The Retail Industry Leaders Association (RILA) in partnership with Auburn University and with sponsorship from Accenture, released the third annual State of The Retail Supply Chain Report today. The report findings reveal a heightened urgency by retailers and supply chain management (SCM) executives to shift from cost cutting to growth. The report also places emphasis on multichannel retailing and explores how retailers are working to meet the increased consumer demand for continual access to products from any channel. @RILAtweets will moderate a live Twitter Chat today from 12-1pm EST via #RILAchat to discuss the report findings. Just follow the hashtag #RILAchat to join in the conversation.
The report data was compiled through a series of executive interviews and industry surveys with retailers across every segment of retail, with the goal of understanding the capabilities that drive exceptional retail supply chain performance. One hundred and ninety-nine retail supply chain executives took part in the research. The criteria for participation included: company revenue exceeding 1 billion, multichannel operations, and Director-level or above responsibilities. The respondents have 17 years of retail experience, on average.
“This study will be essential reading for a wide cross-section of retail supply chain executives seeking insights into the key supply chain trends taking place in retail, including multichannel operations,” said Parag Jategaonkar, senior executive with Accenture’s Retail practice. “Accenture’s own experience with clients indicates an increasing focus amongst retailers on developing their supply chains to more effectively deliver a compelling customer experience, regardless of the channel.”
The most significant takeaway from the report centered on the importance of multichannel operations including fulfillment of .com, mobile, and tablet orders. The report states that electronic ecommerce sales have grown by more than 15 percent to $35.3 billion versus an overall sales growth of 4.1 percent versus the previous year. With predictions that e-commerce sales will grow 10 percent annually, multichannel has become a game changer for retailers. It has also added a new layer of fulfillment complexity that retail SCM executives must manage.
According to the report: Over 85 percent of survey participants indicated that direct consumer fulfillment is a top priority for them and that it is imperative to create a seamless customer experience regardless of the fulfillment channel, order size, origin, or delivery requirement.
“Consumer expectations are changing, and as a result, retail business models are changing,” said Casey Chroust, executive vice president of retail operations. “Traditionally retailers have used separate operational models to move goods and fulfill orders. Now those models need to be merged so that companies can continue to deliver the products consumers want across any channel without losing efficiency or adding cost. This requires advanced integration and innovation and working closely with suppliers and service providers while utilizing technology,” concluded Chroust.
According to the report: In this “anytime, anywhere, any way I choose” environment, supply chain leaders must establish the appropriate mix of fulfillment capabilities. Their networks and processes must be properly aligned with each channel’s order characteristics, inventory profiles, and service requirements.
The report also highlighted the various multichannel challenges facing retailers, including: variation in shipment size, order filling processes and delivery methods as well as the inconsistent SKU assortment of multichannel retailers. Less than 18 percent of the retailers surveyed offer the same SKUs across channels.
When it comes to solutions to the multichannel challenge, the report explored the various technologies that SCM executives are looking at to meet their multi-channel needs. With the complex challenges facing supply chain leaders, utilizing the right technology can mean the difference between mastering multi-channel and succumbing to it.
“The real challenge for today’s multichannel retailer is to become channel agnostic and fulfill demand effectively regardless of order type or origin,” said Brian Gibson, Professor of SCM at Auburn University. “As sales volume grows in nontraditional channels, achievement of technology integration, operational flexibility, and process visibility will separate the leaders from the pack. These capabilities provide the fulfillment agility, accuracy, and cost efficiency needed for multichannel success,” summarized Gibson.
According to the report: experts are recommending distributed order management (DOM) software as a common-sense response to retailers’ multi-channel needs. DOM allows retailers the ability to capture, manage and optimize orders regardless of origin-computer, retailer store, kiosk, or mobile phone. After the order capture, the DOM system identifies the fulfillment facility or channel that will best serve the customer and the retailer.
While not a silver bullet, DOM offers promise for cross-chain visibility, integration and service improvement. Analysis from the report concludes that full utilization of DOM across all fulfillment processes earns the greats cost reductions. DOM also allows customers to shop across all channels with the ability to make returns at any location regardless of where the order was fulfilled.
Other takeaways in the report included insight into supply chain strategy, sourcing practices, the reemergence of Radio Frequency Identification (RFID), and emerging challenges in the retail supply chain.
Retail Industry Leaders Association
RILA is the home of the world's largest and most successful retail companies, whose executives participate in RILA for its unique educational forums, its effective public policy advocacy, and its advancement of the retail industry. RILA membership includes more than 200 member companies - from Abercrombie & Fitch to Walmart - representing more than $1.5 trillion in sales. Through its board of directors, Leaders Councils, committees and working groups, RILA members determine the issues and focus areas for public policy, educational offerings and research. Visit www.rila.org.
Auburn University College of Business
The Supply Chain Management program brings the unchanging values of Auburn University – practical education and research, honesty, and hard work – to a changing world. We actively collaborate with supply chain professionals to ensure that our research, academic degree programs, and industry outreach events effectively reflect current supply chain theory and application. Auburn SCM graduates are well-prepared for the classroom-to-workplace transition and our alumni enjoy successful supply chain careers with retail, manufacturing, 3PL, transportation, and service firms. For additional information, visit www.business.auburn.edu.