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How to succeed in the new retail arena? - a case based solution -

Categories : Omni-ChannelRetail

Summary of a presentation held by Tolga Tanaydin and Maurice Uiterweerd during the Omni-channel Logistics Conference 2016 organized by the VLO and eSCF

Several weeks ago the last V&D store closed. This retailer, once a Dutch iconic brand with large stores in the most beautiful streets, has come to an end and leaves 8,000 persons unemployed. The same applies for dozens of other retailers which went bankrupt over the last two years in the Netherlands.

Today, offline retailers are going online, but online retailers go offline as well, such as Coolblue, Neckermann.com and Amazon. Another trend in the retail market is suppliers selling more often directly to consumers, such as Apple and Samsung with their physical stores and web stores. Both causing more players in this market or arena. On top of this  it has become easier for consumers to compare prices of products online, which results in decreasing sales prices and increased costs for the retailer due to the multitude of delivery options available today, for example next day delivery, deliveries to lockers and click & collect locations. Eventually, this puts a pressure on margins. Which triggers the question: How can retailers succeed in this arena, with a competition that is more fierce than ever?

Integrated customer centric approach

A real-life client case illustrates a way to succeed in this new arena. The client in question is a large European retailer with many physical stores and it has recently launched a web store. These two channels (online and offline) were working more separate than integrated and just like many retailers in the market, they had a profitability issue. During the first conversations it was difficult for the client to define the exact issues, desired benefits and context, such as the overall - and multichannel strategy. Therefore, we concluded together with the client to conduct a pre-study in order to get a better view of the ‘big picture’.

We started the pre-study with analyzing the client’s customers. Today, customers don’t only expect ‘the right product for the right price’, they want more. In addition, there is no average customer or a one-fits-all service for all of your customers. Therefore, the retailer has to pay attention not only to products but also to the customer experience per type of shopper.  A representation as shown in the figure below might be used to define personas for each customer type in order to enable personalization per customer.  

First, the passive shopper; these shoppers don’t like shopping, and therefore spend not much time on it; they want convenience during shopping. The next one is a passionate shopper; they like shopping, are impulse driven, and are sensitive for brands and hypes. The third shopper is the thorough shopper; these shoppers search the best in quality & service. The last mapped shopper is the calculating shopper, whom is focused on savings, is well informed and insensitive to brands and hypes.

Subsequently for each shopper type customer journeys were defined by mapping all the touch points between the customer and the company, from awareness, consideration, purchase, service to loyalty expansion. This exercise resulted in more understanding of the client’s customer needs and desires.

After better understanding the customers, the ‘All Channel Experience framework’ was used to focus on the most important improvement areas. At the centre are the four core components (Customer, Commerce, Content and Fulfillment Management) that support the all channel strategy, which must be accompanied by overarching capabilities. During the analyses we identified that the main client issues concentrated in fulfillment management, especially the coordination of deliveries from multiple stock points during the order process required attention. Therefore, after the pre-study the question for this client was rephrased to ‘how to manage the E2E order process?’

Bridge the gap between marketing/sales and supply chain

Issues in fulfillment management are seen more often when entering the Omni Channel business. The next age supply chain looks different with various sales & delivery options, and huge interaction between the different channels and also directly with consumers.  There is also an increased flexibility to changes post-purchase: change delivery date, change delivery location and add or remove products. These developments lead to different requirements in comparison to how the traditional supply chain was organized (straightforward with fixed sales and delivery options). Therefore the question arises, how to close the disconnect between the demanding customer value propositions on the one hand, and the often not yet correspondingly defined supply chain in a profitable way, even if we might have already an Omni channel warehouse in place?

We strongly believe companies can bridge this gap by introducing Strategic Order Orchestration (SOO), thereby enabling them to deliver customers through each set of different sales channels. SOO provides many benefits: it gives the retailer a global view of inventory availability and fulfillment routes and the ability to maximize profitability (visible cost to serve). Furthermore, the retailer gets clear visibility of end-to-end order management and is able to resolve issues real-time. Finally, the retailer is able to leverage a hybrid of fulfillment methods.  

To fully utilize these benefits, SOO requires visibility of all stock in all locations as well as delivery options and timelines. Therefore connection is needed between online order interaction systems, CRM, ERP, Fulfillment Centers, Retail store systems, 3PL systems and click & collect solutions. If required a SOO integration software package can be used to connect the various systems and make sure all order messages are routed to the right system. During implementation well defined business rules, processes and governance should be specified to make sure the rules of conduct are clear, even in case unexpected events happen.

Optimized customer experience, fulfillment and inventory management by channel integration

At the earlier introduced retailer, channel integration was realized by linking the order capture systems and defining cross-channel business rules.  Not only for fulfillment management, but also for demand planning and forecasting. Furthermore, by only virtually segregating stock between channels the retailer is now able to optimize its inventory management as well. Integrating retail store inventory into the online channel platform provides more choice for the customer, and makes sure retail stores have the capability to manage these store picks ups from an E2E order management point of view. This answered our client’s question: how to manage the E2E order process? By making sure there is an integrated SOO solution!

Zooming out to the overall question ‘How to succeed in the retail arena?’, we state that the customer should be the basis for all optimization and that an integrated approach must be chosen; break down traditional barriers between departments and channels!

About the author

Ad Lavrijsen, Silke Penterman, Tolga Tanaydin and Maurice Uiterweerd
Ad Lavrijsen, Silke Penterman, Tolga Tanaydin and Maurice Uiterweerd
Ad Lavrijsen, Managing Consultant

Silke Penterman, Consultant

Tolga Tanaydin, Supply Chain Management Consultant - Consumer Products and Retail

Maurice Uiterweerd, Managing Consultant

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