DHL’s first publication on the Omni-channel topic draw attention to the extent of the change management efforts required to transition classic retail operations into a profitable multi-channel operating model. Fulfilling the expectations of new shopper generation means in many cases a fundamental redesign of the overall supply chain and a different approach to resource, data, and IT infrastructure management. As such, the journey to sustainable Omni-channel profitability requires a fully-fledged, holistic strategy to identify the right multi-channel supply chain model and secure synergies across the value chain. Lead the way with these four high-impact considerations.
Getting into the strategic mood
The path to a profitable Omni-channel supply chain strategy requires a top-down assessment of the business – from the retailer’s underlying market strategy, all the way to the Omni-channel operating model and execution enablers. To help retailers understand how these factors affect the modeling of their Omni-channel supply chain, DHL Supply Chain and DHLConsulting designed a simple, yet instrumental strategic framework. This framework provides guidance in the areas of strategy, supply chain design front-end, supply chain design back-end, and enablers. By evaluating the key discussion points for each of these areas, retailers will gain a sharper understanding of how to design the optimal Omni-channel supply chain to meet their business needs as well as those of their customers.
Asking the right questions
Clarifying the retailers’ market positioning and distribution strategy will help define viable options for their future supply chain model. Two fundamental questions need answering:
What is the brand value proposition and is it consistent across the various channels? Premium brands focus on maximizing customer experience and should be ready to absorb additional logistics costs to secure high ‘On-time, In-full’ (OTIF) delivery. Discount retailers tend to strive for price leadership to maximize sales volumes. While they are more likely to opt for a centralized e-fulfillment model, they are more sensitive to logistics costs incurred by online ordering.
How does e-commerce help achieve strategic objectives? Whether the retailer’s ambition is to expand their global footprint abroad, enhance their product assortment, or offer their customers a more convenient shopping experience, defining the true purpose of the e-commerce channel in relation to their bricks-and-mortar channel is a prerequisite to designing the right Omni-channel supply chain.
Keeping it simple
Beyond the overall company and channel strategy, strategic Omni-channel planning should take into account factors such as operating model cost, complexity and required investment. The analysis of design alternatives should be forward thinking and consider likely market developments over the next five years. They should also be evaluated holistically, rather than individually, as they are interlinked in many aspects. Given the wide variety of design options available to retailers, keeping it simple remains a survival rule. In its insightful strategic framework, DHL Consulting sheds some light on the most important strategic supply chain choices faced by retailers for their e-commerce supply chain, affecting both the customer offering and operating model.
Getting the balancing act between cost and customer promise right
Retailers exhibit various levels of sophistication and readiness in their Omni-channel supply chain capabilities. The ambitioned supply chain maturity level needs to be a true reflection of their strategy and channel ambition. However, regardless of their ultimate supply chain model destination, it is absolutely essential that the customer-facing supply chain offering be enabled by the right back-end operating model to eliminate negative implications on retailer’s customer experience or cost envelope. To help secure this consistency in the value chain capabilities and get the balancing act between costs and customer promise right, DHL’s next publication will provide deep insight into the customer-facing levers and how to build a solid bridge with back-end supply chain capabilities.