visibility of product status and location.

 

The skills that we will need on our side in this new frontier will change – global and cultural, strategic vision, breadth of working knowledge across and along the chain, analytics and data management will all play their part in the new ‘super-heroes that will run these operations.

 

Finally one area that becomes an absolute essential for us all – wherever we sit in the end to end value chain – is going to be Collaboration. We have to look at the impact driven by the consumer as an entire supply chain organism, with fairness and trust. Share inventory information, share demand data, share networks, look collaboratively at problems and issues and come up with joint solutions – operational and commercial.

 

 

 

About Mick Jones


 

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Mick Jones


Vice President Global Logistics, Supply Chain Strategy & Network Transformation at Lenovo


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