In the era of omnichannel retailing, consumers shop with the expectation that they will be able to browse, buy, and return items through traditional and online stores, mobile apps and call centers. A shopper may try on a pair of jeans in a department store, but make the purchase with over a smart phone with the help of a coupon code and the promise of free shipping and next day delivery.
Call it the Amazon Effect.
Researchers from Auburn University’s Center for Supply Chain Innovation (CSCI) explored the ways in which industry leaders are navigating this ever-changing terrain in the sixth annual “State of the Retail Supply Chain” report, which draws on survey data and interviews with top executives.
“The pressure for omnichannel is constant,” CSCI Executive Director Brian Gibson said in a recent Harvard Business Review webinar. “You can’t have a conversation with a retail executive today without it coming back to the omnichannel topic – how you’re trying to monetize it and make it profitable.”
To understand the disruptive influence of Amazon, with its promises of same-day delivery in major metro areas and its exploration of delivery-by-drone, consider Walmart’s November 2015 announcement of plans to invest $2 billion in e-commerce technology and new distribution centers over the next two years. “Amazon is at the epicenter of this,” said Gibson, who also serves as the Wilson Family Professor of Supply Chain Management in Auburn’s Raymond J. Harbert College of Business. “They’re really forcing everyone to up their game, and everybody is feeling pressure. How do I get my product delivered quickly and, at the same time, efficiently?”
Gibson and fellow Harbert College faculty members Cliff Defee and Rafay Ishfaq conducted interviews with 24 retail industry experts who possess an average of nearly 24 years of supply chain experience. Of that group, 92 percent work for companies participating in omnichannel retail and 78 percent work for companies with revenues in excess of $1 billion. Their report also surveyed more than 50 retail supply chain executives about their challenges, strategies, and processes related to demand forecasting, store-based order fulfillment, and management of customer returns. Among the key findings of the study, conducted in partnership with the Retail Industry Leaders Association and sponsored by Checkpoint Systems:
- 81 percent of retail supply chain executives surveyed are either using, developing or investigating integrated demand planning to better expose store and distribution center inventory to customers and acquire richer analytics about demand for goods and services
- 67 percent offer store pickup by customers as an omnichannel fulfillment method
- 61 percent agree that e-commerce “greatly complicates” company demand planning activities
- 56 percent work for companies that will increase spending on supply chain process improvement this year
- 49 percent work for companies that are increasing their investments in omnichannel fulfillment to support faster, more efficient “click-to-delivery” capabilities
- 45 percent of executives highlight the need to develop more effective omni-channel returns strategies
- 26 percent of executives say their companies are prioritizing “enhanced customer service” as their primary supply chain strategy, up from 11 percent in 2015
Gibson said companies are being challenged to keep pace with the immediacy and convenience wants of consumers. They are increasingly reliant on small screen technology and expect service consistency across store, web, and mobile channels for product search, purchase, and after-sale support.
“I want to buy it wherever I want, whenever I want it and have it delivered however I want,” he said. “And, in some cases, I want to be able to return it to wherever I think is most convenient.”
As a result, retail supply chain executives are intent on expanding capabilities that will effectively and efficiently meet customer demand from anywhere in the supply chain. As one executive stated, “We don’t really think about e-commerce and commerce. We just think about commerce.”
In the Harvard Business Review discussion of the retail supply chain, CVS Senior VP of Logistics Ron Link said the research conducted by Auburn faculty “validates a lot of the things we’re looking at each year. The feedback we get helps us in thinking strategically. We are far more strategic in preparing for the future needs and future demands of business.”
The “State of the Retail Supply Chain” study represents one facet of the newly formed Center for Supply Chain Innovation’s focus on applied research for what Gibson describes as “evolving business problems.” Gibson said the center will work with industry leaders from retail, manufacturing, and service industries on research projects related to supply chain strategy, process improvement, performance analysis, and talent management. The center will also connect Harbert College of Business supply chain students to the profession through internships, case competitions, simulations and company projects.