Is your supply chain process fit for purpose?

Most retailers now appreciate that a strong multichannel strategy is central to success, but redesigning their supply chains to enable them to deliver that to best effect is no easy task.

And for the majority, it’s an essential journey they are only just starting out on. “The supply chain is crucial to a successful multichannel strategy and designing the supply chain so it’s robust and economic is vital,” says Alan Braithwaite, chairman of LCP Consulting. 

The supply chain is something of an unsung hero in retailers’ multichannel operations. But it’s a hero that’s creaking under its new workload.

The problem is that many retailers’ supply chains are lingering in the past and can’t cope with the pressures they face today. N Brown group buying and merchandising director Paul Short says the move from single to multiple channel retailing initially entails using systems and processes that were designed for the main single channel business: “They will not be fit for purpose and changing those processes or systems is difficult, timely and costly.”

There are serious challenges ahead for retailers in delivering the best supply chain for their multichannel strategies because it requires a radical supply chain overhaul, rather than simply tweaking.

“Retailers are right at the beginning of this,” says eCommera co-founder Michael Ross. He believes retailers need to look again at many of the rules and metrics surrounding optimum product quantities that their existing merchandising systems have relied on for years. “It’s about how much stock do you want to hold and where do you want to hold it physically – be that in-store or at the point of manufacture. For instance, why ship to a distribution centre from China when you could ship directly to the customer?” he asks.

Shipping direct from point of manufacture, however, would require 100% conviction in the reliability of the retail supply chain, and until retailers instigate more radical overhauls to ensure that, few are there yet. In the meantime, retailers are working hard to link systems, knowing that a joined-up strategy is required and replacing or simply gluing systems together depending on their budget.

Spending power

Ultimately, capital must be spent. House of Fraser executive director of supply chain Mark Holland says the department store group’s investment in both supply chain infrastructure and technology is part of its drive to provide an optimum multichannel service for customers. It has, for instance, converted its Milton Keynes facility to a dedicated e-fulfilment facility. “It’s vital that the customer promise is consistently delivered and loyalty and trust are built, and to do this the supply chain needs to be robust, dynamic and sustainable,” he says.

But such investment counts for little unless the retailer has correct stock information. First-class inventory management and stock integrity is a must and this has been a focus for Pets at Home. Pets at Home multichannel director Matt Stead says: “Customers’ attention spans are very short online and it’s a massive bugbear having out of stocks, so we have really worked on that as well as on increasing our carrier options.”

Being able to have a single view of product is increasingly important in ensuring correct stock information, so that it can be sold to customers via whatever channel regardless of location.

Aurora Fashions and Next are among the retailers that have worked hard to deliver this. Aurora Fashions chief financial officer Richard Glanville says it is one of the most important things it has done in the journey towards implementing a strong multichannel supply chain. “We have all of our systems connected so that we have one view of the product and one view of the customer and are able to locate product wherever it is in the business and get it to the customer wherever and whenever she wants it,” he says. 

It has enabled the retailer to launch new services such as assisted sales in store using iPads, for instance, to speed up sales, 90-minute delivery slots, as well as the October launch of a ship from store service. The latter involves shoppers being able to visit a store, find a product in another shop if it is unavailable in the first, and staff in that store being able to pick and send it out.

Glanville says it is proving a success: “We are still finding new issues but what’s most amazing is just how popular it is. We were totally gobsmacked by the volumes from the first six pilot stores.”

Since then the service has rolled out to all UK standalone stores. Everyone benefits; it helps ensure the customer gets what they want, and helps ensure stock sell-through for the retailer – particularly in less popular sizes. “On our current best-selling dress we have 98% sell-through when we rarely did much more than 80% previously,” says Glanville.

Services such as ship from store remain innovative solutions. For other retailers having as wide a range of delivery options including twilight and weekend deliveries, as well as providing as much information as they can about the specific time of delivery – such as two-hour delivery slots or text messages informing of imminent arrival – also helps to improve the multichannel experience but again needs a supply chain that enables that.

Others choose to collect from store, and click-and-reserve services have become the norm for a range of retailers – from Halfords to John Lewis. The rise of click and collect to complement home deliveries has become ever more popular. Research from Collect+ – a service that allows customers to collect and return their goods from 4,500 corner shops – suggests that more than 50% of online shoppers use it for some of their purchases, primarily to avoid the risk of a failed delivery. “We see this trend continuing to grow next year and retailers need to build the supply chain to support it,” says Collect+ chief executive Mark Lewis.

Others have taken this further. In October, House of Fraser became the first retailer to launch a stockless click-and-collect store with a 1,500 sq ft House of Fraser.com store in Aberdeen’s Union Square. Housing only iPads and interactive screens for customers to order from has allowed it to capitalise on the click-and-collect boom and enable it to open where finding a traditional department store size unit was just not possible. It followed the launch earlier this year of a buy-and-collect service in its stores. 

Such changes result in the use of a warehouse or distribution centre model that suits retailers’ new multichannel worlds, rather than just supporting their store network. And this means informed decisions have to be made on where to hold stock. Unipart Consumer Logistics chief executive Stephen Ashton points out that some retailers will hold all their fulfilment stock in one place, but in the proximity of a parcel network. Others will hold core replenishment lines in one place and pull in other lines from other locations.

John Lewis head of national distribution centres Terry Murphy says the retailer has decided to pursue a mixed supply chain, with hybrid operations where appropriate. “This means that we service branch and direct to customer demand from the same fulfilment centre, in most cases enabling us to offer a similar and wide range of products both online and in our shops,” he says.  

Being able to flex resources within the supply chain and distribution centres also allows retailers to push their cut-off times for next-day deliveries. Next is a good example – it allows consumers to shop until 9pm and still receive their products the next day. A challenge though, is the order cycle time – the time it takes to prepare the order for dispatch. Automated warehouses are one way to achieve faster orders – one of Wincanton’s automated despatch centres for Screwfix, for instance, despatches 9,000 orders a day and has more than 24,000 SKUs. The average despatch time is 29 minutes.

The reverse angle

With a wider range of delivery options and increasing customer expectation that they will be able to get hold of product through whatever route they want, has come the assumption that the same options should be available for returned product too. For many retailers this part of their supply chain is the weakest. Often this is because of the additional complexities of correctly reconciling the value of returns so that the channel that the product is returned through – be it online or in store – isn’t penalised for a return originally purchased through another channel.

Hewitt says: “Returns is a vital part that’s often overlooked. It works best near to your replenishment distribution centre as that shortens the time to get good product back out as fast as possible.”

He says for Sainsbury’s – one of iForce’s clients – combining outward bound stock and returns in the same shed allows the grocer to get returned items back out within four hours of receipt.

The multichannel world is changing fast. Retailers must keep up or be left behind. Customers don’t view a retailer as a business that sells through different channels. They simply view it as one brand from which to buy product, and expect the experience to be consistent.

Metapack founder and chief executive Patrick Wall says: “Customers don’t care where the product comes from or how complex the fulfilment process is. They just want their product delivered within the promise given.”

This requires the supply chain to work as one and for that, true visibility is the most important feature the best multichannel supply chain should aim for. Glanville says: “We are trying to make every element of the supply chain as close to real time as we can and are looking at every aspect of the business to facilitate that, with the aim of becoming truly omnichannel.”

One retailer, one view, one supply chain – sounds simple doesn’t it? But as retailers are discovering, the reality of having a supply chain that is truly fit for purpose in today’s multichannel retail world is far more complicated.