Keywords: Multi-Channel, Brick-And-Mortar Retailers, Perfect Order, Retailer, Flow Paths.
The term multi-channel refers to companies selling goods through multiple channels – i.e., direct sales, distributors, e-commerce, and so forth. ARC Advisory Group defines omni-channel as a special form of multi-channel commerce practiced by retailers who sell goods through both stores and over the internet.
Perhaps the hottest trend in supply chain management is omni-channel commerce as practiced by brick-and-mortar retailers. As we learned in a recent survey, retailers certainly view omni-channel initiatives as critical: 86.9 percent of brick-and-mortar retailers saw omni-channel as a strategic initiative at their companies!
But an omni-channel commerce project is a very large undertaking, making it unwise to attempt a "big bang"-style project. ARC has identified seven main ways in which omni-channel can be operationalized. Which particular omni-channel projects should be prioritized? What supply chain capabilities and technologies will be necessary to support the path taken? ARC Advisory Group and AGiLE Business Media (parent to DC Velocity magazine) surveyed retailers to answer these questions. There were 177 qualified respondents.
Picking the best path forward requires an understanding of what every deviation from the perfect order costs the retailer. The different omni-channel flow paths – order in-store/deliver to home; order online/fulfill from any location; etc. – will all have different cost structures. Retailers need to understand these costs.
Unfortunately, our survey shows:
While retailers largely understand the costs of shipping goods from an e-commerce warehouse, they do not understand the costs associated with fulfilling omni-channel orders from stores.
Two-thirds reported they do not understand what order fulfillment mistakes cost in terms of lost customers or the reduced lifetime value of a customer.
While customer expectations in the omni-channel are high and increasing, most retailers current execution capabilities are highly constrained by their current in-store logistics capabilities.
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