1. shopping
2. retail

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Retailers are gearing
up their supply chains
to keep pace with
customer demand
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The Supply Chain of the Future
Retailers are transforming their omnichannel supply chains to meet customer demands
B Y N ic o l e Giann o p o ul o s
T
he term “omnichannel” is vague,
and the concept of omnichannel
retailing encompasses nearly every
technology, system and process in
the retail enterprise. It’s not surprising that
many retailers see an omnichannel transformation as a daunting task that will take
years. However, the lack of omnichannel
integration is costing retailers 4.5% of potential sales, and so, nearly half of all retailers cite omnichannel strategies as a key
priority for 2014, according RIS News reports (“Store Systems Study 2014: Stores
Reinvented” and “2013 Cross-Channel
Tech Trends Study: Understanding the
Retail Singularity”).
Consumers today demand an integrated omnichannel experience, and retailers
What’s INSIDE:
Converting Stores to
Fulfillment Centers
Achieving the Perfect
Omnichannel Order
Centralized Inventory
Visibility
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“The lack of omnichannel integration is costing
retailers 4.5% of potential sales, and so, nearly
half of all retailers cite omnichannel strategies
as a key priority for 2014.”
must be prepared to enhance the value of
brick-and-mortar stores. To do this, retailers need to streamline the omnichannel
supply chain, from fulfillment to order
management and centralized inventory
visibility. The revolution begins with understanding that stores are no longer
an independent commerce destination,
rather an omnichannel hub for customer
engagement.
We have entered the age of information technology investment driven by the
need for deeper customer engagement.
Over the next five to eight years there will
be a shift in spending toward integration,
application development, package implementation and infrastructure designed to
build stronger omnichannel capabilities.
In this environment flexible fulfillment
options are table stakes. In-store pickup of
online orders is the first step in a multi-year,
multi-step transformation, driving traffic to
stores where retailers have the opportunity
to create personalized experiences.
For brick-and mortar retailers, offering in-store pickup of online purchases is
an advantage over the online competition
because it adds a tactile level to the experience. Beyond the improved experience and
added convenience, retailers are finding
additional benefits such as an increase in
basket sizes and higher conversion rates.
An accurate order management system that is supported by real-time purchase data is the next step in creating a
truly omnichannel supply chain. Today,
retailers capture purchase data through
POS and e-commerce systems. However, they will need to tightly integrate
both transaction solutions into a hybrid
platform. Replacing these solutions with
a unified transaction platform is a high
priority, but consolidating platforms is a
formidable task.
The final step to successful omnichannel retailing is centralized inventory visibility and real-time reporting to ensure
customers have access to products regardless of the channel they choose to shop.
Both internal and customer-facing inventory visibility grants retailers increased
sales potential, lessens out-of-stocks and
allows for an array of fulfillment options.
As customer demand continues to
rise and the number of shoppable channels continues to increase, retailers must
be prepared to accommodate customer’s
shopping, ordering and delivery expectations. This year, is looking to be the year
of retail transformation, and we look
forward to seeing what the evolution
will bring. RIS
RIS NEWS.COM
3/20/14 3:29 PM
Converting Stores to Fulfillment Centers
Moving Beyond the Traditional Store
Making the store a delivery hub helps retailers create personalized experiences
BY N i c o l e G i a n n o p o u l o s
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etailers need to provide dynamic
cross-channel experiences or risk becoming obsolete. In this environment
flexible fulfillment options are table
stakes. In-store pickup of online orders
is the first step in a multi-year, multi-step
transformation, driving traffic to stores
where retailers have the opportunity to create personalized experiences.
For brick-and mortar retailers, offering
in-store pickup of online purchases is an
advantage over online competition because
it adds a tactile level to the experience and
immediate gratification that cannot be
matched by e-tailers such as Amazon. Beyond the improved experience and added
convenience, early adopters are finding ad-
3 in 4
By 2015, 3 in 4
retailers will leverage
the store as a delivery
hub for online orders,
up from 1 in 3 retailers
currently.
Source: EKN, “State of the Industry
Research Series: The Future
of the Store”
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“We continue to find our stores to be important even
to our online only buyers, whether it would be to
check out a color, try something on, browse to get
ideas or make a return.”
Kar e n H og u e t, C F O , M a c y ’ s
ditional benefits, including an increase in
basket sizes and higher conversion rates.
While in-store pickup of online orders
is a great place to begin an omnichannel
journey, faster moving retailers — Walmart
and Macy’s — have expanded fulfillment
platforms to enable “ship from store”
capabilities for online orders. The offering improves speed of delivery and saves
on shipping costs using shorter delivery
routes. Ship from store can also help retailers avoid potential markdowns by offering
overstocked merchandise in underperforming stores across the enterprise.
Macy’s has “moved beyond the meaning of ‘department store’ in the traditional
sense of the word,” to be “America’s omnichannel store,” according to Macy’s
president and CEO Terry Lundgren. The
retailer has taken a leadership role in the
fulfillment space, catering to consumers
that move between channels without missing a beat. Beginning in 2014, 500 Macy’s
stores will be enabled to fulfill online orders, a step toward the ultimate goal of
offering faster delivery, and even same-day
delivery of online orders.
Macy’s strength in omnichannel trans-
actions and online purchasing, including
transactions on mobile devices, is also clear
in shipping from stores to satisfy online
demand and shipping from warehouses to
satisfy store demand. The retailer also piloted buy online, pickup in store to great
results and will roll it out to all stores during
the spring season. “We continue to find our
stores to be important even to our online
only buyers, whether it would be to check
out a color, try something on, browse to
get ideas or make a return,” said Karen
Hoguet, Macy’s CFO.
Getting products purchased online in
the customer’s hands as quick as possible
is the goal of retailers on the cutting edge.
Walmart is investing significantly in flexible
fulfillment to get products to customers as
quickly as possible, and in some cases, the
same day. Online orders can be picked up
in-store, shipped directly from one of the
retailer’s 130 distribution centers to the
customer’s home, or shipped from store.
The ship-to-store option creates a win-win
for Walmart: its distribution network can
deliver in bulk to stores rather than delivering individually to customer’s homes, while
at the same time getting customers into a
RIS NEWS.COM
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brick-and-mortar location to increase revenue through additional purchases.
The retailer recently doubled the number of stores it utilizes for order fulfillment.
It also plans to test the use of lockers to hold
online orders for customer pickup, as well as
to combine stores, distribution centers and
new facilities into a “next generation fulfillment network,” according to Joel Anderson
president and CEO of Walmart.com U.S.
To better execute on these fulfillment
options, investment in several major supply
chain systems to help optimize the movement and management of inventory is
necessary. Dick’s Sporting Goods recently
upgraded the automation in its distribution
centers to track and coordinate domestic
and international freight, monitor the performance of vendors, help control costs
and provide real-time insight into the productivity of the retailer’s network.
“The productivity and accuracy of
our supply chain has increased dramatically since we began investing in information technology just a few years ago,” said
Matthew Lynch, CIO and SVP for Dick’s
Sporting Goods. “Currently, our teams
are evaluating how store-based fulfillment
aligns with our future investments in supply chain.”
Systems are essential to the efficient operation of Dick’s business and are integral
to the way the retailer plans, operates and
grows the company. Seven of the retailer’s
core merchandising and inventory control
systems have been selected to optimize the
core elements of the business, specifically
financial planning, assortment plans, space
management in stores, pricing controls
across all channels, allocation of seasonal
and fashion merchandise, replenishment of
perpetual inventory, and key performance
indicators and management controls.
This year, the retailer will implement
the final phase of the core systems transformation, which will help to better understand and forecast consumer demand
across all businesses. This is especially
important in businesses that leverage common inventory.
“Our goal is to solve the ultimate retail
challenge: the right product in the right
size and color at the lowest cost, priced by
channel and region, available at exactly the
right time in exactly the right quantity and,
of course, located right where the customer wants it,” noted Lynch.
The future of retail is found in serving omnichannel shoppers who want what
they want, when they want it.
While retailers have a long way to go
before systems are tightly integrated — especially those focused on the customer —
in-store pickup of online orders is a step
toward building a successful omnichannel
business model.
Making the store a hub for local delivery will help brick-and-mortar retailers
create customer experiences and enrich
personal experiences. Retailers’ organiza-
75%
of retailers
will use stores
as fulfillment
centers by 2015.
Source: EKN, “State of the Industry
Research Series: The New Cost
Structure of Retail IT”
“Our goal is to solve the ultimate retail challenge:
the right product in the right size and color at the
lowest cost, priced by channel and region, available
at exactly the right time in exactly the right quantity
and, of course, located right where the customer
wants it.”
M atth e w Ly n c h , S V P & C IO, D i c k’ s S po r t i n g Goods
tional structures, corporate culture, business processes and technology systems are
all geared toward a product and channelcentric retailing concept. Today’s omnichannel retail vision demands a focus
on the customer and the ability to execute
across formerly siloed business functions.
To begin, retailers should build a com-
mon view of inventory across all channels.
This single view of inventory enables expanded fulfillment operations, an endless
aisle and the ability for store associates to
leverage inventory. This also helps to enable buy online, pickup in-store by integrating the order management and order
fulfillment systems between channels. RIS
RIS NEWS.COM
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A chi e v in g t h e P e r f e c t O m nichann e l O r d e r
Fulfilling Customer Expectations
A seamlessly integrated order management system ensures inventory availability
B Y N ic o l e Giann o p o ul o s
F
or an omnichannel order management system to work accurately
it must be supported by real-time
purchase data. Today, retailers capture purchase data through in-store POS
systems and e-commerce platforms. However, moving forward, retailers will need
to tightly integrate both transaction solutions into a hybrid platform for a single
view of orders, or replace multiple systems with a unified transaction engine to
be the database of record.
Replacing multiple solutions with a
unified transaction engine is a high priority for many retailers in the market to
replace outdated POS systems. Among the
30% of retailers that are planning to make
a POS hardware or software purchase in
the next 12 months, many are seeking POS
systems that operate as a unified transaction engine as a step forward on their omnichannel journey, according to the RIS
News “Store Systems Study.”
One way to look at omnichannel order
management is in achieving the perfect
order and optimizing fulfillment. But few
retailers have the organizational alignment and capital investment to achieve
this utopian state today. From a technology standpoint, the key piece of the
puzzle that retailers are missing is a unified order management system. To solve
this problem, some are beginning their
omnichannel transformation by extending their e-commerce platform to be the
primary driver of order status used across
the enterprise, including in-store.
The development of a unified order
platform is the glue that will hold together
inventory tracking on the back-end and
customer profile integration on the front-
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“We’re excited about how the customer is embracing
charge-send, and we’re proud of it’s fairly seamless
implementation.”
M ic h ae l M ac D on al d , CEO , D S W
end. Without the ability to split orders
at any point and coordinate them across
channels, retailers cannot provide an integrated experience.
The most important step in DSW’s
omnichannel journey was the launch of its
charge-send capability. This system allows
the retailer to fulfill dotcom orders out of
stores, as well as satisfy unmet store demand from stock held in other stores. The
capability was piloted in Q3 2013 and
rolled out to all stores beginning in Q4.
“We’re excited about how the customer is
embracing charge-send, and we’re proud
of its fairly seamless implementation,”
said DSW CEO Michael MacDonald.
Other recently implemented systems
that the DSW is benefiting from include
improvements in size-in-stock rate as a result of its new size optimization system.
“In Q3, this capability improved our instock rate by two percentage points on
those items most directly affected by the
system,” noted MacDonald. To sell product through its e-commerce site, but fulfill it from a supplier’s warehouse, DSW
rolled out a dropship system — the re-
30%
of retailers
are planning a POS
hardware or
software purchase
in the next 12 months,
seeking a system that
will operate as a
unified transaction
engine.
Source: RIS News, “11th Annual
Store Systems Study: Stores
Reinvented”
RIS NEWS.COM
3/20/14 3:29 PM
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tailer will never actually own the product
but will simply handle the transaction
between customer and supplier. DSW is
on target to launch dropship with an additional 10 suppliers in 2014. In addition,
the retailer has launched a new return
management system. The system allows
associates to look up receipts electronically at the POS.
To help improve the long-term efficiency of its supply chain, discount retailer
Family Dollar rolled out a pallet delivery
program to simplify store processes and
increase workforce retention. Through
this new system, products are sorted by
product group at the distribution center
and delivered to stores on pallets. This
makes it simpler for the support teams
68%
In the next 2 years,
68% of retailers
plan to share
inventory management
apps across both
physical and online
channels.
Source: EKN, “State of the Industry
Research Series: The New Cost
Structure of Retail IT”
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Family Dollar rolled out a pallet delivery
program to simplify store processes and
increase workforce retention. Through
this new system, products are sorted
by product group at the distribution
center and delivered to stores on pallets.
to unload trucks and replenish goods to
the sales floor more quickly. Utilizing this
process, the North Carolina distribution
center is seeing improved delivery service
rates, reduction in merchandise damages
and higher customer satisfaction in stores.
To continue its improvements, the retailer
has decided to convert three additional distribution centers this year.
The chain also hired an executive vice
president of supply chain and commenced
shipping from its 11th distribution center,
located in Utah, last July. “St. George is
an important addition to our supply chain
network as it will drive transportation efficiencies through stem mile reductions to
our stores out west,” said Michael Bloom,
Family Dollar’s former president and
COO. The retailer spent $76 million on
supply chain improvements, including the
new DC, in 2013.
“We believe that we’re making the right
investments to stabilize the business,” noted Mary Winston, chief financial officer,
chief accounting officer and EVP for Family Dollar. “It will take time to reverse the
recent earnings trends especially given the
challenging environment, but we expect
that the trend will improve modestly in the
second half of the year.”
The only way that retailers can enable
omnichannel sales and fulfillment processes
is by having a common view of the inventory across channels with a common order
management system. This vision may not
work for all given the constraints of legacy
systems. However, a unified order platform
is a good starting point for retailers to improve their core commerce system as they
begin to think in terms of the customer experience across the enterprise rather than
individual channels.
While many retailers have been making an effort to support the expectations
of today’s consumer, it is important to also
begin assessing existing technology solutions to meet these expectations. By using
a single enterprise order entry system —
regardless of what channel the transaction
takes place — the first system of record
becomes the order entry system, helping to
ensure visibility throughout the cycle from
order to fulfillment.
To determine a customer’s best fulfillment source, retailers should first ensure
their order management system works
seamlessly with their inventory availability
system. This will help to remove slow-moving
product from underperforming stores reducing markdowns. An order management system that uses an accurate view of inventory
will ensure customers will not be disappointed by arriving at a store and finding their intended purchase is not available. RIS
RIS NEWS.COM
3/20/14 3:29 PM
Centralized Inventory Visibility
Increasing Customers Access
Real-time inventory visibility helps retailers meet customer expectations
BY T i m o t h y D e n m a n
S
uccessful omnichannel retailing requires centralized inventory visibility and real-time reporting to ensure
customers have access to products regardless of the channel they choose to shop.
Both internal and customer-facing inventory visibility grants retailers increased sales
potential, reduces out-of-stocks and allows
for an array of fulfillment options.
With the amount of effort and marketing dollars that goes into capturing customers both online and in-store, the last thing
a retailer ever wants to tell a customer is
that they are out of stock. By syncing inventory enterprise-wide, savvy retailers are
able to locate available product in realtime and ensure that shoppers ready to
make a purchase are never disappointed.
Only
20%
of retailers are
currently
sharing inventory
across all selling
channels
Source: RIS News,“2013
Cross-Channel Tech Study:
Understanding the Retail
Singularity”
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“We are continuing to work to support availabilitydriven growth through a continued expansion of our
hub stores and inventory optimization. We look to
continue improving in-stocks, and getting inventory
where it matters most, closest to the customers.”
G e or g e S h e r m an , p r e s id e n t, A d van c e A u to Par ts
In addition, by enabling inventory visibility retailers can minimize price reductions
on over-stocked items by offering them for
sale across the enterprise.
Despite the clear business benefits, just
20% of retailers are currently sharing inventory across all selling channels today,
a number that is expected to rise to 69%
over the next two years according to the
RIS News/EKN “Cross-Channel Trends
Study.” Such a large expected rollout emphasizes the importance of a centralized
approach to inventory management and
highlights the strides made in the IT space
to address the traditional challenges encountered when integrating systems.
Inventory visibility, like all upgrades
to the tech stack, requires a significant
capital investment. Best Buy’s Renew Blue
initiative, designed to help the brand compete with the online giants in the crowded
electronics space, includes significant technology investments in merchandising,
marketing and supply chain. The electronics retailer recently rolled out ship from
store at all of its 1,400 locations leveraging
its huge brick-and-mortar infrastructure
to slash shipping times and allow for re-
turns and open-box items to be sold online.
By selling open-box merchandise online the
retailer hopes to trim the $400 million it loses each year on merchandise going unsold
at its brick-and-mortar locations.
“Our goal over the next 24 months is
to leverage this network and improve our
customer experience by providing, number one, increased inventory availability,
number two, improved speed to customer,
and number three, improved home delivery,” Best Buy CEO Hubert Joly said. The
investments are already paying dividends
in operational efficiency and customer satisfaction — the retailer recently lowered its
delivery window by two full days.
Ship from store requires real-time inventory visibility. When an online shopper makes a purchase the retailer needs
to know instantly at which location the
product is currently available and then
mark the product reserved. The inventory
count needs to be reduced by one and total
inventory available for the SKU must be
checked against replenishment standards
and reorders placed if necessary.
Another key omnichannel service that
is proving to be a market differentiator is
RIS NEWS.COM
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buy online, pick up in store. In order to
offer the fulfillment option, chain-wide inventory visibility at the store level must be
available to customers. Seventy-one percent of customers expect to be able to view
in-store inventory online according to Forrester Consulting’s “Customer Desires vs.
Retailer Capabilities: Minding the OmniChannel Commerce Gap.”
One segment of the retailing world
that has been on the forefront of inventory
advancements for decades is auto parts
sellers. The seemingly infinite number of
replacement parts makes it impossible for
any auto parts store to be fully stocked to
meet customer demand. Retail locations
lean on distribution centers to ensure
prompt delivery of in-demand product,
while the DCs rely on sophisticated inventory solutions with real-time capabilities
to account for every SKU in the supply
chain. The retailer must have a centralized view of inventory at the distribution
center, in stores and en route to ensure
accurate product counts and to make demand-based stock decisions.
Advance Auto Parts replenishes many
of its stores on a daily basis, an undertaking that sees product moving at breakneck
speed throughout the supply chain and necessitating real-time inventory capabilities.
Not only is inventory flowing in and out of
DCs but a growing network of hub stores
act as mini fulfillment centers.
“We are continuing to work to support availability-driven growth through a
continued expansion of our hub stores and
inventory optimization,” Advance president George Sherman said. “We look to
continue improving in-stocks, and getting
inventory where it matters most, closest to
the customers.”
Advance opened 172 new stores in
2013, increasing its total retail outlets to
5,300 locations. As more stores come online the need for inventory visibility and
real-time reporting increases. Advance is
in the need-it-today business — its customers rely on quick delivery to keep their
automobiles up and running. By utilizing
a single repository for inventory data the
retailer can monitor the whole enterprise
at once and make strategic decisions both
chain-wide and at a local level.
Real-time inventory visibility is not just
a necessity for retailers whose clients demand same day delivery, but for all retailers operating multiple locations. David’s
Bridal operates on a sell one, replenish one
model at its stores — relying on its distribution centers to house the majority of its
inventory. To provide customers’ access
to the full assortment of available inventory the wedding dress retailer relies on a
technology suite that allows real-time inventory visibility of not only in-stock items
but in-transit inventory as well.
“Our business is founded on offering brides the widest variety of products
71%
of customers
expect to be able
to view in-store
inventory online
Source: Forrester Consulting,
“Customer Desires vs. Retailer
Capabilities: Minding the
Omni-Channel Commerce Gap”
“Our business is founded on offering brides the widest
variety of products always delivered on time no matter how she chooses to shop with us: online, in stores
or by phone. It’s critical that we have one system we
can rely on to provide inventory availability and manage
orders across our network.”
C ary n F u r taw, C I O, Dav id ’s B r id al
always delivered on time no matter how
she chooses to shop with us: online, in
stores or by phone,” Caryn Furtaw, CIO
for David’s Bridal said. “It’s critical that
we have one system we can rely on to provide inventory availability and manage orders across our network.”
Forty-four percent of retailers list inventory visibility as a top store systems
priority for 2014 according to RIS News’
“11th Annual Store System Study” —
and for good reason. As the number of
shoppable channels continues to rise, the
need for a real-time inventory database
with SKU-level accuracy across the enterprise increases to enable customer-facing
technologies and improve engagement to
boost sales. RIS
RIS NEWS.COM
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