16 August 2016

Australian retailers must restructure supply chain as customer demand rises

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Supply chains are becoming more complex. Australian retail supply chains today must be capable of managing increasing customer expectations (lead-times, pricing, options), channel diversification (online, store, multi-channel, omnichannel) as well as increasingly complex product sourcing strategies.

Why is online challenging?

Consumer expectations are shifting as they take more of their spending online. The latest Productivity Commission report projects growth of up to 15% per annum in online sales. Driven by the proliferation of the internet and smart phones, Australians are increasingly making their clothing and electronic goods purchases from the office or the comfort of their homes.

Therefore, many brick and mortar (B&M) retailers are taking their offerings online. In this rush, companies with supply networks designed to support their B&M stores cannot adequately serve their online customers without impacting their bottom lines.

What are some of the constraints and opportunities of online?

Online complexity

Greater choice and transparency in price and product: From online reviews and comparisons customers have already made up their mind on what they want to buy before going to a store website.
Highly competitive delivery offerings with free shipping and prompt shipping offered by most online retailers. Studies have indicated almost half of all carts are abandoned due to shipping charges. Getting the delivery offering right can be a competitive advantage.

Planning becomes even more pivotal to success

Ranging and availability to offer same or next day delivery means optimal stock must be on hand. Warehouse space is limited, when ranging for online, SKUs have to be carefully selected to offer the customer value but must also have sufficient margins. Servicing customers profitably and range planning for each channel is vitally important if a retailer is to survive e-commerce profitably.

Stock transparency is crucial, giving customers the assurance that any orders placed will be fulfilled in a timely manner.

Execution and physical network requires re-design

Less tolerance exists for getting it wrong as reverse logistics can be expensive, unit pick costs are inflated and stock transparency via real-time data as well as managing excess stock becomes more critical.

Picking costs are higher since items have to be picked at the unit level. Traditionally done by the customer in-store, unit picking for online sales have to be done by staff as an added cost.

Reverse logistics can be handled by B&M stores or via return shipping; with the aim of returning sellable products to inventory quickly. How do you ensure a seamless and pleasant experience for the customer at a moment where you can either earn their loyalty or lose future sales?

 The continuing rise of the mobile and connected customer, and the retailers’ capacity to keep pace, will anchor success and future growth.

Don’t miss Akolade’s 4th Annual Online Retail Supply Chain Summit coming February 2017 in Melbourne! Australia’s premier event exploring the latest trends, technologies, and innovations driving the online retail supply chain and examining the transformation and differentiation of fulfilment and customer experience and engagement.

The best part of my job as a Conference Production Manager is to create and manage my own conferences from concept to delivery, identify future conference topics as well as giving me a chance to expand my business card collection. Having a bit of a sweet tooth, you will always find me having lollies on my desk or you will catch me browsing on fashion sites during lunch breaks.

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