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The mid-market’s adoption of an omnichannel fulfillment strategy

ARTICLE  | 

The COVID-19 pandemic has led to a dramatic shift in consumer behavior.  Due to an unprecedented number of physical store closures, the in-store experience has been blanketed with uncertainty.  The abrupt shift from the in-store to a digital experience caused many retailers to scramble and find new ways to maintain customers as well as a robust supply chain.  Large retailers were able to pivot to an omnichannel fulfillment strategy, while the mid-market struggled to maintain market share against competitors with an electronic business supply chain.

As consumers shift to becoming more brand agnostic, retailers have to rely on speed and convenience of personalized shopping.  To address a variety of challenges introduced by ecommerce, an omnichannel strategy is required.  These challenges range from outdated information technology applications, e-commerce fulfillment centers, and SKU assortments relevant to consumer demographics.  This can be accomplished by following three operational strategies:

1.       Develop an intelligent application strategy.

  • Retailers are facing significant challenges to adapt a new digital business model for sustained operational success.  Although technology companies are evolving at hyper-speed, businesses must evolve and rethink how applications should be built and deployed within the business. Businesses have to implement an application strategy to ensure their software meets the needs of the company and its long-term goals.  Selecting applications that create a seamless experience across multiple devices and touchpoints is an expectation of consumers.  Retailers should begin with an investment in an Enterprise Resource Planning (ERP), which are critical to operational success as they are able to provide visibility and efficiency to help steer business towards sustained success.  With additional investments in system and consumer data security, retailers can provide an optimal shopping experience across channels and anticipate future demand.
  • Intelligent applications can identify the root cause for fulfillment failures.  Common failures include items not being found the stores, labor unavailability, and excess number/inaccurate items in the order.  The application of artificial intelligence (AI) for supply chain design, demand identifying, and demand shaping and supply chain operations has the potential to materially move the needle on omnichannel fulfillment.  An AI application can help compile the data of historical sales, emerging market trends, macroeconomic factors, new product attributes and category strategies. This provides planning teams with insights to review suggestions the system has made on how to distribute the products across physical stores and online channels, to optimize the sell-through channel.

2.       Flexibility in the supply chain and inventory control.

  • Over the next decade, high unemployment will persists as the world converges on the internet of things (IOT) driven technologies, augmented reality, and robotic automation.  Warehouse employment has peaked as e-commerce sales are at the highest ever, but as sales increase, and technology evolves, labor will have to be re-purposed and re-trained to other areas of the business.  As retailers see less foot-traffic in stores, and consumers expect to receive goods within two days or less (Amazon effect), brick-and-mortar retail should be repurposing retail locations into fulfillment centers.  Getting goods to consumers as fast as possible has become of critical differentiator in retail.
  • Transforming portions of physical retail space into inventory staging is critical to achieving an omnichannel strategy.  Retailers using an inventory node that sells one unit a day may not need real-time inventory visibility, but a store that enables consumers to buy online, pick-up in store or ship from the store should offer real-time inventory visibility.  Increasing capital investment up-front to transform retail locations to fulfill online orders will lower the cost of digital fulfillment in years to come.  This shift requires an omnichannel inventory management strategy to allocate inventory for a new purchase avenue outside of the physical location, and also provides inventory visibility for its users.
  • Order accuracy is a key differentiator between retaining a customer and a lost customer.  With an increase in inventory, accuracy is vital as it leads to an increase in on-time order deliveries, faster stock cycles, and improved delivery times for customers. This will reduce holding cost expenses.  Without order accuracy, an omnichannel strategy will fail and customers will migrate their business to competitors who can meet their expectations.

3.       Utilizing big to data to understand customer buying trends.

  • Omnichannel data will be sourced from a variety of sources and channels, such as retail stores, mobile apps, websites, telephone and email.  Data about the customer should be exchanged between transactions when the customer switches channels.  If customers can switch between channels seamlessly, the customer feels remembered and more valued. This will lead to opportunities for increased interactions to maximize revenue and loyalty.

Retailers are hesitant to act on an omnichannel strategy, however, this will be required to compete in the new retail landscape.  The transition to omnichannel should not be seen as an operations, marketing or IT initiative, rather it should be a strategic transformation which, when correctly executed, results in significant and continued return on investment and happy customers.

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