Overview. E-commerce and Omnichannel—especially the e-commerce segment—have been and are changing retailing. Amazon, with its online sales and growth, is redefining retailing, selling, and supply chain management to drive it with a new business model. They are doing it on a worldwide scale. So is Alibaba. E-commerce—and its impact on omnichannel-- are not business disruptions. They have reached global mega trend status.
Omnichannel and e-commerce are not just for retailers. They are also for distributors and for manufacturers who have brand identity. That identity is an advantage. But the conundrum for some is selling against retailers who also sell the same products.
These two selling venues are for both B2C and B2B. The latter is often overlooked despite its size. B2B can be more complex because of order size and number of SKUs.
Despite its present and growing impact, there is much uncertainty and different directions taken to deal with omnichannel. Possible reasons that retailers struggle are—
The fact is that e-tailers, non-store sellers, dominate online sales around the world. As store retailers ponder what to do as a coherent strategy, Amazon and Alibaba continue to grow and distance themselves from brick and mortar stores and their e-commerce efforts.
E-commerce will continue and accelerate its growth. And future events, such as virtual retailing, would increase the transition from in-store buying to online purchasing.
This further adds to the uncertainty for retailers on what to do and how to do it. E-commerce is 24/7 buying by customers. It is about the customer convenience to order. What is required is the supply chain to meet the customer expectations of immediacy that go with online buying, namely delivering orders within 48 hours—or less--of placement. Everything should support that. It means more than a website; fulfillment and shipping; or the last mile delivery issue. What it demands is the New Supply Chain to provide the customer experience.
Online buying with its immediacy requirement is not limited to retailers, e-tailers, B2C, and consumer goods. It is expanding and taking root and spreading across markets, industries, and the world. There is little immunity from immediacy and what it will mean to manufacturers, distributors, and others. Pandora's Box is open.
Click And Collect. Perhaps nothing shows the confusion and uncertainty in omnichannel than does the Click And Collect (C&C) approach for customer order delivery. C&C is about having customers go to stores to pick up their e-commerce orders.
The practice raises the questions—
One possible positive of C&C may be fewer returned orders with customers who can check their orders before leaving the store. Also, it raises the potential of using stores as an option for returned orders to bring in customers. That changes customer-retailer dynamic to a positive one, as compared to how C&C can be viewed.
Issues with Current E-commerce / Omnichannel Supply Chain Management.
There is a reality-check as to how well retailers and e-tailers are performing with order immediacy and meeting customer expectations. Here are some initial questions to set the stage—
Findings are that, for click and collect, stores do not have the items/inventory that the consumer purchased. Retailers are trying to force stores and supply chains to do more than they were designed for. Even catalog, direct-to-consumer, retailers are not immune to what is happening and are struggling with customer expectations and immediacy.
Uncertainty can be seen the increased inventories that are being carried. They are inventory rich, and not in a positive way. It creates liquidity concerns. What products needed to serve each channel and how to spread them challenge businesses that have traditionally been one channel.
Another issue is that the current supply chain and the distribution centers are about cartons and pallet loads of product that restock stores or stock factories. E-commerce is about eaches and individual orders to individual customers. Two very different dynamics are in conflict and being forced to co-exist. Making one supply chain meet the differing requirements of multiple sale channels is pushing agility beyond its intent. There is a serious flaw in that one supply chain idea.
Add in that distribution center locations for retailers are based on store placements. That network creates shortcomings to satisfying order immediacy. Also, many e-commerce only firms have limited themselves to shipping orders nationwide from one warehouse.
Immediacy is about more than fulfillment or the last mile. Inventory levels were original based on assumptions and practices that have dramatically changed. The underlying issue is the requirement for supply chains—across the entire company—to drive growth and meet customer expectations. The purpose and role of supply chain management has changed because of e-commerce and its retail impact.
New Supply Chain Management for Omnichannel and E-commerce.
Retailers, e-tailers, manufacturers, and distributors are at a crossroads in supply chain management—stuck with old ways while dealing with e-commerce and omnichannel. Something must give.
Omnichannel is about duality—strategy, retail, and supply chain. Yet many retailers ignore Supply Chain Duality to drive omnichannel. Different channels with different requirements should have different supply chains to deliver consistent performance that meet customer expectations across channels.
New supply chain management is required for e-commerce. That "new" is an innovative imperative and creates the duality for retailers and others to deal with traditional business and with the new business.
The New Supply Chain is about the supply chain, not just parts or functions. Omnichannel and E-commerce need supply chains that accelerate the movement of inventory through the entire supply chain to meet customer expectations. Being able to view inventory is not enough; companies must make it flow through the supply chain. Emphasis is on inventory velocity through the supply chain and time compression to meet Immediacy. As e-commerce and customer expectations advance, inventory velocity will increase speed to inventory velocity2.
Besides the critical inventory velocity and time compression, the New Supply Chain includes—
Looking for short cuts in designing and implementing the New Supply Chain will mean continuing problems meeting customer expectations. Firms doing it may be potentially conceding growth and company future to those companies that do it correctly.
Immediacy of order delivery is spreading and is not limited to consumer e-commerce sales. Companies see that it can be done and its benefits. They want them for their firms, regardless of their business. The immediacy demand is spreading and will spread across industries, markets, and channels and the world.
E-commerce and omnichannel are not just new retailing. They are original ways of doing and operating businesses. Old is out. Change is not an option. For retailers, online sellers, manufacturers and logistics service providers, there will be leaders and laggards.
What firms do and how they do it will determine if they see their futures ahead or if they see it in their rear-view mirrors?
Omnichannel and e-commerce are making 2016 the Year of the Supply Chain for many companies. The New Supply Chain for e-commerce and Supply Chain Duality are part of the new operating reality.