Analyst Insight: Five years ago, having a variety of channels and capabilities across your network was a competitive advantage. But as consumer expectations change, more companies are beginning to question the value of the investments required to build and support certain fulfillment capabilities. Today, supply-chain executives must create a seamless experience for omnichannel consumers, while walking the razor’s edge of balancing tradeoffs between cost and service.
How can an organization ensure that it’s designing a distribution and fulfillment operation that profitably supports the desired brand experience and consumer expectations?
Align on goals. Rising customer expectations aren’t just a supply-chain problem. Companies need to align merchandising, IT, sales, marketing, supply chain, distribution and leadership teams around key performance indicators, with a cross-functional focus on the brand’s value to consumers and what will drive growth and profitability. This approach will help provide structure and clarity of purpose for the broader cross-functional team, ultimately improving distribution and fulfillment. As an example, consumers are growing more concerned about the environmental footprint of their purchases, from sourcing of raw materials and packaging to method of delivery. In a Gartner poll, over 60% of apparel purchasers considered a company’s impact on the environment before buying. Designing an operation with sustainability as a goal could be a contributing factor to improving the consumer’s experience and driving bottom-line growth.
Assign value. How can companies cost-justify new technology investments inside the warehouse? The answer always starts with identifying goals, assigning value to the new capabilities, and developing a broad business case to support capital requests that go beyond straight ROI calculations. The answer to the question “What value will this new capability (improved speed, service, quality, etc.) bring to the organization?” is multi-faceted. It’s vital for supply-chain executives to lead the organization through a discussion that answers additional key questions, such as “Will increasing speed inside the four walls increase sales and revenue?” and “Will there be labor available to support operations, especially around peak periods?” The impact of labor constraints on sales is a key consideration in assigning a dollar value to new capabilities. Such an effort can be difficult, but it ensures that you’re designing an operation that meets the strategic goals of the organization.
Design a flexible solution.Omnichannel business leaders are constantly looking at growth by channels — retail, wholesale, and e-commerce. Omnichannel distribution centers need to leverage technology and material-handling systems more creatively than their single-channel contemporaries. Businesses are demanding that their supply chains meet demand fluctuations without increasing capital investment. Flexibility is critical to omnichannel success.
Outlook:
As omnichannel service requirements and capabilities evolve, so too will the role of the supply-chain leader. In the next three to five years, executives will be expected to align their organizations to meet ever-changing customer expectations around speed, service, availability, selection, and price. Such cross-functional alignment, along with valuation of new capabilities to justify investments, will be critical to achieving business goals and ensuring flexibility to provide a seamless omnichannel experience.
Diana Mueller is an Account Executive with Fortna Inc.
