DC Velocity - February 2017

38 DC VELOCITY FEBRUARY 2017 www.dcvelocity.com
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ysis with supply chain partners. Three other high-ranking factors highlighted the human side of analytics: investing in analytics tools and talent (86 percent), executives understanding the benefits and limitations of analytics (85 percent), and hiring individuals with both supply chain and analytics expertise ( 80 percent).

The human factor should not be underestimated. “Almost everybody we spoke to said they have a big issue with finding the right talent,” Ishfaq says. “It’s one thing to purchase software, but you need people to work the data you collect into actionable information. This is one of the underlying challenges that is a temporary impedance to the extensive use of business analytics across the supply chain.”

b Cost control and recovery. Currently, 50 percent of respondents partially recover the costs of providing omnichannel fulfillment and delivery services, and another

40 percent of respondents recover none of those costs. Ten percent do not even measure omnichannel cost recovery. In fact, only 40 percent of respondents believe it’s even possible to fully recover those costs—something no respondent has yet achieved.

Furthermore, 95 percent of respondents said they expect the cost of their supply chain operations to increase in the near future, which could push the cost-recovery goal further out of reach.

In a bid to at least partially recover costs, many respon-
dents are imposing service fees or plan to do so in the
future. For example, two-thirds currently charge for expe-
dited service, and one-third impose delivery fees for small
orders. Other types of fees are far less popular, and 50
percent or more said they have no plans to collect fees for
in-store fulfillment, returns shipments and processing, or
small orders. (Some respondents may have selected “no
intention to use” because the scenario does not apply to
their business.)

Respondents were also asked to name the three most effective ways they could “monetize” or control retail supply chain costs. At the top of their weighted list was leveraging a single inventory pool across all channels, followed by encouraging customers to buy online and pick up orders in stores, having vendors directly fulfill orders, and charging delivery fees for all orders.

But there are significant barriers to implementing cost-con-trol steps, including an inability to measure and allocate costs, the variety of fulfillment options offered to customers, and competitors’ willingness to absorb supply chain costs. At least 60 percent of respondents considered each of the situations cited to be either moderate or major barriers to controlling omnichannel costs. (See Exhibit 2.)

Nevertheless, Gibson sees reason for optimism. Retailers are gaining a great deal of confidence in using analytics, and most understand the value of cross-channel integration, Gibson says. “If you can’t answer that question, then you’re going to be the next Limited or Sports Authority.”

Editor’s note: The full results of the 7th annual “State of the Retail Supply Chain” survey will be available on the Retail Industry Leaders Association’s website ( www.rila.org) later this month.

Area

Internal ability to measure and allocate costs Company strategy to pursue market share Variety of fulfillment options given to customers Rapid change of supply chain processes Competitors’ willingness to absorb supply chain costs