The impacts of Covid-19 and Brexit are accelerating growth in sales channels, with retailers seeking more routes to revenue to counter uncertainty and unpredictability. Claire Webb, managing director of Advanced Supply Chain Group (ASCG), looks at how retailers can manage the multiple logistical challenges of a multichannel strategy.
Changing channel arsenal
In September 2020, as retail rebounded from the first Covid-19 lockdown, ASCG found that 42 per cent of retailers were looking to increase sales by selling through more channels. Less than a year on, and our latest data shows this has jumped by almost a third to 71 per cent.
Nine in ten retailers planning to grow their channel footprint are doing so in response to the pandemic and Britain’s departure from the EU. However, there’s much more to this growth in channels than recent macro factors alone.
There’s been an upward trajectory in the number of sales channels used by retailers in the past decade. Averages have risen from three channels in 2011 to five channels this year, with an acceleration of 48 per cent growth in the past five years.
Growth has been fuelled by an evolution of ecommerce and wider adoption of digital technologies. The online stores owned by retailers are now part of a channel arsenal spanning mobile, social media, online marketplaces, deal websites and subscription services, as well as physical shops.
This rise in omnichannel has left retailers facing supply chain challenges beyond managing stock levels and forecasting.
Errors, inefficiencies and margin dilution
A quarter (25 per cent) of retailers have experienced an increase in errors when selling through more channels. This includes issues such as incorrect labelling, picking and packing, sending the wrong goods to customers and not following their preferred delivery options.
These mistakes undermine the effectiveness of Lean Six Sigma theory and processes, making it increasingly difficult for retailers to achieve the desired goal of zero defects. It’s leading to retailers encountering rising inefficiencies from multichannel selling and increasing margin dilution.
Supply chain performance and overall profitability are often needlessly compromised by a combination of factors; an acceptance of inevitability when it comes to growth and mistakes; insufficient supply chain technology and the wrong balance between people and automated processes.
More people, places and processes
Selling a higher volume of goods through multiple channels generally requires more people, places and processes. Storing, handling and distributing an increasing number of products often involves larger teams, greater warehousing and fulfilment space and expanded supplier networks to keep goods coming into supply chains on time, and at the right costs.
These challenges are intensified by the real-time demands and expectations that tend to grow in parallel with omnichannel strategies. As shopping becomes more seamless and accessible, consumers want products quicker. This shortens lead times and often means that ‘capacity’ and ‘performance’ become blurred during supply chain planning.
By large, retailers are, correctly, attempting to solve these problems with investment in supply chain management technology. Half (50%) plan to invest more in software as they increase sales channels. However, this investment is often compromised by the view that inevitable growth problems can be resolved by automation alone. The premise being that reducing head count helps minimise human errors, while still accommodating growing capacity. This is misguided and focus must shift from capacity to performance.
Performance first
By focusing on performance, retailers and their supply chain partners will be able to specify a solution that strikes the right balance between people, artificial intelligence and automation. This is increasingly important during times of uncertainty and unpredictability, when human intervention can prove the difference in keeping supply chains agile.
A recent study by Warwick University showed that a once-in-a-generation drop or surge in demand, such as the impacts of Covid-19, would trigger a disproportionate automated response. Fit-for-purpose supply chain management strategies and software solutions must harness the experience of employees, with a design that is bespoke to the operation. This approach can help to continuously optimise the flow of products being sold through multiple channels.
As omnichannel strategies continue to grow and flex in response to changing consumer trends, it’s critical that retailers don’t let the importance of volume dictate a capacity first approach to supply chain management. Capacity is just one part of the complex omnichannel challenge, and a performance-led focus will prove more effective in driving growth, while maximising efficiencies and minimising margin dilution.
Click here for further information about ASCG’s multichannel research and to read more about the growing web of sales channels and supply chain challenges.
Claire Webb is the managing director of Advanced Supply Chain Group (ASCG)
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