Omni-channel Momentum

Manhattan Associates (a Logistics Viewpoints sponsor) held its annual user conference, Momentum 2013, two weeks ago in Las Vegas. I’ve attended many supply chain conferences so far this year, but none have equaled this conference for coverage of the issues associated with omni-channel commerce.

The best speech was the keynote by Matthew Siegel, Executive Vice President of E-commerce at ANN INC., a women’s apparel retailer with 950 stores across its Ann Taylor and LOFT brands. Matthew offered five key insights:

1. The CEO must champion these efforts! It is common in all IT projects to talk about the need for C-level involvement. But whereas a supply chain project might involve the cooperation of both sourcing and logistics, for example, a multi-channel project will require even greater cross-departmental collaboration. It requires the cooperation of store operations, merchandising, and supply chain management. While all groups might be in conceptual agreement about the need to have an omni-channel strategy, each group will have a very different view of how to operationalize this initiative.

2. Prioritize! An omni-channel initiative is, in all likelihood, a multiyear project. Rather than doing a big bang project and trying to enable all potential multi-channel flow paths simultaneously, pick one or two that have the greatest ROI and focus on them initially. Examples of the different flow paths include buy online, ship to store for customer pick-up; buy online, reserve inventory already in the store for the customer pick-up; and buy in store, ship to home from inventory in a DC or another store. By ANN’s count, there are 6 major flavors of omni-channel. But even here, a multi-channel flow path can be operationalized in very different ways. For example, the algorithms that are used to determine where inventory is sourced for an online order can focus on service or profitability. When these subcases are considered, ANN ended up with 17 use cases for which it needed to build business cases.

ANN INC’s third quarter financial call highlighted that its Phase 1 initiative wa providing a “seamless shopping experience” by “allowing stores to fulfill merchandise orders placed online” and allowing internet orders to access “inventory across their store base.” In listening to other speeches and talking to other retailers, I get the sense that this idea of an “endless aisle” is a common multi-channel kick off project.

3. The culture must evolve with the technology! Again, this is common advice for any IT project. But in the case of ANN INC., Matthew pointed out that they have 17,000 store associates that are being asked to do their job in a different way. Issues like who should get credit for an e-commerce order initiating at a DC but fulfilled from a store must be addressed. Store associates must learn to see a virtual order as coming from a real person.

New incentive structures and metrics must be devised to shape behavior appropriately, not just internally, but externally as well. For example, in the case of ANN INC., in its third quarter call with financial analysts the company announced that from now on it would report sales and comps based on the combined sales of the stores and online orders.

4. This is the hardest project you will ever do! In addition to the collaboration and cultural issues, this is a tough IT project that requires moving from legacy batch to a core system based on real-time transactions, and the integration of many different systems. Matthew was not specific, but I suspect the core real-time system he was talking about was Distributed Order Management.

5. Omni-channel is the future of retail! “It works. There is real ROI in these projects.” Again, if we go back to the third quarter financial call, the CEO referred to the outstanding results from their initial multi-channel project. This project provided both higher sell-through and better gross margins.

Manhattan is a supply chain software company, and supply chain solutions have generally provided ROI in the form of lower supply chain costs. But when supply chain software companies like Manhattan provide omni-channel commerce solutions, the value proposition is much bigger — an ROI that can also come from higher sales and better margins.