RETAILERS ARE gEARINg UP ThEIR SUPPLy chAINS cUSTOMER...

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RETAILERS ARE gEARINg

UP ThEIR SUPPLy chAINS

TO kEEP PAcE WITh

cUSTOMER dEMANd

S P O N S O R E d B y

S U P P L Y C H A I N

What’s INSIDE:

Converting Stores to Fulfillment Centers

Achieving the Perfect Omnichannel Order

Centralized Inventory Visibility

RetAILeRS ARe tRANSfoRmINg tHeIR omNICHANNeL SUPPLY CHAINS to meet CUStomeR demANdS

OMNICHANNEL

22 M A RC H / A P R I L 2 0 1 4 R I S N E W S . C O M

The Supply Chain of the Future

The term “omnichannel” is vague, and the concept of omnichannel retailing encompasses nearly every technology, system and process in

the retail enterprise. It’s not surprising that many retailers see an omnichannel trans-formation as a daunting task that will take years. However, the lack of omnichannel integration is costing retailers 4.5% of po-tential sales, and so, nearly half of all re-tailers cite omnichannel strategies as a key priority for 2014, according RIS News re-ports (“Store Systems Study 2014: Stores Reinvented” and “2013 Cross-Channel Tech Trends Study: Understanding the Retail Singularity”).

Consumers today demand an integrat-ed omnichannel experience, and retailers

must be prepared to enhance the value of brick-and-mortar stores. To do this, retail-ers need to streamline the omnichannel supply chain, from fulfillment to order management and centralized inventory visibility. The revolution begins with un-derstanding that stores are no longer an independent commerce destination, rather an omnichannel hub for customer engagement.

We have entered the age of informa-tion technology investment driven by the need for deeper customer engagement. Over the next five to eight years there will be a shift in spending toward integration, application development, package imple-mentation and infrastructure designed to build stronger omnichannel capabilities.

In this environment flexible fulfillment options are table stakes. In-store pickup of online orders is the first step in a multi-year, multi-step transformation, driving traffic to stores where retailers have the opportunity to create personalized experiences.

For brick-and mortar retailers, offer-ing in-store pickup of online purchases is an advantage over the online competition because it adds a tactile level to the experi-ence. Beyond the improved experience and added convenience, retailers are finding additional benefits such as an increase in

“The lack of omnichannel integration is costing

retailers 4.5% of potential sales, and so, nearly

half of all retailers cite omnichannel strategies

as a key priority for 2014.”

basket sizes and higher conversion rates. An accurate order management sys-

tem that is supported by real-time pur-chase data is the next step in creating a truly omnichannel supply chain. Today, retailers capture purchase data through POS and e-commerce systems. How-ever, they will need to tightly integrate both transaction solutions into a hybrid platform. Replacing these solutions with a unified transaction platform is a high priority, but consolidating platforms is a formidable task.

The final step to successful omnichan-nel retailing is centralized inventory vis-ibility and real-time reporting to ensure customers have access to products regard-less of the channel they choose to shop. Both internal and customer-facing inven-tory visibility grants retailers increased sales potential, lessens out-of-stocks and allows for an array of fulfillment options.

As customer demand continues to rise and the number of shoppable chan-nels continues to increase, retailers must be prepared to accommodate customer’s shopping, ordering and delivery expecta-tions. This year, is looking to be the year of retail transformation, and we look forward to seeing what the evolution will bring. RIS

INtRodUCtIoN

BY NICoLe g IANNoPoULoS

21.Omnichannelris0314_v3.indd 22 3/20/14 3:29 PM


Making the store a delivery hub helps retailers create personalized experiences

converting stores to FulFillMent centers

by nicole g iannopoulos

Moving Beyond the Traditional Store

“We continue to find our stores to be important even to our online only buyers, whether it would be to check out a color, try something on, browse to get ideas or make a return.”

Karen Hoguet, CFo, MaCy’s

By 2015, 3 in 4 retailers will leverage the store as a delivery hub for online orders, up from 1 in 3 retailers

currently. Source: EKN, “State of the Industry

Research Series: The Future of the Store”

3 in 4

Retailers need to provide dynamic cross-channel experiences or risk be-coming obsolete. In this environment flexible fulfillment options are table

stakes. In-store pickup of online orders is the first step in a multi-year, multi-step transformation, driving traffic to stores where retailers have the opportunity to cre-ate personalized experiences.

For brick-and mortar retailers, offering in-store pickup of online purchases is an advantage over online competition because it adds a tactile level to the experience and immediate gratification that cannot be matched by e-tailers such as Amazon. Be-yond the improved experience and added convenience, early adopters are finding ad-

ditional benefits, including an increase in basket sizes and higher conversion rates.

While in-store pickup of online orders is a great place to begin an omnichannel journey, faster moving retailers — Walmart and Macy’s — have expanded fulfillment platforms to enable “ship from store” capabilities for online orders. The offer-ing improves speed of delivery and saves on shipping costs using shorter delivery routes. Ship from store can also help retail-ers avoid potential markdowns by offering overstocked merchandise in underper-forming stores across the enterprise.

Macy’s has “moved beyond the mean-ing of ‘department store’ in the traditional sense of the word,” to be “America’s om-nichannel store,” according to Macy’s president and CEO Terry Lundgren. The retailer has taken a leadership role in the fulfillment space, catering to consumers that move between channels without miss-ing a beat. Beginning in 2014, 500 Macy’s stores will be enabled to fulfill online or-ders, a step toward the ultimate goal of offering faster delivery, and even same-day delivery of online orders.

Macy’s strength in omnichannel trans-

actions and online purchasing, including transactions on mobile devices, is also clear in shipping from stores to satisfy online demand and shipping from warehouses to satisfy store demand. The retailer also pi-loted buy online, pickup in store to great results and will roll it out to all stores during the spring season. “We continue to find our stores to be important even to our online only buyers, whether it would be to check out a color, try something on, browse to get ideas or make a return,” said Karen Hoguet, Macy’s CFO.

Getting products purchased online in the customer’s hands as quick as possible is the goal of retailers on the cutting edge. Walmart is investing significantly in flexible fulfillment to get products to customers as quickly as possible, and in some cases, the same day. Online orders can be picked up in-store, shipped directly from one of the retailer’s 130 distribution centers to the customer’s home, or shipped from store. The ship-to-store option creates a win-win for Walmart: its distribution network can deliver in bulk to stores rather than deliver-ing individually to customer’s homes, while at the same time getting customers into a


OMNICHANNELS U P P L Y C H A I NS U P P L Y C H A I N

R I S N E W S . C O M M A RC H / A P R I L 2 0 1 4 25

brick-and-mortar location to increase rev-enue through additional purchases.

The retailer recently doubled the num-ber of stores it utilizes for order fulfillment. It also plans to test the use of lockers to hold online orders for customer pickup, as well as to combine stores, distribution centers and new facilities into a “next generation fulfill-ment network,” according to Joel Anderson president and CEO of Walmart.com U.S.

To better execute on these fulfillment options, investment in several major supply chain systems to help optimize the move-ment and management of inventory is necessary. Dick’s Sporting Goods recently upgraded the automation in its distribution centers to track and coordinate domestic and international freight, monitor the per-formance of vendors, help control costs and provide real-time insight into the pro-ductivity of the retailer’s network.

“The productivity and accuracy of our supply chain has increased dramati-cally since we began investing in informa-tion technology just a few years ago,” said Matthew Lynch, CIO and SVP for Dick’s Sporting Goods. “Currently, our teams are evaluating how store-based fulfillment aligns with our future investments in sup-ply chain.”

Systems are essential to the efficient op-eration of Dick’s business and are integral to the way the retailer plans, operates and grows the company. Seven of the retailer’s core merchandising and inventory control systems have been selected to optimize the core elements of the business, specifically financial planning, assortment plans, space management in stores, pricing controls across all channels, allocation of seasonal and fashion merchandise, replenishment of perpetual inventory, and key performance indicators and management controls.

This year, the retailer will implement the final phase of the core systems trans-formation, which will help to better un-derstand and forecast consumer demand across all businesses. This is especially

important in businesses that leverage com-mon inventory.

“Our goal is to solve the ultimate retail challenge: the right product in the right size and color at the lowest cost, priced by channel and region, available at exactly the right time in exactly the right quantity and, of course, located right where the custom-er wants it,” noted Lynch.

The future of retail is found in serv-ing omnichannel shoppers who want what they want, when they want it.

While retailers have a long way to go before systems are tightly integrated — es-pecially those focused on the customer — in-store pickup of online orders is a step toward building a successful omnichannel business model.

Making the store a hub for local de-livery will help brick-and-mortar retailers create customer experiences and enrich personal experiences. Retailers’ organiza-

tional structures, corporate culture, busi-ness processes and technology systems are all geared toward a product and channel-centric retailing concept. Today’s om-nichannel retail vision demands a focus on the customer and the ability to execute across formerly siloed business functions.

To begin, retailers should build a com-

mon view of inventory across all channels. This single view of inventory enables ex-panded fulfillment operations, an endless aisle and the ability for store associates to leverage inventory. This also helps to en-able buy online, pickup in-store by inte-grating the order management and order fulfillment systems between channels. RIS

“Our goal is to solve the ultimate retail challenge: the right product in the right size and color at the lowest cost, priced by channel and region, available at exactly the right time in exactly the right quantity and, of course, located right where the customer wants it.”

Matthew Lynch, SVP & cIO, DIck’S SPOrtIng gOODS

of retailers will use stores as fulfillment centers by 2015.

Source: EKN, “State of the Industry Research Series: The New Cost Structure of Retail IT”

75%

21.Omnichannelris0314_v3.indd 25 3/20/14 10:56 AM

S U P P L Y C H A I NOMNICHANNEL


A SeAmLeSSLY INtegrAted order mANAgemeNt SYStem eNSUreS INveNtorY AvAILAbILItY

ACHIevINg tHe PerfeCt omNICHANNeL order

bY NICoLe g IANNoPoULoS

Fulfilling Customer Expectations

“We’re excited about how the customer is embracing charge-send, and we’re proud of it’s fairly seamless implementation.”

Michael MacDonalD, ceo, DSW

of retailers are planning a POS

hardware or software purchase

in the next 12 months, seeking a system that

will operate as a unified transaction

engine. Source: RIS News, “11th Annual

Store Systems Study: Stores Reinvented”

30%

For an omnichannel order manage-ment system to work accurately it must be supported by real-time purchase data. Today, retailers cap-

ture purchase data through in-store POS systems and e-commerce platforms. How-ever, moving forward, retailers will need to tightly integrate both transaction solu-tions into a hybrid platform for a single view of orders, or replace multiple sys-tems with a unified transaction engine to be the database of record.

Replacing multiple solutions with a unified transaction engine is a high pri-ority for many retailers in the market to replace outdated POS systems. Among the 30% of retailers that are planning to make a POS hardware or software purchase in the next 12 months, many are seeking POS systems that operate as a unified transac-tion engine as a step forward on their om-nichannel journey, according to the RIS News “Store Systems Study.”

One way to look at omnichannel order management is in achieving the perfect order and optimizing fulfillment. But few retailers have the organizational align-ment and capital investment to achieve this utopian state today. From a tech-nology standpoint, the key piece of the puzzle that retailers are missing is a uni-fied order management system. To solve this problem, some are beginning their omnichannel transformation by extend-ing their e-commerce platform to be the primary driver of order status used across the enterprise, including in-store.

The development of a unified order platform is the glue that will hold together inventory tracking on the back-end and customer profile integration on the front-

end. Without the ability to split orders at any point and coordinate them across channels, retailers cannot provide an inte-grated experience.

The most important step in DSW’s omnichannel journey was the launch of its charge-send capability. This system allows the retailer to fulfill dotcom orders out of stores, as well as satisfy unmet store de-mand from stock held in other stores. The capability was piloted in Q3 2013 and rolled out to all stores beginning in Q4. “We’re excited about how the customer is embracing charge-send, and we’re proud of its fairly seamless implementation,” said DSW CEO Michael MacDonald.

Other recently implemented systems that the DSW is benefiting from include improvements in size-in-stock rate as a re-sult of its new size optimization system. “In Q3, this capability improved our in-stock rate by two percentage points on those items most directly affected by the system,” noted MacDonald. To sell prod-uct through its e-commerce site, but ful-fill it from a supplier’s warehouse, DSW rolled out a dropship system — the re-


OMNICHANNELS U P P L Y C H A I N

In the next 2 years, 68% of retailers

plan to share inventory management

apps across both physical and online

channels. Source: EKN, “State of the Industry

Research Series: The New Cost Structure of Retail IT”

68%


tailer will never actually own the product but will simply handle the transaction between customer and supplier. DSW is on target to launch dropship with an ad-ditional 10 suppliers in 2014. In addition, the retailer has launched a new return management system. The system allows associates to look up receipts electroni-cally at the POS.

To help improve the long-term effi-ciency of its supply chain, discount retailer Family Dollar rolled out a pallet delivery program to simplify store processes and increase workforce retention. Through this new system, products are sorted by product group at the distribution center and delivered to stores on pallets. This makes it simpler for the support teams

to unload trucks and replenish goods to the sales floor more quickly. Utilizing this process, the North Carolina distribution center is seeing improved delivery service rates, reduction in merchandise damages and higher customer satisfaction in stores. To continue its improvements, the retailer has decided to convert three additional dis-tribution centers this year.

The chain also hired an executive vice president of supply chain and commenced shipping from its 11th distribution center, located in Utah, last July. “St. George is an important addition to our supply chain network as it will drive transportation ef-ficiencies through stem mile reductions to our stores out west,” said Michael Bloom, Family Dollar’s former president and COO. The retailer spent $76 million on supply chain improvements, including the new DC, in 2013.

“We believe that we’re making the right investments to stabilize the business,” not-ed Mary Winston, chief financial officer, chief accounting officer and EVP for Fam-ily Dollar. “It will take time to reverse the recent earnings trends especially given the challenging environment, but we expect that the trend will improve modestly in the second half of the year.”

The only way that retailers can enable omnichannel sales and fulfillment processes

Family Dollar rolled out a pallet delivery program to simplify store processes and increase workforce retention. Through this new system, products are sorted by product group at the distribution center and delivered to stores on pallets.

is by having a common view of the inven-tory across channels with a common order management system. This vision may not work for all given the constraints of legacy systems. However, a unified order platform is a good starting point for retailers to im-prove their core commerce system as they begin to think in terms of the customer ex-perience across the enterprise rather than individual channels.

While many retailers have been mak-ing an effort to support the expectations of today’s consumer, it is important to also begin assessing existing technology solu-tions to meet these expectations. By using a single enterprise order entry system — regardless of what channel the transaction takes place — the first system of record becomes the order entry system, helping to ensure visibility throughout the cycle from order to fulfillment.

To determine a customer’s best fulfill-ment source, retailers should first ensure their order management system works seamlessly with their inventory availability system. This will help to remove slow-moving product from underperforming stores reduc-ing markdowns. An order management sys-tem that uses an accurate view of inventory will ensure customers will not be disappoint-ed by arriving at a store and finding their in-tended purchase is not available. RIS


Real-time inventoRy visibility helps RetaileRs meet customeR expectations

centRalized inventoRy visibil ity

by t imothy denman

Increasing Customers Access

Successful omnichannel retailing re-quires centralized inventory visibil-ity and real-time reporting to ensure customers have access to products re-

gardless of the channel they choose to shop. Both internal and customer-facing invento-ry visibility grants retailers increased sales potential, reduces out-of-stocks and allows for an array of fulfillment options.

With the amount of effort and market-ing dollars that goes into capturing custom-ers both online and in-store, the last thing a retailer ever wants to tell a customer is that they are out of stock. By syncing in-ventory enterprise-wide, savvy retailers are able to locate available product in real-time and ensure that shoppers ready to make a purchase are never disappointed.

In addition, by enabling inventory visibil-ity retailers can minimize price reductions on over-stocked items by offering them for sale across the enterprise.

Despite the clear business benefits, just 20% of retailers are currently sharing in-ventory across all selling channels today, a number that is expected to rise to 69% over the next two years according to the RIS News/EKN “Cross-Channel Trends Study.” Such a large expected rollout em-phasizes the importance of a centralized approach to inventory management and highlights the strides made in the IT space to address the traditional challenges en-countered when integrating systems.

Inventory visibility, like all upgrades to the tech stack, requires a significant capital investment. Best Buy’s Renew Blue initiative, designed to help the brand com-pete with the online giants in the crowded electronics space, includes significant tech-nology investments in merchandising, marketing and supply chain. The electron-ics retailer recently rolled out ship from store at all of its 1,400 locations leveraging its huge brick-and-mortar infrastructure to slash shipping times and allow for re-

turns and open-box items to be sold online. By selling open-box merchandise online the retailer hopes to trim the $400 million it los-es each year on merchandise going unsold at its brick-and-mortar locations.

“Our goal over the next 24 months is to leverage this network and improve our customer experience by providing, num-ber one, increased inventory availability, number two, improved speed to customer, and number three, improved home deliv-ery,” Best Buy CEO Hubert Joly said. The investments are already paying dividends in operational efficiency and customer sat-isfaction — the retailer recently lowered its delivery window by two full days.

Ship from store requires real-time in-ventory visibility. When an online shop-per makes a purchase the retailer needs to know instantly at which location the product is currently available and then mark the product reserved. The inventory count needs to be reduced by one and total inventory available for the SKU must be checked against replenishment standards and reorders placed if necessary.

Another key omnichannel service that is proving to be a market differentiator is

“We are continuing to work to support availability- driven growth through a continued expansion of our hub stores and inventory optimization. We look to continue improving in-stocks, and getting inventory where it matters most, closest to the customers.”

GeorGe Sherman, preSident, advance auto partS

of retailers are currently

sharing inventory across all selling

channels Source: RIS News,“2013

Cross-Channel Tech Study: Understanding the Retail

Singularity”

20%


Only


buy online, pick up in store. In order to offer the fulfillment option, chain-wide in-ventory visibility at the store level must be available to customers. Seventy-one per-cent of customers expect to be able to view in-store inventory online according to For-rester Consulting’s “Customer Desires vs. Retailer Capabilities: Minding the Omni-Channel Commerce Gap.”

One segment of the retailing world that has been on the forefront of inventory advancements for decades is auto parts sellers. The seemingly infinite number of replacement parts makes it impossible for any auto parts store to be fully stocked to meet customer demand. Retail locations lean on distribution centers to ensure prompt delivery of in-demand product, while the DCs rely on sophisticated inven-tory solutions with real-time capabilities to account for every SKU in the supply chain. The retailer must have a central-ized view of inventory at the distribution center, in stores and en route to ensure accurate product counts and to make de-mand-based stock decisions.

Advance Auto Parts replenishes many of its stores on a daily basis, an undertak-ing that sees product moving at breakneck speed throughout the supply chain and ne-cessitating real-time inventory capabilities. Not only is inventory flowing in and out of DCs but a growing network of hub stores act as mini fulfillment centers.

“We are continuing to work to sup-port availability-driven growth through a continued expansion of our hub stores and inventory optimization,” Advance presi-dent George Sherman said. “We look to continue improving in-stocks, and getting inventory where it matters most, closest to the customers.”

Advance opened 172 new stores in 2013, increasing its total retail outlets to 5,300 locations. As more stores come on-line the need for inventory visibility and real-time reporting increases. Advance is

in the need-it-today business — its cus-tomers rely on quick delivery to keep their automobiles up and running. By utilizing a single repository for inventory data the retailer can monitor the whole enterprise at once and make strategic decisions both chain-wide and at a local level.

Real-time inventory visibility is not just a necessity for retailers whose clients de-mand same day delivery, but for all retail-ers operating multiple locations. David’s Bridal operates on a sell one, replenish one model at its stores — relying on its distri-bution centers to house the majority of its inventory. To provide customers’ access to the full assortment of available inven-tory the wedding dress retailer relies on a technology suite that allows real-time in-ventory visibility of not only in-stock items but in-transit inventory as well.

“Our business is founded on offer-ing brides the widest variety of products

always delivered on time no matter how she chooses to shop with us: online, in stores or by phone,” Caryn Furtaw, CIO for David’s Bridal said. “It’s critical that we have one system we can rely on to pro-vide inventory availability and manage or-ders across our network.”

Forty-four percent of retailers list in-ventory visibility as a top store systems

priority for 2014 according to RIS News’ “11th Annual Store System Study” — and for good reason. As the number of shoppable channels continues to rise, the need for a real-time inventory database with SKU-level accuracy across the enter-prise increases to enable customer-facing technologies and improve engagement to boost sales. RIS

“Our business is founded on offering brides the widest variety of products always delivered on time no mat-ter how she chooses to shop with us: online, in stores or by phone. It’s critical that we have one system we can rely on to provide inventory availability and manage orders across our network.”

Caryn Furtaw, CIO, DavID’s BrIDal

of customers expect to be able to view in-store inventory online

Source: Forrester Consulting, “Customer Desires vs. Retailer Capabilities: Minding the Omni-Channel Commerce Gap”

71%

R I S N E W S . C O M M A RC H / A P R I L 2 0 1 4 31

OMNICHANNELS U P P L Y C H A I NS U P P L Y C H A I N


A S U P P L E M E N T T O R I S N E W S

T H A N K Y O U T O O U R S P O N S O R S

Celerant Technology’s Omni-Channel solutions expertly manage all

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time system. www.celerant.com

GT Nexus provides the cloud-based collaboration platform that lead-

ers in nearly every sector rely on to automate hundreds of supply chain

processes on a global scale, across entire trade communities. For more

information please visit us at www.gtnexus.com

Symphony EYC delivers ROI for retailers, manufacturers, and wholesal-

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the competition, improve productivity and deliver value to the bottom

line. More at www.eyc.com and follow us on twitter @SymphonyEYC.

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