Retailers face several key omnichannel challenges that affect suppliers. Retailers are in a very competitive race to give consumers the products they want in a seamless online to in-store or in-store to online experience.
Any channel the consumer chooses must be executed with fast delivery whether that means pickup in the store, or shipment from the distribution center or shipment direct from the supplier.
Omnichannel expectations are becoming pervasive and the tipping point has been reached. Last year about 37% of adults shopped both online and in stores. This year the expectation is that over 50% will do so.
The challenges that retailers face have a ripple effect that impacts suppliers.
There is now a heightened need for inventory precision to support omnichannel delivery. Inventory at the single item level has to be accurately allocated and visible across store shelves and distribution centers. Consumers expect retailers to know what they have and where they have it. This is true whether the shopper is looking online at an item or in a store talking with a sales associate with a tablet.
Forecasts and demand planning are now more important than ever to avoid out-of-stock items. At the same time, inventory costs have to be controlled with the right level of safety stocks and inventory turn velocity.
Suppliers must dependably ship orders on time and with completely accurate EDI Advance Ship Notices to do their part in fulfilling consumer expectations. In the past, suppliers sent most of their shipments to distribution centers. Now a mix of shipments to stores, distribution centers, and direct to consumers is becoming more common place.
Direct-to-Consumer Shipment Challenges
Direct-to-consumer shipments speed is a major problem. Many retailers are using stores as fulfillment centers to increase the speed of shipments. Some use stores exclusively and some use stores to augment distribution centers during peak times.
While store shipments can offer a speed advantage, they can be more expensive. Distribution centers are designed for efficiency. A general rule of thumb is that it costs twenty cents to ship an order from a distribution center and a dollar to ship from a store. Over time, retailers will undoubtedly become more efficient with store fulfillment. For now, many are overlooking increased costs to stay competitive with delivery times.
The result this year? You as a supplier may have more direct to store orders during peak demand times. Requests to ship orders directly to consumers may increase as well and your speed of delivery to the consumer will be important and increasingly measured for performance.
Additional Implications for Your Small Business
Integrity of data at the item level is essential to inventory precision for individual SKU’s and their location. The emphasis on supplier accuracy, which has always been high, will be even greater. Trading partners will be “cleaning up” location codes and any UPC codes ambiguity.
Currently the emphasis is on inventory precision within the retailer’s locations. Retailer changes are focused on improving their internal systems and improving the data interaction with suppliers using existing processes.
In the future, we expect retailers to expand their reach to include suppliers’ systems as they strive to compete in an omnichannel world and be efficient enough to generate the profits they need to succeed.
We expect more aggressive and innovative retailers will:
- Begin to use EDI Advance Ship Notices to inform consumers of goods that are on the way and which will be available soon.
- Start requiring more supplier inventory information to support promises to consumers for delivery based on what a supplier can ship.
RFID roll-out has been slow so far. However, because RFID automates the accuracy and speed of item-level inventory by location, we will likely start to see movement towards it in the next few years as costs for RFID continue to decline. You can read a blog post about RFID here.
Contact us anytime to find out more about how we can assist your small business.Retailer Omnichannel Challenges That Affect Suppliers by Steve Brewer