DC Velocity - IdeaBook 2017

store. Instead, supply chain and store leadership are collaborating to establish store-based fulfillment capabilities. Supply chain professionals can lend their “pick, pack, and ship” knowledge and returns management process expertise to store personnel who are neophytes in these critical areas. Training on in-store order picking, backroom fulfillment-module layout, and invento-ry-accuracy improvement are three such opportunities. One respondent’s company is doing this by building cross-functional store teams to support omnichannel efforts. As the role of stores continues to evolve toward serving both in-store and online customers, this collaboration must become stronger.

Another essential relationship change must occur between SCM and merchandising groups. The traditional “buy versus move” responsibilities must be broken down to create better communication between the groups and to develop channel-agnostic demand plans. Leading retailers in our study indicated that they are either moving demand-planning activities completely into the supply chain area, or they are embedding supply chain staff in the merchant group to improve forecasting and allocation. Figure 2 highlights the engagement of supply chain professionals in demand planning.

Retailers’ relationships with vendors and carriers must also change. Customers are no longer limited to what is on the store shelf. They have “endless aisle” access to a brand’s full catalog of stock-keeping units (SKUs) via in-store kiosks, mobile devices, and websites that link to retailer and vendor stock across the supply chain. As that customer access expands, vendors become an extension of the retail enterprise and are required to meet the commitments the retailer has made to its customers. The same holds true for parcel carriers, because delivery excellence is a proxy for a retailer’s performance. The supply chain group must work closely with both vendor types to ensure that requirements are understood, order visibility is maintained, and compliance is consistent.

Changing these relationships and the accompanying
processes must be approached with caution. Too often,
the mad dash to omnichannel capabilities has resulted
in ill-planned and poorly communicated changes that
may appear irrational to those tasked with implement-
ing them. Executive leadership must recognize that
gaining buy-in to a more supply chain-centric focus
will require time, their explicit support, and tactful
engagement of the affected areas. It will also be nec-
essary to embed supply chain competency into each
element of the organizational structure and invest in
the development and retention of capable supply chain
professionals so they are able to handle their expanded
roles.

3. ALIGN INVENTORY PLACEMENT WITH DEMAND In an omnichannel environment, getting inventory into the right place in the network is a key priority. Another priority for retailers, therefore, is leveraging investments in building omnichannel infrastructure and order management technology for optimal inventory management.

Although positioning inventory in the right place at the right time has always been a fundamental responsibility of logistics, it is very difficult to get this right in an omnichannel environment. One reason is that the need to quickly fill omnichannel orders has superseded the objective of filling the order efficiently from the best location. Reactive “save the sale” efforts that move inventory among facilities or fulfill an order from a node with little thought about total cost will satisfy customers but will not protect margins.

Moreover, it is not sufficient to simply know which products customers demand in an aggregate sense; it’s becoming equally important to know where and when to place the inventory in advance of that demand. As one senior supply chain executive in this year’s study noted, “In this whole notion of omnichannel, it really matters where you put inventory the first time. It may even matter more now than it did before omnichannel.”

To achieve that goal requires point-of-sale systems with demand data, but they must be supplemented by such information as order origination point, customer contact information, and delivery addresses. Hence, more powerful order management systems are needed to synchronize inventory, order status, and location with customer demand.

Some retailers are developing more effective capabilities for aligning this type of information and have undertaken a number of initiatives to synchronize demand and inventory. One approach is to establish highly detailed demand plans. For example, some are prioritizing the ability to generate item-level forecasts with geographic demand information to support inventory availability, wherever and whenever customer demand occurs.