Online customers around the world are disrupting retail themselves, through easy access to information and hundreds of options for businesses to shop from. E-commerce sales have grown 900% since 1998 and PwC says 46% of customers worldwide shop online at least few times a year.
Over the last few years, we have seen interesting digital innovations like location based services, augmented reality and many more but, the supply chains of organisations that wish to use these technologies optimally, are not adept to support them. To enable ‘innovations of today’, retailers need ‘supply chains of tomorrow’ that promise speed, scalability and convenience to both retailers and shoppers.
This would mean moving away from traditional supply chain practices – channel specific fulfilment, unilateral returns processes, operating in silos – and transitioning to accelerated fulfilment, intelligent returns and partner collaboration.
Accelerated and connected fulfilment
To ensure an excellent purchase and delivery experience, retailers need real-time global inventory visibility (GIV) and exchange across all channels. This enables real-time insights to customers and store associates so that stock keeping units (SKUs) can be ordered or reserved to prevent loss of sale. GIV also helps in identifying optimal fulfilment sources for an online order.
Retailers today are moving towards ‘connected fulfilment’ i.e. they are leveraging their warehouses, distribution centres, stores and return centres for e-commerce order fulfilment. Real-time inventory visibility across all these can select the right (quickest and cheapest) source to fulfil an online order.
This also enables capabilities like ‘buy online, pick-up at store’ that have become the norm for today’s customers. A US-based electronics retailer recently transitioned from traditional ways of fulfilment to a more connected enterprise.
Back in 2012, all its orders were shipped from a central warehouse. Since then, it has developed and perfected global inventory visibility and now all of its 1400 stores in the US act as fulfilment centres with roughly 40% of online orders being fulfilled from nearby stores, which result in faster deliveries and lower operational costs.
In addition to real-time global inventory visibility, machine learning can truly enhance fulfilment capabilities by making allocation decisions more agile and relevant. With retail operations becoming more and more complex, rule-based algorithms have started to give in at certain times.
There are so many scenarios and exceptions, that in the long run (keeping flexibility and scalability in mind), retailers will eventually have to transition to machine learning systems that have a more probabilistic approach (rather than deterministic).
Rule based systems are able to work with a certain set of parameters, but a machine learning system will learn over time, and will be able to understand and process new information quickly, making adjustments before it is too late.
Returns and resale
The National Retail Federation (NRF) says merchandise returns in the US were close to $260 billion in 2016 which is 8% of all purchases. Returns is one area that retailers continue to grapple with, and are coming up with unique and innovative approaches to solving challenges.
Many retail organisations have outsourced these complex functions to third parties like Optoro, where items, after being returned in stores, are sent to Optoro’s warehouse. There returns are tested, inspected and if required – refurbished. They are then listed on online marketplaces and Optoro’s own retail site – blinq.com – for sale.
This start-up also uses complex technology platforms to find the best resale price for items at the time of return, to make the price competitive and ensure quick turnover while giving higher cents per dollar in most cases.
Some other retailers are taking a different route by optimising their supply chains to offer convenience and better experience to their customers. While cross-channel, cross-country returns are a challenge to process, an integrated PIM (product information management) makes it easier not just for retailers but shoppers as well. This allows them to buy from any channel and return via any channel. Additionally, through an integrated PIM, managing returns would be more agile and hassle-free.
With retailers getting more access to customer data and many using big data analytics, value created through data sharing can be immense. While retailers and suppliers have been sharing data for years, the focus now is more on quality and relevance.
For instance, in addition to sharing POS information, retailers can share potential reasons for slow stock movement, such as the unavailability of relevant product information, low-quality product images, lower pricing by other sellers (in marketplace model) etc. For cases of cart abandonment, one step ahead would be gathering details on alternatives purchased.
It is not just a question of ‘what’ to share but also ‘how’ this smooth exchange of information can be enabled. Since the ‘70s, retailers have been using the EDI (electronic data interchange) to connect and share data with vendors. Even today’s version of EDI has a hard time processing data from various sources and onboarding new business partners with different data types and configurations. And, it’s nowhere near real-time. Where EDIs define what you can communicate, APIs define how you can communicate with there being no restriction on ‘what’. APIs (application programming interface) are easy to implement and can be scaled to become a network that provides deep visibility of real-time data.
Two European retail moguls use such APIs and other digital platforms to collaborate with their suppliers. One leading global retailer takes pride in its relationship with its vendors and uses an online vendor portal to share data with them that helps in tracking and improving performance.
Today’s retail supply chains often experience bottlenecks and inefficiencies with information concentrated with certain partners, functions or systems.
With the rise of omni-channel commerce, customer expectations and associated complexities, the supply chains of tomorrow will have to be customer-centric, with the ability to power innovations and ensure speed and agility in this competitive landscape.
Sourced by Saransh Aggarwal – senior consultant – Domain Consulting Group, Retail, Wipro Ltd