DC Velocity - IdeaBook 2017

tomer satisfaction and retention.

For that research, we conducted an online survey of RILA’s members, DC Velocity’s readers, and customers of Checkpoint Systems. To gain meaningful insights from the major players in retailing, we sought participation from organizations with: ( 1) annual revenues above US$1 billion; ( 2) omnichannel capabilities; and ( 3) broad geographic activity. Eighty-eight percent of respondents were at the director level or above, with an average of 23. 5 years of supply chain experience.

To round out the picture, we also conducted telephone interviews with retail supply chain executives, in which we asked them to discuss their longer-range plans and go-for-ward priorities. (Verbatim quotes from those interviews appear throughout this article.)

Those conversations provide clues about the future focus and structure of retail supply chains. Collectively, the supply chain executives identified four major opportunities that are capturing their attention, driving their decisions, and influencing their spending. Two of the priorities are strategic in nature, while two are more tactical. They are highlighted in Figure 1 and are discussed below.

1. DRIVE COMPANY GROWTH THROUGH SCM

A key reason why supply chain management (SCM) has a seat at the strategic planning table is that it is positioned squarely at the crossroads of omnichannel retailing success. Revenue growth is largely being driven by e-commerce sales, and flawless e-commerce execution requires exceptional supply chain capabilities. Hence, savvy senior executives are taking an active interest in SCM.

This level of engagement and focus on supply chain management as a growth catalyst is a far cry from the days when SCM was viewed as a necessary evil. No longer are retail executives adopting a cost-centric approach to SCM with a relentless pursuit of expense reduction. Instead, a more sensible perspective has emerged among the retailers in our study: they are shifting away from logistics-cost optimization to customer-value creation, with the goal of driving sales.

In our survey, fewer than 20 percent of the respondents indicated that their SCM strategy for 2016 centers on the traditional cost-control issue. Far more popular were strategies that focused on cost-service balance or customer service enhancement. In this vein, an executive vice president of supply chain noted, “Our challenge next year and for the foreseeable future will be to lay in capabilities that allow us to respond to and grow with the customer.”

As the executive intimated, these growth-generating strategies are easy to articulate but difficult to execute. Significant challenges await retailers that seek to fuel growth through SCM. First, current supply chain processes, metrics, and incentives must be recalibrated to promote growth and customer service. Next, customer choice creates supply chain complexity. Just as a wide inventory assortment is difficult to manage, omnichannel fulfillment is more demanding and costly than store-only fulfillment. Finally, customer expectations will escalate in tandem with competitors’ supply chain innovations. One SCM executive succinctly noted, “The differentiator is no longer price. It is the experience, speed of delivery, and convenience for the customer.”

Overcoming these challenges to become more growth-oriented mandates that retailers retool their traditional, store-based supply chains. No longer is a one-way flow to the store adequate. What retailers need instead are customer-centric supply chains that can consistently serve demand from virtually anywhere in the network. However, these expanded supply chain services must not significantly

“I’ve been in supply chain for many decades, and it is pretty exciting to participate in discussions about how the supply chain could drive sales, That’s not typically a conversation that you have in the supply chain.”