Judy Blackburn, head of the supply chain practice at Kurt Salmon UK

Judy Blackburn, head of the supply chain practice at Kurt Salmon UK

Investment in mobile and omnichannel retail is the number one business priority for the year ahead, according to a recent survey of UK retail chief executives. But creating a dynamic supply chain that can profitably support the extensive product fulfilment options offered to customers is going to be a major challenge.

Despite more and more companies competing to provide ever faster and more convenient deliveries to consumers, just 29% of the 25 leading UK retail chief executives surveyed for a recent report believe investing to create a dynamic supply chain is a priority.

Additionally, some 63% of retailers surveyed for the Retail 2015 report are prioritising achieving a single view of their customers, compared with 25% who are focusing on stock; so while there is general investment in supply chain management, the focus is still very much on the customer.

“However, having visibility of stock, along with the flexibility to fulfil orders from any inventory holding location, is paramount to support growth, maximise margins and minimise cost to serve within an omnichannel business,” contends Judy Blackburn, head of the supply chain practice at Kurt Salmon UK, which co-authored the report.

“The supply chain, alongside organisational structure and technology, are the three pillars that support a successful omnichannel business. Bricks and mortar retailers should, therefore, be looking at ways to optimise their existing store supply chain to work across multiple channels.”

One approach gaining in popularity is ‘ship-from-store’. According to Blackburn, retailers can use their stores as a network of mini-warehouses, connected by distributed order management systems and delivery networks.

“In this way they can gain considerable benefits from increased stock availability, as well as positioning inventory closer to their customers and, therefore, reducing transport costs.”

Leading US omnichannel retailers, such as Nordstrom and Urban Outfitters, are among the early exponents of this practice.

“With the additional uncertainty about how much further online will grow, all retailers should be actively reviewing their fulfilment capabilities and capacities and developing contingencies now so that there is not a repeat of the high profile failures around peak trading events such as Black Friday and Christmas. Using the store network to fulfil orders is a good way to supplement distribution capacity during particularly extremely busy periods,” adds Blackburn.

With speed and flexibility within the supply chain essential, retailers are looking at “everything and anything” to improve the delivery process. According to one department store COO interviewed for the report: “Track and trace is becoming more important certainly - knowing where your containers are, knowing when they’ve come into port, and trying to speed up the whole operation when a product touches down.”

Full visibility on costs
Turning to visibility of costs, retail leaders say measuring profitability at a channel level is possible, but they are struggling to understand the impact that each channel is having on each other. 

“Without obtaining full omnichannel cost visibility, of which the supply chain plays an important part in providing last mile visibility, it will be a challenge to know the financial impact of meeting consumers’ expectations for free deliveries, which, not unexpectedly, is something they would very much like,” notes Blackburn.

According to consumer research commissioned for the report, free delivery is revealed as a top priority for 57% of consumers when shopping online for clothing, and 45% when shopping online for food. However, only one in 10 consumers would like deliveries within 24 hours.

“This not withstanding, increasing delivery speed is still a key objective for most retailers.  To succeed in the future, all retailers should develop a consistent customer service offering based around choice and convenience. With better supply chain cost transparency, businesses will be able to better develop this menu of services with an eye on the bottom line,” concludes Blackburn.

Retail 2015, produced by Retail Week in association with Kurt Salmon, contains the views of 25 retail leaders on the state of retail across key business areas.