Home' MHD Supply Chain Solutions : MHD Jan-Feb 2017 Contents Automating processes
Despite growing investment in inventory
visibility, few retailers are at a stage where
they're able to automate the movement of
products across channels. It's still common
to see stores and distribution centres picking
up the phone or writing an email to request
a product, giving little control, oversight or
consideration to future demand, in-transit
supply, cost-efficiency or alternative methods of
achieving the sale, such as purchasing online.
Many Australian retailers have put in place
efficiency initiatives to automate processes for
order capture, fulfilment and returns across
channels, but very few today are automated.
In response, leading retailers are looking to
distributed order management (DOM) systems
to move past these constraints and manage the
increasing complexity of multichannel order
fulfilment. A DOM is able to do what traditional
order management solutions cannot: use rule-
based procedures to manage customer orders
and inventory across multiple channels, and
determine how best to balance fulfilment lead
times and the cost of doing business.
Those companies that successfully leverage
a DOM can scale to drive more profitably
executed incremental sales that optimise the
customer experience, and those without cannot.
Employ fast, cost-effective delivery
A growing number of retailers are looking to
fulfilment of online orders from stores as a
means to improve fulfilment lead times and
reduce costs by picking products that are held
closer to the desired delivery address. This
can be seen in the significant increase in the
use of click-and-collect to fulfil online orders to
completeness from store-level inventory.
Leading retailers are taking key actions to
leverage store inventory whilst ensuring cost
efficiency and smooth store operations are
maintained. These include:
• Assessment of cost-to-serve for each fulfilment
type used to understand net profitability in a
richer and more meaningful way.
• Examination of what changes to usage of
staff and store space can occur to support
efficient in-store logistics and increase
• Establishment of a cross-functional project team
focused on optimising order fulfilment from
stores, inclusive of a roadmap to implement
in-store logistics technology solutions.
For supply chain leaders looking to achieve
faster, more cost-effective last-mile logistics
in retail, developing capabilities to support
fulfilment from stores alongside distribution
centres is critical.
Recognition of the importance of reverse
logistics within multichannel retail is growing. In
the past, a change-of-mind returns policy was
often seen as a differentiator. Today, offering
such a policy has become table stakes.
Instead, leading retailers are looking to make
returns more simple and convenient, removing
the legalese and presenting their policy to the
consumer in an easy-to-read, understandable
format. With this more consumer-friendly returns
policy, the volume of returns the business
handles will grow, not just sales. Retailers
should examine the initiatives they need to put
in place to minimise excess inventory holdings
and write-downs associated with returns.
Supply chain leaders can differentiate
themselves through their capacity to identify
the most profitable route for a product to be
returned to the inventory pool by:
• Identifying whether the item is part of the
assortment within the store it was returned to.
• Using forecast sales to determine whether the
return will create an overstock situation.
• Recognising when the product could be more
efficiently sold at full price if it was located
elsewhere in the network.
• Making profitable trade-off decisions between
the cost of write-offs, discounting and
obsolescence versus the cost of relocating the
product within the network.
It's not just the question of what to do with
the returned product that needs to be answered.
Retailers must also identify what the return
means for open-to-buy --- the available money
to spend on bringing product into the business.
Returns are growing to become a key supplier
of the business and needs to be considered as
such. Leading organisations are forecasting and
providing visibility of returns into the buying and
planning processes. This visibility allows them
to more effectively invest in inventory, minimise
overstock situations and optimise sell-through
across the network.
Thomas O'Connor is a principal research
analyst in Gartner's retail supply chain
industry team. Thomas focuses on retail
demand-driven supply chain maturity and
benchmarking initiatives. For more information
"Retail is undergoing a wave of change globally ...
consumers now have more control of how and when
they choose to shop."
Zara in Brisbane. Photo by
Gpccurro - Own work, CC
BY-SA 4.0, https://commons.
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