The majority of focus in retail today is all omni-channel this and omni-channel that. I believe now it is not about how I do omni-channel, it is how I do retail. Transacting business this way is the way of retail now and in the future. Five pillars support retail. Each pillar is dependent on the others, yet in very different ways for different retailers. There is no “prescription” to follow to support retail today, even by type of retailer – every Retailer presents unique challenges and opportunities on the journey to the next phase of Retail. If you missed part one of this article, click here to read it. Then let's continue on to look at two more pillars of retail!

From an operations perspective, one of the most formidable challenges Retailers are facing today to change operational behavior is compensation. People will do what they are compensated to do even if it is the right thing to do for the company or even for the customer. Compensation drives actions and response, making decisions based on the good for the individual. We are all aware of the examples of behaviors that have supported the business for years, now no longer appropriate for the new retail paradigm. 

Companies must understand this is not only for the sales channels; it includes all organizations, from Sourcing through fulfillment and all supporting organizations. All organizations make decisions daily, which compromise the ability to service the customer in a timely, cost-effective manner. Companies have to analyze compensation and goal structures modeling the intended behaviors throughout the organization in support of the new Retail. This is especially critical as more and more volume moves through this dynamic channel. Comp increases by store and channel; payroll as a percentage of sales; transportation costs as stand-alone measures; will lose meaning when evaluating a company’s performance. Basing success on comps by categories and profit margins that measure performance going forward. 

Supply Chain

The legacy approach to channel-specific retailing as discussed previously was inherently one-to-one. Suppliers shipped to prescribed DCs, and those DCs shipped to prescribed stores or consumers in a very simple supply chain. Today, the supply chain is many-to-many. Customer demand is both the starting point and the most variable point in the supply chain. Any-to-any channel fulfillment requires a new degree of flexibility. At every stop a product makes in the entire supply chain, it must be capable for reallocation for changes in demand, supply or even customer fulfillment.

The primary capabilities of any supply chain are based on the following characteristics:
1) Visibility – the ability to see all orders – Purchase Orders (on order and intransit Sales Orders from all channels, Vendor or other third-party providers and at all company locations (DC, Store, Return) at the right level – to the level of action,
2) Availability – information needs to be available at whatever time the supply chain needs it to be. It can’t wait for overnight processing or system availability. Product is moving in real- time and customers are ordering in real-time requiring decisions in real-time.
3) Capability – the ability to process orders in whatever way required at that point in time: split orders; re-label; pick, pack and ship to customers; hold; and add services to provide whatever is needed at that point in time to service the customer
4) Integrity – Lastly, there has to be trust in the information. To make decisions based on credible real-time information.

The future supply chain must have these characteristics to be nimble and responsive enabling the ability to service customers timely with a complete understanding of the costs involved with every decision. Stay tuned for part three!

Jim Brownell is enVista Senior Director.