2017
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undermine profit margins.
In response to these needs, major retailers are making
massive investments in their supply chain capabilities.
For example, Target will spend up to US$2.5 billion
annually to upgrade its supply chain and technology
infrastructure as it races to reduce stock shortages and
pushes for online growth. 2 The purpose of such investments, according to one of our interviewees, is simple:
“We are building capabilities that will allow customers
to get, within our assortment, what they want, when and
how they want it.”
The retailers in our 2016 study indicated that they
are also working to embrace change management, align
inventory with demand, and elevate omnichannel fulfillment capabilities. Each of these growth-promoting
priorities is discussed below.
2. SUPPOR T EFFEC TIVE SCM CHANGE MANAGEMEN T
To successfully serve omnichannel demand now and
in the future, an integrated and nimble network of
resources and processes must replace the traditional
sequential activities and flows. All elements of the
organization must recognize and accept that changing
market dynamics necessitates adjustments to the old
ways of doing things. Achieving such a dramatic shift is,
however, a difficult task, according to a senior supply
chain executive, who told us, “The challenge is getting
an organization to think differently about what they need
to do, and then to connect that to existing processes and
take the risk to change those processes.”
Change is nothing new for retail supply chain professionals. Over the last 20 years, rapid change has become
the norm in their industry, and they have responded
to the promise of e-commerce by routinely modifying
their supply chain processes to meet evolving requirements. For example, many retailers have made the
transition from the use of third-party fulfillment for
their online business to handling online fulfillment
internally in dedicated e-commerce facilities, eventually moving toward a unified internal process that
integrates fulfillment of online orders with store-based
processes. Accompanying upgrades to technology and
logistics processes have also taken place.
Building omnichannel-capable supply chains can be
chaotic, however, and these changes have not always
gone smoothly or been successful. They do take a toll
on people if not appropriately enacted, so it is essential
to take measured approaches to transitioning individ-
uals, teams, and the organization to the new norms.
Assisting them through the learning and acceptance
curves is the essence of a successful change manage-
ment program. That can be frustrating and slow, but it
is the only way to achieve the lasting benefits of supply
chain change.
To create the customer-centric supply chains discussed above, retailers must go beyond better alignment of demand planning, inventory management,
order fulfillment, store replenishment, and returns
management. Engagement between the supply chain
organization and other retail entities must also become
more comprehensive. Interactions must be more frequent and more information-rich, expertise must be
shared, and traditional roles must be redistributed to
those with the relevant core competencies.
The most visible change in this area to date has been
the way supply chain and store operations are interacting in a more cohesive fashion. No longer do supply
chain responsibilities end at the back door of the retail
[FIGURE 2] DEMAND PLANNING
RESPONSIBILITY
SOURCE: “6TH ANNUAL STATE OF THE RETAIL SUPPLY CHAIN
REPORT”
“There continues to be a human element of change management. Buy-in is critical, with everybody signing up for
and utilizing the new technology and processes that you’ve
invested in, but we’re still finding our way through this.”
