Commentary

Cross Channel Fulfillment

Supply Chain 2018: In Service Of The Customer, made this observation:FMCG retailers (primarily grocers, drug stores, and convenience stores) are feeling the heat from Amazon’s acquisition of Whole Foods and recent Amazon Go! store opening. In this study’s revelation that retailers are focusing their supply chain efforts on the ‘last mile’ considerations of faster fulfillment with improved cost controls, FMCG’ers are the now most concerned about developing the new metrics required to get their hands around the cost issue.”

While that’s certainly true, says the report, “Quantifying labor & shipment costs for cross-channel fulfillment” was rated the top operational challenge by 45% of the non-FMCG retailers, compared to 70% for FMCG’ers, that’s only part of the story. Those retailers’ responses to the questions in the survey indicate that many of them are operating in a no-man’s land between knowing that consumer omnichannel shopping is really starting to affect them, and recognizing that their store-centric processes and systems will need some fundamental revisions.

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Two questions RSR asks in every survey; 

“what are the top three organizational inhibitors that prevent retailers from addressing identified business challenges and opportunities?”and

“what are the top three ways to overcome those inhibitors?” 

The top inhibitor for non-FMCG retailers is that “perpetual inventory rarely matches actual inventory levels” (51%). While that is certainly an issue for FMCG’ers too (45%), it is superseded by two closely related problems: 

  • “lack of active top-level understanding of supply chain issues” (50%), and “there is no internal appetite to redesign our supply chain to meet current business challenges” (50%). 
  • And when it comes to ways to overcome those inhibitors, FMCG retailers’ top choice is that “the company needs to understand that there is no ROI involved.” This is a critical strategic initiative” (60%).

Self-awareness is a good thing, says the report. If the Retail industry had a 12-point program for 21st Century readiness, that would be step one. Beyond these admissions, however, nine out of ten FMCG respondents indicated that the supply chain “helped our company performance” 90% compared to 74% of other retailers, says the report. 

But consider how these retailers’ rate certain supply chain management challenges compared to others:

  • While FMCG retailers are better than either non-FMCG retailers or Retail Winners in general at managing fast-moving products, they are far worse at managing slow-moving products. That negatively affects how they rate their overall ability to manage out-of-stocks, says the report.
  • These management challenges are the result of problems that retailers have with demand forecasting, and the study reveals that FMCG retailers are challenged by pressures directly related to new consumer shopping behaviors that affect the forecast.

All indications are that grocers, convenience store operators, and drug stores, while perhaps last to jump onto the “Omnichannel” bus, have finally joined in. Just in time, because like the general merchants and fashion and specialty retailers that have come before them, they now have to battle fierce competition, not just from relative newcomers like Amazon, but also from those Tier-1 operators like Walmart, Target, and Kroger, who have all moved aggressively to address the new competition.

Read The Report

The annual supply chain benchmark, Supply Chain Management 2018: In Service Of The Customer brings clarity around the full impact. It turns out the main pressures come from both competitors and customers, but that just scratches the surface. 

This report is available FOR FREE to all registered users (registration is required and also free), and is sponsored by Symphony RetailAI.

 

 

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