Best Fulfillment practices:How to design Omnichannel supply chain infrastructure

By | January 30, 2015

There is a constant tussle between maintaining optimum stock levels for both channels without risking the business as a whole with too much or too infrastructure little inventory. To be or not be an omnichannel retailer is an old debate now, as most of the brick and mortar retailers are turning omnichannel these days. However, the question here is how to build an efficient omnichannel supply chain infrastructure that ensures smooth delivery.

Today’s retail is experience driven, and here, omnichannel retailing is a must, where the consumers today do window shopping on their smartphones first and then check out the store, for better price and deal and vice versa. In such a compelling situation, building a robust supply chain infrastructure is of paramount importance, voice Retail CEOs.

A recent survey says, as mobile commerce comes of age, one of the biggest challenges facing CEOs is managing the transformation to omnichannel retail. However, only 34 per cent of CEOs consider the rise of omnichannel shopping to be an external threat, while only 22 per cent said it will have a direct impact on their organisation.

Commenting on the same, Ranjan Sharma, VP- Supply Chain and IT, Bestseller Retail India Pvt Ltd, said, “Internal collaboration with information transparency and cross-channel connectivity across the business is a pre-requisite to design an omnichannel supply chain infrastructure in today’s retail.” In today’s retail, there is a need to evolve the current multichannel approach into one seamless presentation of merchandise, be it in-store, online, and via mobile device.

But optimising the consumer experience for maximum profitability and customer loyalty requires more than an integrated presentation of merchandise. It requires supply chain strategy and infrastructure specifically designed to anticipate the needs of the clientele in general and to react quickly and efficiently to the ultimate purchasing decisions of each individual customer.

Creating infrastructure

Undoubtedly digitally-connected consumers have turned retail models upside down as omnichannel shopping has transformed supply chain from an important business concern to a mission- critical one. So profound is this change that 50 per cent of CEOs recognise that their supply chain can be a strategic differentiator. However, 83 per cent of worldwide CEOs believe that their retail supply chains are currently “not optimal” for today’s changing retail environment. Also, the omnichannel supply chain brings ease in increased complexity in shipping including the ability to move inventory from store-bound for pointof-sale availability, to being delivered to a consumer’s home via parcel carrier for reasonable shipping and handling fee, or to being shipped to the store of a customer’s choosing so it can be picked up ‘for free’ the next day.

But the omnichannel supply chain can also mean an infrastructure that enables retailers to monetise the latest trends more quickly and with lower risk, dramatically decreasing inventory carry costs and being able to move merchandise out without having to resort to deep-discounting.

Striking a similar note, Mahesh Madiyala, Director, Product Management Group, JDA Software India, said, “The decision for a retailer to be an omnichannel player has to be a strategic one. Having a “me-too” eCommerce website or a mobile application or approaching this as just another channel for getting some share of online sales is bound to be a failure. It is imperative to get the right combination of People, Processes and Technology.”

Cases in point

In a recent development, Future Group announced to invest Rs 100 crore over next 18 months to provide consumers a ‘single view’ of its many brands across physical and digital channels.

It is targeting 30 per cent increase in business once its omnichannel platform becomes operational. Another retailer Infiniti Retail, which operates a national chain of multi-brand electronics stores under the brand name Croma, has started delivering orders placed online the same day in 16 cities, where it has its stores.

The number of daily clicks on stands at 2, 10,000. Textile manufacturer and the flagship company of the Lalbhai Group, Arvind Ltd, recently launched its online custom clothing brand, Creyate, on the back of which it hopes to build a Rs 1,000 crore business in the eCommerce space over the next three years. Speaking about creating such synergy through omnichannel platform, Ankur Bisen, Sr Vice-President, Retail and Consumer Products, Technopak Advisors, said, “It is about staying relevant. With the way the retail ecosystem is evolving, technology will change the way customer experiences retail.”

Figuring shortcomings

In fact, today’s hyper-connected customer expects just about everything to be faster and instantly available.

Therefore, retailers in particular, must reinvent their supply chains into flexible infrastructures with both inventory visibility and intelligence to accommodate consumer expectations who want to shop seamlessly across stores and online presence and want to be able to choose on where and how to receive the goods.

Commenting on the same, Ashish Sood, Co-founder, Youshine explained, “The biggest challenge is how to allocate inventory between offline and online PoS. This is because it is very difficult to predict demand at offline PoS which takes longer to replenish due to distance constraints and at online PoS which are mostly marketplace models now.

There is a constant tussle between maintaining optimum stock levels for both channels without risking the business as a whole with too much or too little inventory. We have implemented a “Just In Time (JIT)” daily inventory replenishment model to overcome this challenge, which enables us to maintain optimum stock levels at warehouse, offline PoS and online PoS.”

Technology comes to rescue

How is anyone supposed to make decisions rapidly and accurately using outdated, traditional systems? The answer is retailers can’t. Clearly, it’s time for a rethink.

Traditional supply chain tools cannot keep pace with the digital modern commercial landscape. And they certainly can’t keep retail competitive. Madiyala explained, “Technology is the core platform on which an omnichannel business can be built. Traditional retail ERP, supply chain systems and store management systems are too siloed to achieve any significant benefits. One of the fundamental requirements of an omnichannel strategy is to have a single view of customers, inventory and orders.”

Rethinking the supply chain isn’t just about harnessing data. Retailers are also expected to accommodate both physical and digital multi-channel experiences. Like it or not, the omnichannel environment is upon retailers, making the need for supply chain agility and innovation greater than ever. Obsolete supply chains designed for a single channel world have no place in today’s market.