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RILA and Auburn University release State of the Retail Supply Chain Report

Sponsored by Accenture, read the report that reveals the new multichannel reality for retailers and a shift from cost cutting to growth.

Overview

The Retail Industry Leaders Association (RILA) in partnership with Auburn University and with sponsorship from Accenture share results from the third annual study on the State of the Retail Supply Chain.

The report findings reveal a heightened urgency by retailers and supply chain management (SCM) executives to shift from cost cutting to growth. The report also places emphasis on multichannel retailing and explores how retailers are working to meet the increased consumer demand for continual access to products from any channel.

The report data was compiled through a series of executive interviews and industry surveys with retailers across every segment of retail, with the goal of understanding the capabilities that drive exceptional retail supply chain performance. One hundred and ninety-nine retail supply chain executives took part in the research.

The most significant takeaway from the report centered on the importance of multichannel operations including fulfilment of .com, mobile, and tablet orders. The report states that electronic ecommerce sales have grown by more than 15 percent to $35.3 billion and total sales are 4.1 percent higher than the previous year, with predictions that e-commerce sales will grow 10 percent annually. A game changer for retailers, multichannel has added a new series of complex layers to the retail supply chain for SCM executives to adapt to.



Background



Supply chain performance was one of the few retailing bright spots during the year. Despite battling with inconsistent sales, an anemic economic recovery, and vacillating transportation rates, supply chain executives provided calm, controlled leadership to their companies. Through it all, goods continue to flow to the store shelf in an efficient, effective manner.

Despite the external uncertainties, the strategic focus of supply chain executives shifted from all-out cost cutting to a more balanced perspective. They realized that a pure inventory rationalization focus would leave their organizations susceptible to lost sales as the economy recovered. Hence, they moved to meet customer expectations of continuous product availability while maintaining strong control over inventory levels and waste.

With the support of top management, supply chain executives pursued numerous initiatives to meet these goals. Investments were made to refine supply chain capabilities and enhance internal alignment. Closer ties were forged with merchandising and store leadership to improve cross-chain agility, asset utilization, and visibility. And, innovative retailers expanded the sphere of supply chain activity with multi-channel and manufacturing capabilities.



Key Findings



Retail supply chains provided a solid operating foundation as retailers were encouraged by a growth in demand. At the same time retail supply chain executives had to wrestle with uncertainties derived from an uneven economic recovery, customer demand fragmenting across multiple channels, the impact of government regulation, and an evolving supplier base. Top SCM organizations navigated these complexities with grace and billions of products were delivered to store shelves and into customers’ hands efficiently and reliably.

According to the report, there were three key takeaways:

  1. Over 85 percent of survey participants indicated that direct consumer fulfilment is a top priority for them and that it is imperative to create a seamless customer experience regardless of the fulfilment channel, order size, origin, or delivery requirement.

  2. In this “anytime, anywhere, any way I choose” environment, supply chain leaders must establish the appropriate mix of fulfilment capabilities. Their networks and processes must be properly aligned with each channel’s order characteristics, inventory profiles, and service requirements.

  3. Experts are recommending distributed order management (DOM) software as a common-sense response to retailers’ multi-channel needs. DOM allows retailers the ability to capture, manage and optimize orders regardless of origin-computer, retailer store, kiosk, or mobile phone. After the order capture, the DOM system identifies the fulfilment facility or channel that will best serve the customer and the retailer.



Analysis



Supply chain executives continue to emphasize a balanced service/cost strategy and stronger cross-channel alignment. The best retailers understand that efficiency, effectiveness, and alignment are needed to succeed in today’s competitive multi-channel retail environment.

Direct to consumer is the fastest growing retail segment and customers are increasingly taking advantage of the multiple ordering options. As demand shifts from in-store to online and mobile methods, multi-channel fulfilment becomes more critical to the success of many retailers. Multi-channel operations are made more complex due to the divergent mix of SKUs offered across channels. Top retailers are undertaking a strategic analysis of their current and emerging multi-channel requirements to determine optimal fulfilment strategies and align operations when possible.

Already globalized supply chains are becoming more distributed as suppliers move to new countries of origin beyond China. Savvy retailers are proactively collapsing their supply base to fewer manufacturing points in an effort to control the consistency of product on their store shelves. At the same time, the best suppliers are taking a larger role in strategic decision-making through supplier working groups and gainsharing.