The retail landscape has probably changed more in the past year than it has in the past decade. While e-commerce has been disrupting traditional brick-and-mortar retail for more than a decade, nothing could have prepared retailers for the disruptions and uncertainties that emerged in 2020. The combined impact of the Covid pandemic, supply chain constraints, and shifting consumer expectations have created high levels of uncertainty, variability, and complexity within supply chains.
As communities grappled with implementing lockdowns and public safety measures, retailers had to immediately pivot to new planning scenarios, distribution channels, and fulfillment methods to both meet consumer needs and comply with COVID restrictions. As a result, omnichannel distribution models, which bring together traditional retail sales and D2C sales through brand stores and digital avenues, took center stage for many retailers.
But as economies now slowly emerge from the peak of the pandemic, there will be continued opportunities for omnichannel, specifically in e-commerce and direct-to-consumer (D2C) channels. For example, a retailer’s direct consumer interaction can result in:
- Creating a tailored brand experience.
- Greater product ranges that can be offered.
- Promotions that are targeted and personalized to customer segments.
- Gathering first-party consumer preferences, purchasing behavior, and feedback that can lead to new product innovation.
Additionally, omnichannel distribution can greatly increase customer reach, resonate with current customers while expanding into new customer segments, and drive higher margins. Retailers that continue to embrace an omnichannel approach that encompasses in-store experiences, multiple pick-up options, and D2C channels are likely to become industry innovators and leaders in the new world of retail.
Omnichannel isn’t without its challenges
Omnichannel distribution is a viable way for retailers to pivot and can be very beneficial from a marketing and product innovation perspective. However, this distribution model can have drawbacks from a supply chain standpoint. Omnichannel distribution can be challenging because of an increasingly complex supply chain that includes multiple modes (cross-docking, VMI, drop-shipment, etc.). Additionally, today’s customers are expecting a high-quality fulfillment experience (i.e., free 2-day delivery) with multiple pick up/return options such as:
- Direct-to-consumer (D2C)
- Reserve-Online-Pick-up-In-Store (ROPIS)
- Buy-Online-Pick-up-In-Store (BOPIS)
- Traditional Online Return
- Buy-Online-Return-In-Store (BORIS)
One of the ways to mitigate challenges in omnichannel distribution is by ensuring transparency and integration across all associated functions throughout the supply chain.
The role of integrated planning
Retail demand planning is also evolving into a more functional approach, shifting away from seasonality/schedule towards event/exception as the main process driver. This approach can create a more seamless retail supply chain if it is accompanied by a tighter integration:
- Functional integration, which would better align supply chain planning with merchandise financial planning.
- Business unit integration, which draws connections across data structures, planning, and governance across all market, product, and brand dimensions.
- Channel integration, which connects B2B and B2C channels to support a unified vertical.
- Process integration, which unsiloes planning processes across an organization.
While an integrated planning approach will help create alignment across a retailer’s organization and supply chain, actually building out an integrated planning system will require complex technology, to achieve optimal business outcomes.
As larger volumes of data become more prevalent, due to the availability of data related to weather, local events, mobility, e-commerce shopping carts, and website glance views, retailers will be able to make better-informed decisions. The challenge is converting these vast amounts of data into actionable insights that align with business goals. AI/ML technologies can make all the difference. Retailers can effectively manage an integrated omnichannel strategy through leveraging advanced analytics, demand sensing, and other AI use cases to better understand customer needs and demand.
Demand sensing allows retailers’ planning teams to incorporate vast amounts of external demand data into their planning processes and AI/ML algorithms are able to connect data points, enabling a much more granular and accurate forecast. This allows companies to automate execution, better collaborate with upstream and downstream suppliers, and increase engagement with their customers through understanding their buying intent.
Building an effective omnichannel is worth the investment
Building a strong omnichannel model takes time and effort, but in the long run, it can set retailers on a path to navigate today’s challenges while building a strong distribution model that will keep up with future needs. As part of their omnichannel journey, retailers can deploy and benefit from the following capabilities:
- Leverage advanced analytics to manage uncertainty.
- Use AI to understand consumer demand and right-size production to meet demand more accurately.
- Provide visibility of inventory across all locations and transition inventory segregation policies to more holistic ways of allocation and fulfillment.
For retailers who are ready to invest in building an effective omnichannel model, a truly integrated business planning platform can help them take planning and decision making to the next level.