subscribe: Posts | Comments | Email

The Need for Removing Retail Organizational Silos in Omni-Channel Fulfillment

Comments Off on The Need for Removing Retail Organizational Silos in Omni-Channel Fulfillment

Before and throughout the 2015 holiday fulfillment quarter, Supply Chain Matters has highlighted industry developments related to one of the most significant challenges facing the retail industry today, namely the increasing implications of online customer fulfillment on retail supply chain business processes and organizational alignments. Indeed, included in our retail industry supply chain predictions for 2016 is our continued belief that the ongoing permanent shift among consumers towards favoring combinations of online and in-store fulfillment channels and more integrated Omni-channel fulfillment capabilities will necessitate the accelerated breakdown of organizational silos.

Already the evidence is of such implications are building. Besides announcing the closing of over 200 select locations, Walmart announced in in January that the retailer is merging all of its existing corporate IT and Silicon Valley online commerce IT groups together under a singular umbrella of leadership and direction. Walmart’s existing corporate CIO and the Chief Technology Officer of Walmart Labs now report directly to the head of the retailer’s E-Commerce division.  In its reporting of the Walmart move, Reuters quoted the head of Walmart’s E-Commerce division as indicating that customers do not think of interactions as different physical or online experiences, but rather as one experience.

Also in January, office supplies retailer Staples announced the departure of the head of North America stores and online operations in favor a revised alignment where retail store and online operations report to a North America operations chief. The CEO of Staples indicated the change was brought about to speed decision-making and drive toward more profitable growth.

And there is obviously more industry change unfolding as the realities of industry financial performance and eroding profitability continue to unfold.

Thus it was very timely that results from the third annual PWC Viewpoint 2016 executive survey were announced this week. This survey conducted on behalf of JDA Software, included 300 retail and consumer goods CEO’s and was administered in late 2015.

Last year’s survey confirmed increased challenges related to profitability because of the higher unplanned costs associated with online customer fulfillment needs and expectations. One area of challenging costs was logistics and transportation, key criteria for influential Free Shipping policies. The 2015 report revealed only 16 percent of retailers indicating that they could fulfill Omni-channel demand profitably. That reality continues to unfold.

The headline results and takeaways of the latest survey reflect a mere 18 percent of surveyed CEO’s indicating that they have eliminated operational silos that are hampering a singular Omni-channel shopping experience for customers. However, this minority of companies expressed greater confidence in future revenue and profit growth than their peers. The study further revealed considerable differences in Omni-channel maturity across various geographic countries.

Readers who review all of the survey data observations will find a lot of insightful indicators. What particularly caught the eye of Supply Chain Matters were the indications of what areas Omni-channel leaders were electing to invest within during the next 12 months vs. the next three years. This for us was an indication of priority and as noted by the survey authors, the current sense of urgency. For instance the executive summary indicates:

CEOs’ investment intentions are higher for the next 12 months than they are over the following three years, especially for the critical Omni-channel functions of extending the range of customer fulfillment options and providing seamless customer shopping experiences. The emerging markets in particular are spending heavily in these areas, as well as in understanding social media, improving supply chains and creating new in-store experiences.

The accompanying Figure outlining areas of near-term investment points primarily to initiatives that classified as either customer or supply chain centric initiatives. The categories for extending the range of customer order fulfillment options, providing a more seamless shopping experience or expanding supply chain capabilities for customer order fulfillment options each garnered high preference.

We continue to believe and advise that more integrated Omni-channel fulfillment capability will trump customer engagement Initiatives in 2016 as will the overall ability to be able synchronize and context customer fulfillment execution with network-wide inventory management with logistics and transportation cost needs.

Bob Ferrari

Disclosure: JDA Software is one of other sponsors of the Supply Chain Matters blog.

Be Sociable, Share!

Comments are closed.