Leveraging the Supply Chain to Deliver a Multi-Channel Experience...

While the supply chain is a functional area that has historically been on the tip of retailers' tongues, talking about the supply chain today, especially in the context of eCommerce and multi-channel, is passé.  It is much more in vogue to focus on things like AJAX, social networking, search engine optimization, rich Internet applications, product reviews, affiliate marketing, etc, etc.  While the front-end technologies (inasmuch as they impact user experience) are important, especially in the context of customer acquisition and retention, core functional aspects of a retail organization still have a tremendous impact on brand loyalty.  In that context, I contend that a retailer's supply chain planning and execution, comprised of both technology and business processes, should still be considered the biggest impact to customer satisfaction.      

To be fair, (most) retailers have worked very hard on their supply chains.  Retailers have spent many millions of dollars optimizing their supply chains.  This investment has produced (in many cases) very tangible results.  These results can be seen in the draw down of aging or expired inventory, increases in average inventory turns, reduction in stock-outs, and reduction in overall cost of goods sold.  Retailers have done a good job reducing the costs and increasing the efficiencies of their supply chains. 

Before we declare retail supply chains "optimized" however....there is still some work to be done.  The first problem is that most supply chain optimization efforts have been based on a store fulfillment/replenishment model.  This model plans replenishments (either push or pull) assuming the store as the customer.  Pack sizes, truck building/load balancing, replenishment quantities, warehouse layouts and capacities, etc are all based on the concept of supplier-to-warehouse-to-store flow.  Even reverse logistics scenarios, like returns management, assume stores as the aggregators (or a third party) of returns. 

The second major issue centers around the concept of order management.  One has to remember that order management in the traditional retail enterprise context centers around Purchase Order, Replenishment Order (i.e. DC/Supplier to Store) and Internal Transfer order management.  This is a vastly different animal than "Customer Order" management.  The primary differences here are in the areas of order life cycle and customer service. 

Retailers have dealt with these differences in a number of different ways.  Some have spent millions modifying ERP systems to deal with customer order management.  They had to take the architectures, business flows and other system constraints of traditional order management systems that ERPs are known for and find a way to "make it work".  Others have built or bought so-called distributed order management applications, like those offered by Yantra (now Sterling Order Management).  The goal here was to build workflow and architecture oriented around a customer and not an order management system clearly architected to interact with the GL application. 

With all of these complications (and many more I have not even touched on) retailers struggle with this cross-functional and technical challenge:  how can we adapt our supply chain processes and technologies (while not sacrificing our efficiency standards) in a way that will allow us to capitalize off of our growing multi-channel revenue growth?

While I certainly do not have all of the answers, here are some tenets I have seen lead retailers toward success:

• Using the core enterprise order management system for B2C may be a challenging endeavor
• Adopting these systems will be costly and will produce diminishing returns.  These systems were not made for customer order fulfillment, customer service and B2C scenarios.
• New systems, built or bought, may be more appropriate for the flexibility required
• Data can still be made to roll up as it needs to, even in a near real-time fashion...integration is the real key
• Enabling an efficient supply chain in a multi-channel environment should be based on an architecture with the customer as the foundation
• This will more easily enable customer service, CRM and B2C order lifecycle scenarios
• Integration points that are critical to transact business like financials, inventory, content etc are not being forgotten, but they should be interacted with in a publish/subscribe model
• Adopting physical fulfillment models for multi-channel business is often worth the cost and complexity
• Whether it means DCs specifically tailored for B2C (specialized material handling equipment, modified storage layouts, specialized training, etc) or simply process flows built around the B2C model, architecting physical processes that align with a focus on the customer will pay dividends.