Traditional retail organizations have relatively predictable supply chain flow: Boost your inventories before anticipated busy seasons and keep it minimal during slower periods.
But the rise in omni-channel shopping — in which customers can order products from their mobile devices, clients could be located anywhere in the world, and other modern retailing realities — has the executives at some of the largest US retailers concerned about whether the existing supply chain is up to the challenge.
That’s one of the takeaways from a recent report compiled by the consulting firm PwC (formerly Price Waterhouse Coopers) entitled “CEO Viewpoint: The Strategic Role of Supply Chain in an All-Channel World“.
Supply Chain Inadequacy “Staggering”
Of the more than 400 chief executives from retail companies in a variety of industries who participated in the survey, 83% said they believed their supply chains are not optimal to meet omni-channel demands, a statistic the report labeled “staggering”.
“Herein lays the irony,” the report stated. “Because the fact is a retailer’s supply chain is going to be the biggest enabler to meet the omni-channel customer’s fulfillment needs.”
Among those participating in the survey was Ken Hicks, president and CEO of the Foot Locker chain. Hicks said while supply chain is slow to respond to changes, omni-channel shopping is quickly becoming the company’s fastest-growing sector.
“We’re making it more responsive and faster,” Hicks said. “We are looking at new ideas and new ways to distribute goods, not just to get them to the store, but also to the customer.”
Like many companies in today’s retail environment, Foot Locker’s growth model is no longer based on opening new stores but redefining the role of the store in omni-channel retail. That’s because there’s currently a shift in consumer preferences, with fewer people driving to the mall or downtown shopping district and more people ordering products and services online.
Some Still Relying on Outdated Growth Models
Still, many CEOs who participated in the survey still defined growth using the traditional model: Expanding their brand into new regions and markets (48%), opening new stores (40%), and through mergers and acquisitions (32%). Yet the report suggested that this type of traditional view of retail growth fails to recognize the importance of the supply chain as the differentiator or put omni-chain at the center of their future expansion strategies.
Baljit Dail, chairman and CEO of JDA Software, which commissioned the survey, said CEOs who fail to see the shift in the retail marketplace may pay the price later.
“The rise of omni-channel is one of the most transformational shifts that have occurred in retail in recent times,” Dail said. “Retailers who don’t understand the strategic alignment of their supply chain with consumer expectations are in danger of becoming non-competitive. This isn’t about making a tweak to the operating model, it requires a massive change. Taking a cautious, incremental approach to this kind of market disruption can be a deadly course of action.”