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The multichannel challenge for retail supply chains

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Gavin Parnell, Director of Go Supply Chain Consulting Limited, considers the multichannel challenges for retail supply chains, and what this presents to supply chain and logistics operations.

Most supply chain directors in the fast-moving consumer goods (FMCG) sector that were interviewed recently believe that adapting their supply chains to meet the demands of multichannel retailing is the most pressing priority their teams face in 2015.

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Multichannel, also called omni-channel retailing, refers to using a variety of delivery channels to satisfy customer needs.  These channels include conventional bricks-and-mortar retail stores, on-line web-based shops, mobile app stores, telephone sales and any other method of transacting with a customer.  These shopping experiences include browsing and returns as well as pre-sale and after-sales advisory services.

Many of the supply chain directors interviewed in this study “Supply Chain trends and innovations in Retail 2014 – 2015”, agree that improving cost efficiency remains a constant objective, notably in warehousing and logistics where cost efficiency, agility and shortening lead times are all identified as key drivers.  87%of the supply chain directors interviewed said that their company’s investment in the supply chain is increasing.

Innovation in fulfilment and delivery will be the predominant drivers behind everything they do in 2015. There is no doubt that multichannel is changing the way deliveries and inventory will be managed across all FMCG categories.

WHAT ARE THE MAIN TRENDS?

On-line shopping

The rise of on-line shopping has prompted most retailers to invest substantially in their product offerings and delivery capabilities.

Last year was a landmark for the online sector, with sales growing 14 per cent and smashing through the £100 billion mark. Meeting consumer expectations and demands has never been more challenging and retailers now rely heavily on the efficiency of their increasingly complex supply chains.

“Click and collect” is often the first step into e-commerce for established retailers. ASDA, the supermarket chain owned by Walmart, found that each click & collect customer spends on average an additional £9 each time she shops. Getting the volumes and timing right is a tricky business.

This change in operations has had a major impact on its supply chain that now involves multiple suppliers for both their technology and logistics services.

Distribution centres

Retailers are investing heavily in regional and/or national distribution centres due to these changing consumer behaviours.  Dixons, originally a photographic retailer has re-invented itself as a leading non-food on-line retailer. It has restructured its distribution network, closing some depots to make way for a single central Distribution Centre that has allowed it to reduce its overall stock holding. It has built a true multichannel 24/7 fulfilment facility over the last four years.

Economic outlook

UK retailers are generally optimistic about their fortunes in 2015/6 with many predicting an improvement in sales over the next twelve months especially through new channels. After a number of years battling against strong economic headwinds and poor consumer confidence, retailers are set up to enjoy an improvement in their fortunes despite the fact that they will need to invest more heavily in their supply chains.

Fast fashion logistics  

Cheap fashion is now an FMCG category. Marcel Beelen, VP of Global Business Development in this category at DHL, said that “fashion trends change all the time so we have to think of these products as perishable goods” It’s not only clothing but many higher-value beauty products and accessories are also moving on line, very successfully.

There is immense pressure on supply chains to have products in store ready to sell on very specific launch dates or on the right week. But as well as keeping up with the whims of consumers, DHL reckons the biggest business issues and challenges among the fashion retail industry include the dramatic growth in sourcing from emerging markets. This shift, combined with the need for “”speed to market” is requiring adaptation of supply chain processes.

Multiple Logistics Providers

Many large retailers accept that they need professional advice and services from multiple suppliers to satisfy their supply chain requirements.  Paddy McLaughlin, M&S head of supply chain operations, said of one of their main advisors, “ their independence, speed and flexibility has allowed us to drive performance, visibility and control across a number of disciplines and regions, while using multiple logistics providers”.  Integration between M&S’s supply chain partners makes information on shipments available in real time in addition to a complete audit history of all orders.

Multichannel and the Supply Chain

Offering a broadening range of fulfilment options to give customers greater flexibility and choice is now a key part of the supply chain brief, and this comes with new demands, including the sourcing and retention of talented employees.  A positive outcome is that it is elevating the supply chain function to be more valued in organisations.

Despite all the new channels, there will always be a place for brick-and mortar-retail stores. Some individuals will always want to touch and feel certain types of products. Supply chains will have to continue to cope with this too.

 

Gavin Parnell is a Director of Go Supply Chain Consulting, a specialist in optimising logistics in retail supply chains.    

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Published by: Go Supply Chain Ltd