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2012
vsehgal

Omni-Channel Omni-Complex

Posted by vsehgal Jul 30, 2012

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According to the U.S. Commerce Department, retail e-commerce sales accounted for 4.9% of all retail sales in the second quarter of 2012, up from 4.6% at this time last year. In fact, e-commerce has consistently grown from a mere 1.6% to almost 5% of the total retail sales, often growing two to three times the rate of growth for conventional retail. Omni-channel retailing is here to stay. That part is concluded! Therefore, if you are a retailer and wish to stay around longer, welcome to the new world of omni-channel retailing. Hopefully, you have been working on building your omni-channel capabilities for some time, because it ain’t going to be easy or quick for that matter! 

In 2009, I had presented a process-focused view of the omni-channel capabilities that a company must build in order to be successful in the bold new world of retaining. The focus at the time was on integrated processes across the conventional enterprise silos: Integrated Assortment Planning, Integrated Supply Chain Planning and Execution, and Integrated Store Operations. The premise in that article was that process-based integration will lead to efficiencies across the board bringing cost and customer-experience benefits. Since then, several studies have shown an increased understanding of such an integration across the enterprise. However, actual adoption has been low. Why?

Obviously, there are synergies that can be leveraged across these processes and physical assets. Ideally, the supply chain assets (think the warehouse building, MHE, people, inventory etc.) should be common no matter what channels do you operate. Same holds true for consolidating the sourcing spend, technology overheads, and shipping costs across these channels. Simple logic dictates that if you can consolidate these assets and use them as shared assets across all channels, you will be enhancing your ROA!

Conceptually, the companies get it. I believe that the reason for low adoption are generally more practical. I would put them into the following four categories:

  1. Operational: Consider a distribution facility that is just not designed for picking eaches to fulfill consumer orders. It may be the existing shelving, MHE, order fulfillment system, or the packing area that might constrain the direct-to-consumer fulfillment, but unless redesigned, such a challenge will likely constrain the options a retailer may have in consolidating the warehousing assets across their store and e-commerce channels. Improving a facility’s infrastructure and systems to support mixed order fulfillment to replenish stores, supply wholesale customers, as well as fulfill individual consumer orders can be expensive and time-consuming.
  2. Processes: Lack of integrated processes constrains a retailer’s ability to respond quickly to changes demand, supply, and flows across their supply chains. Achieving a working relationship among the different organizational units responsible for merchandising, supply chain, and store operations may be hard. Quite often, these organizations don’t share identical goals, focusing instead on specific departmental objectives at the cost of collective failure. Purchasing and inventory planners, for example, are at logger-heads and so may be the merchandising and sourcing!
  3. Current Org structures: Independent organizations responsible for managing different channels are quite the norm until now. For example, it is still not rare for the big retailers to bring in a chief honcho for their online channels. This creates inconsistent customer experience and set of objectives that these organizations try to achieve. The conventional channels are entrenched (and larger in size) for the time being, and therefore may not be quite amenable to the requirements of the new channels. This might be the biggest challenge for the retail executives to solve, though this is also a challenge that lies squarely in their own area of influence!
  4. Systems: Finally, as most of the enterprise processes are enabled through technology, achieving a working integration among the systems enabling these business processes is another challenge. These systems span across merchandising, inventory planning, demand and supply management, procurement, distribution and logistics.  Since these systems come from different solution providers and frequently hosted on different technology stacks, they are not designed to easily integrate. Lack of industry standards is also an issue creating challenges that may be hard to implement, if not quite impossible. Broken integration among the planning and execution systems is another challenge that retailers have struggled with over the years without a viable solution in sight forcing them to spend their energies in areas where they would rather not.

Related Articles:

Other Resources:

Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon .


© Vivek Sehgal, 2012, All Rights Reserved.



Originally posted by Vivek Sehgal at http://feedproxy.google.com/~r/SupplyChainMusingsstrategyVisionOperationalExcellence/~3/pwq_J-2h5Xs/omni-channel-omni-complex.html
vsehgal

Tomorrow is Too Late!

Posted by vsehgal Jul 13, 2012

Sit back and relax. No need to dress up, no need to find your car keys, no need to get into the car, spend on gas, search the endless aisles of your local big-box retailer, no need to worry about whether your size or color will finally be in stock or not! Have a computer on the web and a credit card, you are all set to go. Look for an Amazon warehouse near you enabling same day delivery on thousands of products.

Amazon has been pioneering some of the most consumer friendly retain concepts for years. Think about the product review from other buyers just like you, what others bought after seeing the product you are considering, automatic product recommendations for you, recommendations based on your history, product subscriptions, free delivery over $25, prime membership with unlimited content streaming thrown in: You get the idea.

That was all that was visible to you as a consumer.

Behind the scenes Amazon has been working on technologies to mine the data to bring you’re the magical recommendations, to better define the demand for their products, tune their assortments for you: the Consumer. They have also pioneered the Amazon web-stores, fulfillment by Amazon and checkout by Amazon for you: the Small Business Owner. And finally, they have been perfecting their supply chain operations: procurement, distribution, warehousing and order fulfillment to make the magic that is Amazon by developing technology and systems to enable their supply chain and by buying companies like Kiva Systems to further automate the physical operations of a warehouse.

Building on their successes in enabling one of the most efficient and integrated supply chain, Amazon now seems to be working on enabling “same day delivery” in most of the bigger population areas. According to news reports collated by Slate, “Some of these facilities are very close to huge swaths of the population. Amazon is investing $130 million in new facilities in New Jersey that will bring it into the backyard of New York City; another $135 million to build two centers in Virginia that will allow it to service much of the mid-Atlantic; $200 million in Texas; and more than $150 million in Tennessee and $150 million in Indiana to serve the middle of the country. Its plans for California are the grandest of all. This year, Amazon will open two huge distribution centers near Los Angeles and the San Francisco Bay Area, and over the next three years it might open as many as 10 more in the state. In total, Amazon will spend $500 million and hire 10,000 people at its new California warehouses.”

Though building warehouses near the biggest metros is no recipe for “same day delivery” success, this may quite be a possibility that Amazon can pull off. Amazon has shown unmatched ability to understand the complexity of the retail operations and automate these processes through systems and technology custom built for the purpose. Therefore, if someone can pull this off, it will be Amazon.

Welcome to the new phase of “agility” in online retail! Online consumers, raise your expectations once again!  

Related Articles:

Other Resources:

Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon .
© Vivek Sehgal, 2012, All Rights Reserved.



Originally posted by Vivek Sehgal at http://feedproxy.google.com/~r/SupplyChainMusingsstrategyVisionOperationalExcellence/~3/XaBXFwbQpGE/tomorrow-is-too-late.html