Retailers Moving toward Multi-Channel Supply Chains: Study

There is a heightened urgency by retailers and supply chain management (SCM) executives to shift from cost cutting to growth, as well as to more strongly focus on multichannel retailing and meeting the increased consumer demand for continual access to products from any channel, according to a new study from The Retail Industry Leaders Association (RILA) in partnership with Auburn University and with sponsorship from Accenture.

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

According to the report, over 85 percent of survey participants indicated 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,” said Casey Chroust, EVP of retail operations. “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 research also revealed that in this “anytime, anywhere, any way I choose” environment, supply chain leaders must establish the appropriate mix of fulfillment capabilities. Their networks and processes must be properly aligned with each channel’s order characteristics, inventory profiles, and service requirements.

The report also highlighted 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 percent 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,” said Brian Gibson, professor of SCM 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.”

Because of these findings, experts are recommending distributed order management (DOM) software as a common-sense response to retailers’ multi-channel needs. 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. 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.

The report data was compiled through a series of executive interviews and industry surveys with retailers across every segment of retail, with the goal of understanding the capabilities that drive exceptional retail supply chain performance. One hundred and ninety-nine retail supply chain executives took part in the research. The criteria for participation included: company revenue exceeding 1 billion, multichannel operations, and director-level or above responsibilities. The respondents have 17 years of retail experience, on average.

RILA membership includes more than 200 member companies - from Abercrombie & Fitch to Walmart - representing more than $1.5 trillion in sales.