Omnichannel Is Only As Good As The Supply Chain

Kris Gorrepati

If my family’s buying habits are any indication, omnichannel marketing and commerce are the two most important things that retailers and consumer products companies should be working on right now.

The essence of omnichannel commerce is to allow customers to buy products anywhere, anytime, and to let the customer get the products in the most convenient manner as soon as possible. It certainly takes more than building and deploying a responsive and scalable commerce website and mobile application to support omnichannel commerce profitably.

Develop, experiment with, and improve omnichannel commerce capabilities

While omnichannel commerce is clearly essential for retailers amid the onslaught of Amazon and other pure-play e-tailers, it is also increasingly necessary for consumer products companies and brand owners. Take, for example, Dollar Shave Club, which is boisterously attacking the men’s shaving category. It is an unusual and potentially profit-sapping competition for a company like Gillette, a division of P&G, which relies primarily on traditional retail distribution channels. Gillette might lose market share and mind share if it does not respond to competition from the likes of Dollar Shave Club. These type of competitive puzzles abound in many consumer and business-to-business product categories.

The answer for retailers and brand owners is to develop, experiment with, and continually improve their omnichannel commerce capabilities. The key goal, of course, is to support omnichannel commerce profitably. The Webvan debacle of the dot-com era continues to cast an ominous shadow, however. Fortunately, and thanks to the likes of Uber, Google Express, Postmates, and Deliv, the last-mile ecosystem to support omnichannel commerce is getting better, more ubiquitous, and cheaper.

Support omnichannel commerce with the right infrastructure

At the same time, the design and implementation of the rest of the supply chain – including distribution centers, transportation options, and inventory placement – is just as crucial to ensure profitable omnichannel commerce. The picture below shows a highly simplified supply chain designed to support omnichannel commerce (and/or a consumer product company that is operating in an omnichannel environment).

omni-channel-supply-chain

It is clear that behind the glossy and responsive website and mobile application is a substantial real-world infrastructure that makes omnichannel commerce possible. The key, however, is to have a supply chain that can fulfill the promise of omnichannel commerce profitably. Omnichannel commerce adds a number of complexities that are usually not present in traditional retail or pure e-tail channels, including:

  • Online ordering and in-store pickup
  • Product availability in stores for online order fulfillment
  • Integration of non-traditional, low-cost, last-mile delivery options
  • Inventory positioning
  • Retail store as a warehouse
  • Returns processing
  • Short-term inventory rebalancing

Gain a competitive edge with omnichannel commerce supply chain

High customer acquisition costs and logistics costs continue to make life difficult for pure-play e-tailers as they struggle to earn a reasonable return on investment. On the other hand, a well-designed and operated supply chain for omnichannel commerce builds on the strengths of traditional retailers and provides a competitive edge that cannot easily be replicated by pure-play e-tailers or category specialists like Dollar Shave Club.

For more omnichannel strategies, see Extended Supply Chain: What Are We Really Thinking About?


About Kris Gorrepati

Kris Gorrepati is part of the Solution Management team for Extended Supply Chain Solutions. He works with SAP's ecosystem to support customer success and to promote excellence is Supply Chain Management, Manufacturing and Product Lifecycle Management. Kris has extensive experience in Supply Chain, Manufacturing and Product Development as a practitioner, designer and engineer.

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Omnichannel