Bringing the Omnichannel to the Supply Chain

Bringing the omnichannel into the supply chain

The first rule of retail has always been that “the customer comes first” – however, that statement has rarely been truer than it is now. With so many retail options available, the customer has truly gained power – if they don’t like your service they can not only find other options quickly and easily, but voice their dissatisfaction loud and clear on the internet. Personalisation has become increasingly important as retailers look to appeal to consumers individually because they know there are so many choices out there that the “one size fits all” approach rarely works any more.

In an effort to stay relevant to consumers, therefore, businesses are increasingly turning to the so-called omnichannel – a cross-channel business model that can be used to enhance customer experience. In this guide we take a look at how the omnichannel works, and why it’s become increasingly important to integrate it into the supply chain, as well as other aspects of the business.

Where does the omnichannel idea originate from?

The origins of the omnichannel in retail date back to 2003 when Best Buy used customer centricity in an effort to compete with Walmart’s electronics department. Its approach centred on the customer both online and in-store, with the firm also offering post-sales support.

Effectively, Best Buy was integrating its physical and digital channels to offer a better customer experience – and it is this concept that is the heart of the omnichannel theory. The customer has started to dictate how transactions occur, and so to keep up, businesses must create integrated services that will facilitate the customer journey and make it easier for them to transact.

So the basis of omnichannel is that there should be a consistent shopping experience across all sectors with complete visibility and a unified path towards purchase.  To make the most of it, companies have to ensure there is clear visibility between how products are sold from manufacturer through to retailer.

How the omnichannel theory is being implemented

The concept of the omnichannel has already found its way into many different forms of business, including:

Finance

With the explosion of digital banking, omnichannel banking developed to include individualising channels and marketing for customers.

Government

Believe it or not, the US Government is actually using omnichannel as an approach with customer-centric shared platforms. Through the omnichannel, citizens are able to communicate using the platform they choose, when they want.

Retail

Perhaps there is no other area making better use of the omnichannel than retail, which utilises a variety of channels to research consumers even before they buy. Companies are integrating digital, mobile, telephone sales and more to transact and interact with consumers. According to EY research, omnichannel is making a significant impact on retail: omnichannel initiatives are increasingly important with bricks-and-mortar revenues likely to fall down from 93% to 81% of revenues in the next five years.

The area that businesses are overlooking…the supply chain

According to the same EY research, omnichannel represents the most significant growth opportunity available for the retail industry. Its survey found that 88% believe that consumer goods firms cannot rely solely on traditional channels for growth – and the supply chain is one key area that needs to be addressed.

Traditionally, supply chains were designed to bring goods to stores, but in an omnichannel world they have become increasingly customer-facing. Today the supply chain is a front office and plays a vital role in determining whether or not the consumer enjoys their experience.

So what can be done to improve the supply chain?

Any successful omnichannel strategy starts with knowing what consumers want and how these needs are changing. Think about what they really value in the supply chain – such as accurate delivery times – and delivering them. It’s no longer just about being efficient, it’s about being responsive too.

Balance efficiency with agility

While many consumers want next day delivery, most just want their order fulfilled accurately. Speed of delivery requires cost and you must always be aware of changes in consumer behaviour, such as cyclical shrinking in demand, or volatile purchase peaks. As such, it becomes vital to know your customer to know how to serve them and balance efficiency with agility.

Supply chain mix

EY suggests there are two broad models in fulfilling online orders. One is to leverage a store network and fulfil orders from the store, which requires less capital and can lead to greater efficiency; and the second is to establish a warehouse, which can be more expensive but also give you the chance to offer consumers a greater range and better customer service. It suggests that choosing the right mix for your business is key – and that it is quite possible a combination of the two will be preferable, with long tail items in centralised warehouses, while products that typically move quickly would be housed locally.

 What inventory to stock

Another key consideration is what you should stock and where – think about the level of stock kept in store compared to that held back to be available online. Getting it wrong can disappoint customers so think strategically, assess growth opportunities and the potential to expand profit margin and adjust your strategy accordingly.

Think about tomorrow

When assessing the omnichannel supply chain, think about tomorrow and not just today. New services like “click and collect” are emerging all the time, while some companies are focusing on same delivery rather than next day – so you will need to have the agility to adapt to new market requirements.

Make sure you stay one step ahead by exploring emerging concepts as early as possible – and assessing which ones are likely to impact your business. As with all aspects of the omnichannel, you will need a structured and strategic approach supported by all aspects of the business to thrive and prosper.

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