5 Building Blocks to a Profitable Omni-Channel Supply Chain Strategy

Profitability – an imperative for any modern retail business, and yet a highly complex one to get right. How palpable the success picture can be very much depends on the retailers’ maturity level and their willingness to undertake the end-to-end transformational change required. Succeeding at multichannel retailing can take different forms. But ultimately, it boils down to striking the right balance between fulfilling growing customer expectations and following market trends, without losing sight of one’s profitability.

Start here with some insightful call-to-actions to facilitate the articulation of a sound Omni-channel supply chain strategy.

1. Know Your Channels

Know the mechanics of your channels and which target groups they serve. Create transparency across the various retail formats you intend to capitalize on. Develop an honest understanding of true channel profitability by establishing accurate and realistic end-to-end supply chain cost allocations for each platform.

2. Define Your Supply Chain Success Picture

Fully comprehend your company business strategy and realistically evaluate the implications on your supply chain operations. Start at the top and translate your market positioning, value proposition and channel strategy into clear, measurable, and relevant multi-channel supply chain objectives.

3. Balance Your Customer Promise

Outline the customer-facing supply chain design by defining your assortment strategy, delivery and return option space. This must be done in close collaboration with the marketing, sales and supply chain organizations. It is critical to find out what customers genuinely value, to avoid over-committing or investing in services that create no tangible or meaningful value to your target audience.

4. Perfect Your Operating Model

Explore several back-end operating model alternatives that could back up your target service offering and make sure to test them through various simulations. This may require several iterations of scenario modeling to get the right balance between the desired front-end service offering and a cost-efficient operating model. Run a holistic cost-to-serve analysis to enable an effective head-to head comparison between all viable Options.

5. Adopt a Trial and Error Mentality

Test diverse elements of the operating model on a limited scope through an adequate number of pilots. Collect customer feedback, measure results, and make the necessary calibration before implementing full-scale. It is particularly important to secure a fast feedback loop when making major adjustments to the operating model (e.g., implementing flexible fulfillment).

In Brief

There is no one answer – or single blueprint – to solving the Omni-channel retail supply chain challenge. However, retailers and their logistics service providers have come a long way in turning a margin-eroding endeavor into a profit-generating one. More work needs to be done, but as DHL Consulting’s extensive findings illustrate, there are well-established and credible strategic frameworks available to retailers to master the supply chain transformational change process – from strategy articulation to process definition, and decision enablement. The ultimate goal remains the same: Make Omni-channel retailing work for both retailers and consumers.

DHL elaborates extensively on this topic in a comprehensive whitepaper.  This reports provides instrumental insight on Omni-channel profitability with the ambition to guide retailers and their partners through the challenge of supply chain transformation.

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