DC Velocity - February 2017

36 DC VELOCITY FEBRUARY 2017 www.dcvelocity.com
s
p
ec
i
a
lre
p
or
t
R
E
TA
I
L
T
R
END
S

processing, a costly and complex activity that’s proving to be a thorn in retailers’ sides.

Why so much variation? “When people respond, they
are drawing upon their area of expertise and how they see
integration in their own functional areas,” observes Ishfaq,
an assistant professor and research fellow in supply chain
management at the school. “Somebody on the warehousing
side will have a different perspective than someone on the
merchandise side.”
Respondents have ambitious goals for the future. When
asked what level of integration they expect to achieve
three years from now, 50 percent or more said they would
achieve complete integration in demand planning, order
management systems, inventory allocation, and order ful-
fillment. Interestingly, 60 percent said the same for returns
management, signaling that this area will be getting a lot
more attention than it has in the past. (See Exhibit 1 for a
“now” and “three years from now” comparison.)

None of that will be easy to achieve, cautions Gibson,
who is a professor of supply chain management at Auburn
and the study’s leader. He calls the level of integration
required for effective omnichannel operations “mind-bog-
gling.” The detailed work of implementation and obtaining
visibility over inventory across channels is challenging,
and groups that traditionally did not communicate much,
such as supply chain and merchandising or store oper-
ations, must now collaborate very closely, he explains.
Furthermore, retailers’ approach to incentives and rewards
can discourage decision-makers from taking a hit for the
team, that is, taking on additional costs that may make their
function’s performance look subpar but will benefit the
overall organization. Still, he adds, “the level of omnichan-
nel integration compared to where we were when we first
started the survey has vastly improved.”

b Analytics. Respondents clearly see value in supply chain analytics, ranking “improving forecast accuracy” and “retaining current customers and sales” as the top benefits of developing such capabilities. Next on their list was “capture new customers and sales.” It’s notable that customer- and sales-related benefits ranked higher than such obviously supply chain-related benefits as optimizing inventory investments and improving order fill rates. That may reflect the influence of lessons learned from last year’s strategic focus on customer service.

Very few respondents consider their organizations to have advanced capabilities when it comes to the use of the four types of supply chain analytics: predictive (which are designed to project what will happen in the future), prescriptive (to establish forward-looking strategies and capabilities), descriptive (to evaluate current conditions), and diagnostic (to understand why results occurred). The majority said they have either “basic” or “intermediate” capability, while in each of the four categories, a little more than one-fourth said they have no capability at all. The areas where respondents currently make the most extensive use of analytics are inventory planning and allocation, and customer needs analysis. Only 18 percent said they use analytics extensively in their returns operations, an area many retailers are struggling to manage.

Respondents were on the same page when it came to their assessment of what it takes to develop analytics capabilities. Ninety percent either agreed or strongly agreed that having an enterprisewide strategy is critical to success. Similarly, 86 percent agreed that effectively managing the volume and complexity of supply chain data is a major success factor, and 80 percent said the same about sharing data and anal-

Areas

Demand planning Order management systems Inventory allocation Order fulfillment Order delivery Returns processing Performance analytics Executive leadership Other