It’s not just Amazon these days.
According to ArticleDesk.net, a website that watches, among other things, the rapid evolution of the e-business and the supply chain. The top ten includes names we’d expect, including names like Amazon, eBay, Etsy, Overstock.com, and Alibaba.com. What is interesting are the names that show up next on the list.
Numbers 10 through 14 are names that were once traditional brick and mortar retail outlets. Walmart. Sears. Kohls. Costco. Target. Once upon a time each of these companies managed a traditional and hierarchical supply chain. Those days are over. While we have spent the pandemic years isolated and today less often in the office, these companies have been restructuring their supply chains.
Consider the description Arthur Valdez Jr., the executive vice president and chief supply chain and logistics officer, gave this magazine, published in DC Velocity’s February 2021 issue. “Supply chains—really, the logistics of supply chain—have evolved considerably over the last 30 years.” What customer facing supply chains have done is fundamentally restructure fulfillment structures.
Operating income for Target was a little over $75 billion in 2018. Sales in 2021 were just over one hundred six billion. Profits grew from about $4 billion to just shy of $8 billion. How can profits for a retailer double in the middle of a pandemic, while simultaneously restructuring the supporting supply chain?
According to Valdez, “We set ourselves apart through our stores-as-hubs model to sort and ship product, creating efficiencies across our supply chain and leveraging the talent of our team members.” More specifically, “Target’s continued investment in its stores-as-hubs model places our more than 1,900 stores at the center of how we serve guests, continuing to enhance the guest experience, including shipping online orders in store and offering same-day pickup and delivery, while providing an easy and safe in-store experience for our guests.”
And there it is: Target stores are now also hubs, in addition to the legacy distribution centers.
Rather than considering the bricks and mortars stores as a separate channel, Target realizes the benefits of an Omnichannel approach to the market.” According to dictionary publisher Oxford Languages, omnichannel is a “type of retail that integrates the different methods of shopping available to consumers (e.g., online, in a physical store, or by phone).”
Walmart, Sears, Kohls, like Target, are all well down the path with omnichannel. While Costco's emphasis on the warehouse allows the bulk discount retailer to keep prices low, omnichannel does not really translate to the type of omnichannel experience customers expect now.
As Costco is discovering, omnichannel isn’t a universal solution for retail. But, if it fits your business, there are challenges to look out for. There is risk and challenges.
Before heading down the omnichannel path, be honest with yourself. Consider the business you are in, and make sure omnichannel is a fit. You may be like Costco, with a business model ill-suited for Omnichannel. Don’t try and be something you are not.
If 0mnichannel passes the sniff test for your business model, review your legacy approach. If the business process is designed to support a variation of daily batch processing, get ready to do some business process re-engineering. Omnichannel doesn’t fit with traditional batch processing.
Be certain that you have the discipline to maintain accurate on-hand inventory balances. omnichannel execution relies on system logic. Without accurate and timely balances, the approach will fail.
Omnichannel drives integrates, unifies, and responds to demand across disparate channels. This means you need a cross-function and integrated project team. Omnichannel cannot be a “store” project, or a “distribution center” project. It must be a balanced attack.
Determine how profitability gets measured, before pulling the triggers. There is an inter-relationship among in-store retail sales, in-store omni shipments, and distribution center fulfillment. The operating costs in each may be different, so shifting demand patterns can be challenging in an omnichannel world.
Think about the strategic agility that target demonstrated. Target faces an Amazon distribution network of over 1,000 distribution centers. By restructuring logistics and transforming their stores into Omnichannel distribution centers, Target challenged Amazon with a reinvigorated network of over 1900 omni channel hubs.
The evolution continues.