Last week, Clint Reiser and I attended the National Retail Federation’s (NRF) Big Show at the Jacob Javits Center in New York, NY. This was my third straight year attending the event as an analyst for ARC Advisory Group and eighth consecutive Big Show overall. In years past, there has always been a main theme that I’ve seen emerge from my meetings, whether it was multi-channel, cross-channel, omni-channel, big data, cloud, mobile, inventory centralization, or social commerce. This year was no different and a common theme emerged. In fact, it was a theme that has emerged for years on end – omni-channel. But this year was a little different than years past. Omni-channel is a term that is commonplace these days, so it’s no surprise that it is top of mind for so many people. What differed this year was the angle that omni-channel took. It was no longer about planning, or simply connecting channels. This year, the talk was about taking things to the next level with a real focus on omni-channel execution.
The store’s role in omni-channel is changing as it becomes part showcase and part warehouse / shipping center. The problem is that in the past, the execution layer has simply not been there. In fact, Steve Banker’s initial omni-channel research for ARC in 2013 found that the store was the weak link in omni-channel fulfillment. And the same holds true today. There are so many business rules, workflows, and technology integrations that need to run seamlessly to allow for omni-channel commerce and fulfillment. If any of these processes or technologies break down, so does your omni-channel operation.
One area that is often overlooked in terms of omni-channel execution is store labor. Store labor is a vital cog in an organization’s omni-channel operations. For the most part, store associates have significantly different tasks and training than a warehouse worker. However, when a retailer implements ship from store or click and collect, store associates essentially become warehouse workers. They need to understand proper procedures for picking, packing, and shipping orders. At the same time, stores need to be aware that pulling merchandise from in-store customers can be costly. For this reason, many retailers only utilize the store for web orders during certain times or days. This all comes down to executing on specific strategies.
Three of the big meetings Clint and I had talked about these specific issues as they relate to omni-channel execution. In our conversations with JDA, we talked a lot about the workflows that enable click and collect. This includes sourcing from multiple points and all the transport involved in replenishment. One of the more interesting topics we discussed was destination-driven demand, which is part of their Intelligent Fulfillment release. Destination-driven demand accurately represents where order demand took place. This means understanding where order came from, not where it shipped from. So if the local store or warehouse doesn’t have an item in stock, and needs to be shipped from another location, the replenishment takes place where the order originated, not where it was fulfilled. This is one way retailers can better execute their omni-channel strategies.
We also met with HighJump and discussed Retail Advantage, which is their Warehouse Advantage product geared towards retailers. This conversation also delved into omni-channel execution, as it was noted that stores are not designed for picking, packing, and shipping. This is in large part due to bad layouts, since stores are designed for customers to walk the entire floor rather than for picking orders efficiently. When it comes to grocery, it is especially difficult, as the timing of picking needs to be precise for fresh produce or frozen items, where bulk items can be picked days in advance. Again, this is an issue that retailers are trying to overcome as they look at the reality of their store becoming a mini-warehouse for the omni-channel customer.
Our conversation with SAP also turned to omni-channel execution, especially as it relates to grocery. SAP talked about Fresh Replenishment, which allows grocery stores to replenish fresh produce throughout the day as demand for click and collect grocery gains steam. The SAP team also talked about the internet of things (IoT) becoming a reality in the retail world. This is especially true as warehouses get smarter as goods come in and are shipped out. This is another area that can help to make omni-channel execution more efficient. While we did not go too in-depth on this topic, it will certainly be an area of focus for Logistics Viewpoints throughout the year.
Clint and I also met with the team at Manhattan Associates. Unfortunately, we are unable to write about that meeting yet, but I expect us to have some interesting points later this year after their newest release.
So with another NRG Big Show in the books, the focus is squarely on omni-channel execution and how the store’s role will continue to evolve and change. There is a lot of work to do from a business process and technology standpoint for stores to shake their reputation as the weak link in the omni-channel environment. But with advanced planning and a detailed eye on the execution, not to mention better training, 2016 could be the year of the store. But only time will tell. Hopefully we’ll have an update on how stores are doing next year.