The retail sector has been permanently disrupted by technology, and retailers of all sizes are battling to manage technology's impact on their business models. For many of them, gaining control of e-commerce, multichannel and omnichannel fulfillment, and customers' expectations of ever-faster and customized delivery is a matter of survival.
To find out how companies are responding to these and other pressures, Auburn University annually polls supply chain executives about their overall strategies as well as their experiences and plans regarding several "hot topic" areas. As in the past, this year's study was conducted by the university's Center for Supply Chain Innovation under the leadership of professor Brian Gibson, with colleagues Rafay Ishfaq, Cliff Defee, and Elizabeth Davis-Sramek. The researchers surveyed members of the Retail Industry Leaders Association, readers of Supply Chain Quarterly's sister publication, DC Velocity, and companies that collaborate with the Center for Supply Chain Innovation. To round out the picture, the research team conducted telephone interviews with supply chain executives.
This year's "State of the Retail Supply Chain" report will be released in late February at RILA's 2018 Retail Supply Chain Conference in Phoenix. DC Velocity will cover the research findings in two parts: this article, which will focus on the topics discussed in the interviews, and a summary of the survey results in our April issue.
GETTING A GRIP ON CHANGE
The researchers conducted 20 interviews with retail supply chain executives, most of whom were chief supply chain officers or senior vice presidents of supply chain. All work for medium-sized to very large retailers; all but a handful of those companies report annual revenues exceeding $1 billion, and together, they account for nearly $1 trillion in annual sales.
When asked about their overall strategy for 2018, many executives cited better management of omnichannel commerce as a top priority. Although a small "lagging" group of retailers are still rolling out basic omnichannel capabilities, companies that can be described as "leaders"—generally, the biggest brand names—are looking at refining the omnichannel strategies and practices they already have in place, such as cutting delivery times to consumers and ensuring service consistency across all channels. Those companies, the researchers say, have come a long way since their previous survey report was published. "Last year, we were still getting a lot of companies wondering how to respond to the 'Amazon effect.' Now, retail leaders have taken control of their omnichannel operations and have a game plan they're ready to execute," Defee says.
The interviews with retail supply chain executives also zeroed in on several specific areas, including urban fulfillment, relationships with third-party logistics service providers (3PLs), sustainability, and disruptive technologies. Here is the research team's take on the issues and trends the interviewees addressed.
During the course of the researchers' interviews, several common principles came to the fore. One was that retailers should ensure consistent service and product availability regardless of how they are interacting with customers. Another was that they must become true omnichannel organizations, leveraging inventory, technology, and distribution networks to get to a single pool of stock. Omnichannel success also requires the capacity to deliver orders wherever and whenever the customer wants them. "We're going to hit that tipping point where a retailer's capacity to make last-mile deliveries will either be game-changing or it will bog [the operation] down and get very expensive," Gibson says.
Finally, the researchers say, retailers are starting to understand that being involved in omnichannel does not mean they are obligated to be "all things to all people." Instead, many are taking advantage of advances in supply chain analytics to judge whether their scope of offerings and cost to serve specific channels and customers are justifiable. How they respond to the data will be driven by external competition and/or internal strategies, Gibson points out. Something may be costly from a supply chain standpoint, he says, but in an omnichannel world, retailers ultimately must make decisions based on overall strategic benefit.
Editor's note: An earlier version of this article originally said that the Retail Industry Leaders Association conducts the poll. While RILA members (among others) are polled, the survey itself is conducted by Auburn University's Center for Supply Chain Innovation.
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