Published on June 9, 2019
1. Operations.Insights Competitiveness in the New Autumn 2016
2. 20 Six Success Areas for winning against Amazon: Omni-Channel Fulfillment at its best Towards Omni-Channel Retail In today’s marketplace, customers are researching their purchases over multiple touchpoints - online, mobile and via call centers - often at the same time. Increasingly, they do this while browsing in the store as well. This is causing store-based retailers to rethink their strategies and to adapt to customer expectations. An Accenture study found that 39% of customers are unlikely to visit a retail store if the online store does not provide physical store inventory information. Furthermore, 47% of customers use in-store pickup to avoid shipping costs1. Store-based retailers face these rising customer expectations, and about 36% are investing in omni-channel fulfillment to stay competitive with online pure players like Amazon and Zalando. They strive to make the most of their store assets1, but only 10% of retailers have achieved the desired integration across their store and fulfillment operations to benefit from the opportunities2. It comes down to the so-called omni- channel fulfillment maturity curve, which indicates the stages that retailers must go through to become a sophisticated omni- channel retailer. It starts with being a pure bricks & mortar business and heads to a visionary omni-channel approach (Figure 1). The surge in online, mobile, and other new selling formats demonstrates how much consumers want flexible shopping. Most store-based retailers now see omni-channel retail as a way to offer a seamless customer experience across different sales channels and thereby build their own brand. Still, retailers struggle with the practicalities of creating a seamless customer experience. Retailers who want to win against pure online players like Amazon need progress in six “success” areas: Network Strategy, Demand Forecasting & Replenishment, Inventory Allocation & Execution, Pick-Pack-Ship, Last Mile Delivery, and Returns Management. € Omni-Channel Fulfillment Maturity CurveCustomer expectations 49% of customers think “Integrating Stores/Online/Mobile” is where retailers need to improve the shopping experience most 52% of customers would be interested in scheduling deliveries 41% of customers expect their in-store pickup order to be ready in under an hour 47% of customers use in-store pickup to avoid shipping costs 39% of customers are unlikely to visit a retail store if the online store does not provide physical store inventory information Best in Class These companies have optimized their shipping capabilities to reduce costs and deliver fast Emerging These companies provide their customers with visibility to their inventory, and customers can choose how they want to receive it Foundation These companies can get visibility on all their inventory – no matter where it is Old School These companies are focused on the bricks and mortar channel Visionary These companies use sophisticated analytics to determine what they ship and where they ship it from Figure 1: The Omni-Channel Fulfillment Maturity Curve1,3 1 Customer Desires Vs. Retailer Capabilities: Minding The Omni-Channel Commerce Gap (Forrester commissioned by Accenture, 2014) 2 US Online Retail Forecast, 2010 to 2015 (Forrester commissioned by Accenture, 2011) 3 Accenture Seamless Retail Research
3. 21 Challenges To move along the omni-channel fulfillment maturity curve, retailers face a number of challenges which slow down their progress. First, most supply chains are built to support their “legacy” supply chain focused on one channel (e.g. store sales). Omni-channel requires re-thinking end customer expectations and re-defining the entire network setup. Second, demand forecasting becomes more challenging when customers interact through multiple channels. It is difficult to capture consumer demand in forecasting across multiple channels and develop one view of the demand. Third, order management processes and systems are not geared to capture and fulfill demand across channels. This leads to limited visibility of inventory, which can slow down the sales process and increase logistics cost. Additionally, complexity rises as multiple inventory sources are needed to meet customer demand. This makes inventory governance and stocking strategies significantly more difficult. Fourth, customers expect the same experience regardless of the channel that is fulfilling the order. Lack of visibility and integration of last-mile delivery routing systems as well as inﬂexible return processes diminish customer satisfaction and raise distribution costs. Companies that make strides in six areas will beat the competition in meeting the identified challenges. The six success areas are: Success areas 1. Network Strategy Omni-channel fulfillment requires re-thinking end customer expectations and re-defining the use of the various supply chain nodes and third-party relationships to support various channels. Key questions are: • What is the right number and definition of supply chain nodes? • Which nodes have fulfillment capabilities and which nodes have safety stock? • What capabilities are outsourced? 2. Demand Forecasting & Replenishment • Accurate forecasting and replenishment requires the ability to view the demand of the omni-channel network and translate it into a single, holistic and channel-agnostic supply requirement. Key questions are: • Is the organization structured in a manner to enable both demand and supply planning capabilities? • Is the current F&R system robust enough to handle the complexities of having multiple retail channels? 3. Inventory Allocation & Execution Flexible processes and systems enable a single view of the customer to provide differentiated offerings tailored to customer needs. Key questions are: • What new capabilities are required to enable managing and fulfilling orders across channels without creating a new supply chain for each channel? • Do the business processes, technology and organizational structures support omni-channel order fulfillment? 4. Pick, Pack and Ship Consitent customer experience regardless of the channel is a top priority of omni- channel fulfillment. Key questions are: • How to support multiple channels within the same facility? • How to provide pick, pack and ship capabilities out of each node? • How to synchronize the shipments out of each node?
4. 22 5. Last Mile Delivery Last mile delivery is crucial for omni- channel fulfillment as customers expect fast product deliveries from all channels, preferrably the same day. Key questions are: • Are delivery strategies and expectations in line with customer and business requirements? • Do current systems and processes have the ﬂexibility and accuracy needed to drive delivery efficiencies? 6. Returns Management Returns management within an omni- channel setup requires the ability for customers to return items through any channel. Key questions are: • Which reverse logistics activities are outsourced to a third party? • Where in the supply chain are decisions made about what to do with returns? • What hardware and software technologies are installed to assist returns handling? In order to excel in the six areas, retailers need to build up specific capabilities in each area. Figure 2 illustrates the key capabilities required for omni-channel fulfillment. Conclusion For most retailers today, seamless omni- channel operations are still an aspiration. The journey is a significant undertaking that requires years of investment, and the risk involved has kept many retailers from getting started. Yet all indications are that consumers will reward those retailers who offer a consistent cross-channel experience between online and offline channels. Given the complexity of the required transformation, embarking on the journey certainly does seem daunting. However, the six success areas of omni-channel fulfillment provide the structure necessary to keep focus while on the journey. They outline the key capabilities retailers must acquire to take advantage of the many valuable opportunities in the market. Key Contact: Dr. Michael Dittrich Principal Director, Accenture Strategy – Supply Chain firstname.lastname@example.org Authors: Dr. Michael Dittrich, Christian Meißner Returns Management Returns connected to corresponding outbound shipments to avoid blind receipts at stores / returns center Return labels to be made available during purchase online or in store Last Mile Delivery Real-time visibility to exceptions (e.g. traffic conditions) and ability to respond to service disruptions Routing and scheduling system that enables dynamic and static product delivery, returns and services delivery Pick, Pack and Ship Ship to multiple channels out of each node Store level fulfillment Integration with vendors to provide direct shipment Demand Forecasting & Replenishment Robust demand and supply planning system Manage promotional forecasting, replenishment and seasonality across channels Key capabilitiesSuccess areas Inventory visibility across all locations (within organizations, and partner locations) Centralized order management system to capture and fulfill orders across channelsInventory Allocation & Execution Cost to serve analysis Optimize on a more frequent basis (e.g. quarterly) to react to market changes Network Modeling Network Strategy Figure 2: Success areas and key capabilities for omni-channel fulfillment in retail
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