The challenges of selling through multiple channels will be made increasingly complex by innovation in shoppable formats, and will require greater holistic, end-to-end visibility of supply chains. With this in mind, Dr Fahian Ansul Huq, Senior Lecturer in Operations and Supply Chain Management at Alliance Manchester Business School looks at the growing importance of supply chain integration.
Beyond growth
Retail sales channels aren’t just growing, they are also becoming more and more sophisticated. Retailers are either harnessing the latest technologies to enhance consumer experiences and their propensity to purchase or are modifying existing channels in response to trends. Lockdowns during the pandemic, for example, have seen the emergence of dark stores, where retailers have turned shuttered shops into micro-fulfilment centres to service local ecommerce demand.
When non-essential retail has reopened, these dark stores have evolved into hybrid shops, meeting both the demands of in-store shoppers and those buying online. This trend has the potential to continue in the long-term, as curbside pickup grows in popularity and retailers look at more localised options for final mile deliveries. Utilising cycle couriers can help beat delays caused by traffic in urbanised areas, while also reducing carbon emissions and appealing to eco-conscious consumers. A network of shops, also acting as fulfilment hubs, makes this a possibility.
There has been an accelerated blending of the physical and the digital worlds, with instances of retailers embracing the latest virtual reality and augmented reality (AR) technologies. Ikea has recently teamed-up with Apple to create an app that enables shoppers to virtually furnish their homes. Using AR, consumers can photograph an item from the Ikea catalogue and then scale and move it to accurately see how it would actually fit in their desired room at home.
The trend of merging digital and physical channels isn’t just limited to using technology to optimise more traditional retail formats. Ecommerce-first retailers are investing in real-world showrooms to increase the opportunity for shoppers to interact with products. These showrooms recreate the more social and emotional elements of shopping, which the functionality of online shopping cannot necessarily replicate. It is, perhaps, one of the reasons why retailers still identified bricks and mortar as a prominent channel in Advanced Supply Chain Group’s (ASCG) research of retailers.
Channel cannibalisation
By constantly striving to make touchpoints with consumers increasingly shoppable, retailers run the risk of creating inter-channel competition. This can quickly lead to cannibalisation of sales, compromising both the value and volume of sales. It can accelerate the depreciation of stock value and shorten the timeframe for realising optimum selling prices. Supply chain integration strategies can help overcome these challenges by improving transparency throughout the whole chain and the overall exchange of data. Integration involving Vendor Managed Inventory (VMI) is key to this and streamlines order fulfilment across multiple channels through closer collaboration between the retailer and supplier. It’s an approach that better empowers the supplier of goods to plan, forecast and replenish inventory on a retailer’s behalf, which allows the retailer to place more strategic emphasis on optimising different sales channels and customer service.
For VMI to be effective, retailers need supply chain management software that can seamlessly join up the front and back ends of supply chains. Information needs to quickly and accurately flow from the point of sale back to the source of products. This becomes increasingly challenging as more suppliers have been added to the chain. The ASCG research shows 42 per cent of retailers have grown their supplier networks to meet the demand of selling through more channels, meaning there’s even more reliance on technology and software to collate data and ensure it is communicated to the right places, at the right times and in the right formats.
Investing in IT skills
The growing connectivity of devices, advances in artificial intelligence and automation all present the opportunity for more seamless supply chain integration. These different technologies all enable the development and operation of data-led supply chains, underpinned by joint inventory managements strategies that can keep pace with changing and growing sales channels. The biggest challenge to realising these more integrated supply chains is finding the right digital skills and expertise.
Historically, supply chains have been viewed as manual and relatively low skilled operations, which has limited the progression and appeal of supply chain management as a tech-focused sector. This is changing but is still impeded by a zero-budgeting approach to supply chains, where retailers aim to minimise margins by keeping overheads as low as possible. As a result, capital investment can be restricted, which can feed a reluctance to invest in the innovation that attracts those individuals with the IT skills and vision to harness the ever-evolving possibilities of technology.
Data from the ASCG research shows 38% of retailers are prioritising the recruitment of staff with relevant expertise to solve the problems of growing retail channels. Although this is positive, it still lags behind the investment in supply chain technology. Both factors need to align in terms of investment priorities to truly leverage the opportunities of data-rich supply chains and optimise joint inventory management strategies that efficiently and effectively service multiple channels.
Dr Fahian Ansul Huq is a Senior Lecturer in Operations and Supply Chain Management at Alliance Manchester Business School.
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