Is Your Supply Chain Ready for the Omni-channel Revolution?

This is an excerpt of the original article. It was written for the September-October 2015 edition of Supply Chain Management Review. The full article is available to current subscribers.

September-October 2015

It’s September, which means the kids are going back to school, and soon, you’ll spend the evenings helping them with their lessons. September is also the month that we publish Gartner’s annual look at the Top 25 supply chains. While the Top 25 is a celebration of great supply chains, the leaders also offer lessons for the rest of us who aspire to the top. It’s news you can use right now in your planning. And, we’ll have you home for dinner on Tuesday. We hope you’ll join us for this inaugural event.

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Omni-channel retail sales are expected to become a $1.8 trillion dollar market by 2016, and then quickly grow to $7 trillion by 2025. Winning in this arena will require a seamless delivery of goods that meets increasing consumer expectations for assortment, convenience and price, and a supply chain that increases product availability with flexible delivery options at a lower cost. As developed regions scramble to integrate in-store and online channels and developing regions work through financial and logistical infrastructure, supply chain innovation will be critical to omni-channel growth. A.T. Kearney has identified six global trends that will shape a successful supply chain in the new omni-channel revolution.

Blurring of Value Chains
The traditional value chain is starting to blur under omni-channel as companies attempt to get closer to consumers. Retailers are taking on traditional manufacturer roles such as product design, development, and product sourcing. Manufacturers, on the other hand, are shifting downstream and taking on retailer roles, such as managing the shopping experience (either in stores or on the Web), offering “merchantainment” and product informational services, and even brokering actual order fulfillment. As value chains continue to blur, manufacturers and retailers will need to manage channel conflict over the segmentation of products and SKUs and collaborate on shared assets and inbound logistics optimization. For manufacturers it may mean direct to consumer fulfillment or network integration with retail stores or even pop-up store operations. For retailers it may mean adopting a manufacturer mindset and capabilities in private label, developing a segmented supply chain for private label, and more sophisticated inventory deployment.

Rise of the Marketplace
While the concept of the marketplace has been around for decades in vehicles like the “classified ads” in the Sunday newspaper, only recently has their digital counterpart become a critical retailing channel. Amazon’s marketplace saw 25 percent CAGR while eBay and FlipKart are becoming endless aisle options for consumers in emerging markets. There is an explosion of emerging marketplaces from new players and global retailers offering logical places for retailers to expand internationally. Going forward, every omni-channel retailer must have a coherent marketplace strategy and corresponding supply chain capabilities—in particular, that includes decisions about where and when to hold inventory versus cross-dock orders versus shipping vendor direct to balance assortment, lead time service, and cost. Marketplaces can be a significant compliment to standard e-commerce sales used by many U.S. and European retailers to expand in emerging markets; however, marketplaces can be risky if they negatively affect the quality of product, customer presentation, accuracy, and service.

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