Earlier this month, I wrote about my experience visiting the National Retail Federation’s (NRF) Big Show in New York. The big focus at the show this year, much like in years past, was the focus on improving the omni-channel customer experience. As I wrote, customers do NOT expect a similar experience across channels. Instead, they are seeking out a brand experience that allows them to interact through multiple channels during the shopping journey. In the end, it all comes down to whether or not they can receive the product they want, when they want it. And that was the big differentiator for this year’s Big Show: the true driver of omni-channel customer experience is inventory availability and the ability to fulfill orders on time and through the appropriate channel. Retailers face a two-fold challenge in their quest to achieve omni-channel success. First, they need to do a better job of empowering their customers, who clearly want to dictate the customer experience. And second, a technology gap hinders omni-channel operations. Too many retailers lack adequate resources to meet their customer demands.
Product availability and a retailer’s ability to fulfill orders on time and through the appropriate channel drive the true omni-channel experience. ARC Advisory Group released a report in July 2013 based on an on extensive omni-channel logistics survey. This research indicated that retailers must overcome a few obvious gaps. First, order fulfillment must empower the consumer. According to the survey, retailers do a better job managing returns than fulfilling orders as a customer moves across channels. More than 70 percent of retailers indicated customers can return an order to a store even if it was ordered online. However, barely 50 percent enable buy-online/pick-up-in-store capabilities. And even less (under 36 percent) allow customers to order from the store and fulfill from another store. This gap means that customers cannot get the item they want when they want it. This leads to lower customer satisfaction scores and, ultimately, customer defection.
The second gap is in the technology applications that retailers use to enable omni-channel retailing. When asked which technologies retailers believe they need, but do not have, to drive their omni-channel initiative, 48.2 percent indicated distributed order management, 37.6 percent indicated inventory optimization, and 30.6 percent indicated real-time inventory location applications for the store. Retailers need all these technologies to ensure that they keep inventory availability and visibility up to date and can fulfill orders.
Distributed order management systems allow the retailer to capture all information in the order management process across all relevant channels. This includes the entry of the order, sourcing, payments, and fulfillment. It also spans all channels of sales operations. The benefit to retailers is that it doesn’t matter where an order originates. All fulfillment channels have access to the information and the retailer can appropriately allocate the inventory depending on stock levels, demand requirements, and timing of fulfillment. To the consumer, this is all a seamless experience, and that is all they expect. The customer wants to be able to order a product online and pick it up in the store. Or, if they are in the store, and the store is out of stock, they want it shipped to the house. The reality, however, is that too many retailers do not possess these capabilities right now. This explains why barely 50 percent of retailers enable buy-online/pick-up-in-store capabilities and only a third allow customers to order from the store and fulfill from another store.
The second technology component is inventory optimization. This technology enables retailers to balance their inventory levels with customer demand. Clearly this is easier said than done. There are a variety of market conditions that impact inventory management, including economic factors, supplier relations, and fluctuating and seasonal demand for products. However, the use of multi echelon inventory optimization software can help retailers to identify the appropriate amount of stock needed at stores, warehouses, and distribution centers. By carrying less physical, retailers can reduce their inventory carrying costs and become more profitable. By matching supply with demand, the customer is able to find the product they need / want, and the retailer can fulfill it through the appropriate channel.
The final technology component that is lacking for retailers is real-time inventory location applications for the store. This technology enables the store to gain much needed visibility into on-hand inventory levels. When inventory is low, the store can replenish; if they are sold out and a customer is looking for a specific item, the store can locate it at another store or warehouse or distribution center. This enables the retailer to find the inventory that is needed to fulfill the customer’s order and ensure a positive customer experience.
The Omni-Channel Customer Experience
One of the biggest challenges (and opportunities) for retailers is to close the technology gap. When more than 50 percent of retailers do not possess critical supply chain management technology to ensure proper fulfillment of orders, there is clearly a problem. The three technologies highlighted above are a good set of building blocks for retailers to investigate in their path towards delighting customers and achieving a truly omni-channel experience.