The 2014 National Retail Federation (NRF) Big Show, one of the biggest trade shows in the country, was once again all about the customer experience. There are a lot of ways to look at the customer experience and what retailers are doing to shape it. And there are a lot of vendors out there that are delivering systems and platforms to enable retailers to provide a positive customer experience. When one thinks about the customer experience, there are generally a few thoughts that come to mind. First, the customer expects a similar experience across channels. And second, customer engagement is at the heart of the customer experience. These two thoughts have been written about time and time again, but each one is only a partial truth.
The simple fact is that customers do not necessarily expect a similar experience across (or regardless of) channels. Each channel is a separate interaction point and must be treated differently. There are different ways in which merchandise and promotions are presented. The level of personalization varies by channel. The lead time to receive a product varies, as does the means to receive the product. That is precisely why customers choose a specific shopping channel. The reality is that customers do not expect a similar shopping experience, but rather, a unified brand promise.
Creating a positive customer experience is not driven by customer engagement. Instead, it is driven by inventory availability. If there is no product to sell, there will be no customer, and hence, no customer experience. NRF 2014 was a showcase for companies ensuring that retailers can deliver products to their customers. This can be achieved through a variety of means: in-store stock, shipping from a warehouse or DC, shipping online orders from the store, transferring merchandise between stores, and buy-online pick-up in store. Managing the supply chain and flow of inventory between channels is the backbone of a true omni-channel retail experience. As channels continue to merge and evolve, and customers expect a converged brand experience, those retailers that can fulfill orders on-time and through the channel of choice will be the ones left standing.
Many retailers are integrating channels to create a unified brand promise, while simultaneously improving operational efficiencies. For example, a well-known fashion retailer is utilizing Manhattan Associates’ store inventory and fulfillment solutions to support the fulfillment of online orders from its stores. The retailer sets daily limits of “buy online, ship from store” based on the stores’ labor constraints. Also, thresholds are established by SKU to assure that store inventory remains available to support the in-store customer experience. The daily fulfillment limits are flexible and can be adjusted to accommodate changing demand patterns. A snowstorm during the recent holiday season substantially reduced foot traffic at a number of retail locations. The company responded by increasing the daily shipping of online orders from these stores, resulting in increased labor utilization and order fulfillment.
That ability to set inventory limits by channel is based on what is most commonly called a distributed order management (DOM) solution. IBM and Manhattan Associates have been particularly active in selling these solutions to the retail industry.
But JDA used NRF to talk about their offering in this area as well. The JDA solution leverages their history around providing profitable to promise solutions in B2B settings. This solution, however, has a distinctly retail flavor. If you are selling goods through multiple channels, and shortages occur, a retailer needs to reserve supply for channel, key customers, and promotions. This is done with allocation logic. My colleague Steve Banker had been given a detailed presentation on this solution and mentioned that the JDA allocation engine was a particularly flexible and powerful tool for determining how constrained supply is distributed throughout the allocation hierarchy and that the solution offered nice cost to serve capabilities.
Brick and mortar retailers are mainly focused on brand today, integrating their in-store and online channels to offer consumers a more seamless shopping experience. In subsequent phases of omni-channel, there will be more emphasis on tuning the logistics model to drive better profitability.
(Manhattan Associates and JDA are Logistics Viewpoints sponsors).