Supply Chain Planning for Omni-Channel Holiday Retailing
At many retailers, holiday shopping is the Super Bowl of supply chain planning. Demand comes at you from all directions, at all times day and night. Filling that demand—in a way that makes business sense—can drive a Chief Supply Chain Officer to distraction.
Consumer buying habits have changed dramatically—that isn’t futuristic, it’s here. Customers today are buying across multiple channels and receiving their purchases via different delivery methods. They may buy at the store and leave with the goods, or have them shipped. They may buy online from a smart phone (even while at the store) or order through a call center, using in-store pickup for part of the purchase and having the rest shipped from another store or a distribution center (DC).
The retailer does what it can to get the customer’s order, since competition is an app or click away. So retailing can become a battle waged in seconds. And that battle can extend beyond execution to supply chain planning. Here’s how.
Successful supply chain planning means being able to promise—at the right moment and with confidence—to fill an order from store stock, the retail network, or even a brand vendor’s warehouse. So the challenge is to invest in the right inventories to have the optimal service level. To do that requires channel integration—the ability to sense, collect, and analyze demand signals from both physical and virtual channels, as customers come to you at brick-and-mortar stores, through Google, your website, a supplier website, from review pages, etc.
It also requires segmenting demand at a high level of detail, so that the omni-channel inventory at territory locations can be matched properly to demand streams. This is where marketing and supply chain segmentation converge. Detailed demand signals allow you to cluster customers and behavior patterns to shape demand with personalized offers. Demand analytics and machine learning lets you process the data points in a rapid, automated process.
And allocating demand to the serving point should calculate margin in real time, before you confirm. Otherwise you gain the sale, but at what cost? Margins are already squeezed by aggressive competitors like Walmart and Amazon.
Let’s consider an example. Mindy is looking for a television for her new apartment. Having done some research on-line and chosen her preferred model, she walks into your store, browses the selection and looks at prices. But there are many other brands with similar features. She pulls out her iPhone and uses an app to check prices on the web and in stores nearby.
At that point, being able to offer Mindy price points and discounts based on web data from competitive sites can help you drive a response with highest chance of a sale. What about this floor model at this price point? Or one from the warehouse with slightly different features and a slightly different price point? In other words, armed with good supply chain data, the salesperson has an array of attractive, yet profitable, options to entice the in-store buyer.
So real-time assignment of demand means closely coupling planning and execution with real-time algorithms and detailed customer segmentation. These diverse demand streams drive inventory optimization that calculates the optimal service points with the highest probability of realizing the greatest margin. The retailer benefits from greater profitability, higher supply chain visibility, increased shelf fill rates, reduced lost sales at the point of sale, and lower inventory.
Sound futuristic? Check out Costa’s supply chain innovation in our last blog, where a camera in the dispensing machine identifies customer demographic information for demand sensing and to make improved supply chain decisions.