Friday 9th Dec 2016 - Logistics Manager

Omni-channel aspirations

It’s no longer just a multi-channel world. It’s now omni-channel, and to succeed in this developing environment takes technology. Johanna Parsons sizes up the requirements.

Retailing has been transformed by the internet, and the various routes to market that it represents. More sales is always good news. But processing so many types of orders is a massive task for retailers and suppliers alike, and in particular their IT systems.

UK shoppers have long had a reputation as multi-channel pioneers, with a surge in shopping via mobile devices and more stores are offering sophisticated collection options every day.
These new ways of placing and delivering orders are stretching many ERP systems. Retailers must work with apps for sales via mobile phones, tablet computers and televisions, and consolidate these with orders from their own websites as well as online marketplaces such as Amazon.

And while many businesses are adapting their existing IT to fit the new tasks, it’s the number of orders flowing through new channels that threatens to flood embedded systems.

Steve Keifer of GXS gives the example that even 500 online orders out of a shipment of 5,000 items means 500 times the documentation, with 501 purchase orders where previously, before e-commerce reared its head, there would only have been one.

“Even though IT systems will support this, the sheer volumes mean the percentage of exceptions will grow.”

Another extra burden of this new style of retailing is bridging the gap between the customer and the product. Shoppers want to know precise dimensions, what materials are used, and, for example, how clothes look in motion. A lot of rich data, typically involving 3D photos and videos, that was never required of retail before.

“You’d think this data comes from suppliers but a lot of the time it comes from retailers themselves… Accuracy is directly related to returns volumes, so some retailers deliberately add rich data to add competitive advantage,” says Keifer.

“The danger is that if the supplier subsequently makes changes, data becomes inaccurate.”

Another danger, in an age of lean operations, is being overwhelmed by complicated orders, with items from numerous suppliers or from different points in the supply chain.

Online engagement

According to a survey from certification organisation TÜV SÜD, some 60 per cent of UK manufacturers, distributers and retailers are still unable to trace their entire supply chain.

So retailers using a “pull” strategy, particularly from online marketplaces, using the internet as their shop floor for a wide variety of goods, may need to fulfil orders from multiple suppliers or locations, potentially causing huge problems if distributed order management software is not up to scratch.

Keifer gives another example of the new type of engagement demanded by e-commerce, which is to actively work with price comparison websites. The exposure such sites give means making sure they’re kept up to date is of huge value. But doing so goes against the grain for many,  and requires entirely new processes.

“It’s kind of a reverse model that retailers have to have, actively sending pricing data out. It’s a whole new set of data flows that never previously existed.”

The scale of this challenge is underlined by the fact that many retailers struggle to share such data flows internally. For some, the different sales channels are effectively in competition.

“The last thing a retailer wants is for a customer to be told a product is sold-out on one platform when they could have accessed it from another, or to find product variants only available on a certain channel, for example ‘blue’ in the brand store and ‘red’ on Amazon,” explains Markus Schmücker of arvato UK & Ireland.

This is where omni-channel comes in. Whereas multi-channel describes the reality of many retail operations, bolting on new sales channels as they become viable (or impossible to ignore) omni-channel is the unified approach everyone aspires to.

Its definition is still up for debate, but crucially omni-channel retailing means fulfilling orders from all channels seamlessly, with integrated IT systems giving total visibility for the retailer, and maximum availability for the customer – regardless of the medium they’re using to do their shopping.

Jim Spittle, who chaired BT’s recent Retailtopia panel, stressed the importance of internal co-operation and data sharing: “Much greater collaboration, with information transparency and cross channel connectivity across the business, is a pre-requisite to building an omni-channel supply chain.”

This means integrating data from suppliers and vendors alike, and factoring in fulfilment flows and in-transit inventory to provide a consolidated view of availability. Installing such a system means a drastic business wide re-organisation – no simple task.

But it’s not being adopted  for laughs. More streamlined supply chains are always a compelling proposition. But the most convincing argument for making the decided change to multi-channel retailing is increased sales.

“In general, sales growth in an omni environment manifests itself through ease of consumer access, better informed choices and enhanced customer service,” says Phil Streatfield of LCP Consulting in its new report Retail Supply Chain Management: The Omni-channel Revolution.

There is no denying that the convenience for consumers from such joined up systems feeds back to supply and fulfilment. Streatfield says that sales growth is also influenced by re-aligning business operating models to improve availability, reduce markdown and extend ranges.

In the same report, Stuart Higgins, LCP Consulting says: “Business operation changes, as a result of omni-channel implementation, will enable retailers to balance appropriate assortments with optimised replenishment, inventory postponement, balanced in-bound stock flows and seamless returns management. Stock visibility and availability will simply be a derivative of these wider operating model changes.”

The report found that 55 per cent of multi-channel retailers are already planning to make the transition to omni-channel in the next two years.

And in an impressive sign of strategic fortitude, although 90 per cent of the retail board members surveyed agreed that such a move will require a significant re-engineering of the whole business, an enhanced operating model was seen as the most significant benefit in moving to an omni-channel approach.

Not everyone thinks omni-channel requires all-new systems. Many agree that the gradual nature of new channels’ emergence has allowed established supply chain IT to adapt along with increasing requirements.

Platform performance

“In some cases, legacy systems have been explicitly developed to satisfy a specific requirement, and as long as they can be reconfigured to meet the changing market needs, they will continue to be fit for purpose,” explains Darrel Williams of Vocollect.

But some disagree, and think that such complex demands require something new. “Most legacy systems are simply not built to deal with online trading let alone with multi-channel commerce and the flexibility and scalability needed to support this,” says Craig Sears-Black of Manhattan Associates.

Andrew Dalziel of Kewill warns: “Given the rapid rate that multi-channel is developing at, it’s important that retailers continue to review their requirements against the capabilities of their existing systems.”

And Sean Feeney of GT Nexus, says: “The old ways of trying to use enterprise software to orchestrate global supply chains are giving way to network cloud platforms.”

Many stores just don’t have the IT or network capability to deal with multi-channel volumes, and firms like iForce and Clipper offer outsourced internet based reselling. Some retailers are trading exclusively via cloud services, spurning the complexity of their own websites, and in some cases even stores, and opting to sell exclusively through third parties online.

There are several SaaS retailing platforms emerging to back up established online market places like Amazon and E-bay. “Cloud is the emerging technology and will have its day once the perception issues around security are resolved,” reckons Jas Virdee, of Kurt Salmon.

It should come as no surprise that the ultimate retailing platform which has created the concept of multiple sales channels, the internet, is also providing some solutions to the challenges.

These challenges are very real, indeed too much for some to handle on their own. But no-one can afford to ignore the opportunities unleashed by selling through so many new channels. And whether retailers decide to update their existing IT or invest in totally new systems, the ultimate aim of a cohesive omni-channel operation may be a challenge, but it will be IT that delivers it.

Technologies- Ways to meet multi-channel demand

– GXS has launched its “Trading Grid” a global integration platform that enables and streamlines multi-channel business processes by minimising complexity, and cutting manual and duplicate processes.

– BWise says its new Vendor Risk Management system integrates business unit controls, such as a centralised vendor database, contract management, issue and incident management and reputational risks. It also manages individual vendors and supports vendor off-boarding.

– Zebra Technologies produces passive RFID printers including a portable device for printing and encoding RFID tags on the go.

– The University of Derby’s Centre for Supply Chain Improvement has launched a consultancy service to help firms put data to better use. Dr Ming Lim, head of the Centre, said: “I don’t think a saving of 20 per cent on fuel costs for a medium-sized firm, for example, would be impossible.”

– Having set up online fulfilment operations for Asda, John Lewis and Tesco, Clipper has opened an eBay store, Genesis-UK, to help its retail customers to dispose of in season excess stock, and end of season clearance lines.

– In April GT Nexus merged with TradeCard to become what it reckons is the world’s biggest cloud platform for global commerce, with over 25,000 suppliers, financial institutions, factories and logistics providers managing goods and funds flows. 

– Arvato is offering a SaaS fulfilment platform which allows retailers to sell an extended range without having to physically hold stock themselves. It integrates shopping carts, order fulfilment and delivery through one dashboard. Arvato then picks, packs and ships orders directly from its warehouse.

Case study- JJ Food Service takes on Relex for first UK deal

JJ Food Service, the multi-channel catering supplies retailer, enlisted Finnish IT firm Relex to integrate forecasting and purchasing optimisation systems with its existing ERP to improve the efficiency of its supply chain.

The retailer is the first UK company to take on Relex, but it had previously worked with companies similar to JJ Foods to cut waste, increase shelf life, improve shelf availability and cut inventory.

JJ Food Service sources both locally and globally and supplies institutions and restaurants as well as the general public.

Orders can be placed online, by phone and via on-site internet ordering terminals at its depots so that in-store customers can take advantage of internet only deals.
It offers timed collection, collection without appointment and delivery.

JJ Food Service employs around 900 people and turned over £182 million in the year to 31 March 2012.

It has a fleet of some 200 multi-temperature controlled vehicles at its Enfield DC, with seven other depots in Aston, Bristol, Basingstoke, Doncaster, Leeds, Manchester and Sidcup.

The new systems from Relex are intended to reduce waste, improve product shelf life, manage promotions better, automate re-ordering processes, and to optimise stock levels and availability for hundreds of products with a lower turnover.

“It’s not the high turnover, big volume items that let us down most of the time,” says JJ Food Service’s chief operations officer Mushtaque Ahmed. “It’s the more peripheral lines that we carry so we can offer a one-stop-shop service.

“That’s what drove the decision to bring in the forecasting and optimisation that our existing ERP didn’t include.”

Relex provided a pilot programme to “try before you buy” and Ahmed says they made a convincing business case.

Head of Relex’s UK operations Tommi Ylinen says: “We pride ourselves on working closely with clients to develop their processes and wrap our systems around them quickly and efficiently.”

The software is designed to be quick to install, configure and roll out. Relex says its systems are adjustable, so clients don’t need to understand code, have an IT department, or call in the consultants to make changes.

Relex has a database specifically for supply chain applications, processing big data “in-memory” to give results in real time.

This enabled the company to build up agile process development; a flexible, goal-orientated approach that allows processes to evolve through constant fine tuning.

Case study- Omni-channel update for supermarket from DAI

Danish supermarket chain Dansk Supermarked took on UK firm Digital Applications International to install a multi channel IT system following its previous WMS installation a new automated warehouse in Aarhus, Denmark.

The new system was intended to resolve distribution problems associated with multiple internal and external distribution centres including drop-ship vendors.

It also had to offer realistic, and flexible options on delivery to the customer and how to manage the transition from a non-internet business with legacy ERP, distribution and inventory management systems to a bricks and clicks business.

Dansk Supermarked says that its non-food e-commerce website was growing quickly and while the new automated distribution warehouse could cope with increased orders, unfortunately its legacy ERP, e-commerce platform and outsourced e-commerce distribution couldn’t.

Their existing store replenishment systems couldn’t deal with the e-commerce systems requirements, and its external e-commerce distribution service could only deliver within two working days.

DAI provided inventory services, fulfilment determination and carrier management systems.

These are integrated, and together work out a selection of delivery options for customers to choose from.

For example if a customer orders three products where two of the products are held in separate internal warehouses and one is to be fulfilled by a drop-shipper, it will automatically work out which products can be delivered from where, and by when. It also then calculates the best option to get the goods to the customer in the shortest-time and at the least-cost to the business.
The supermarket also took on a fulfilment determination and specialist e-commerce WMS.

This allows integration to multiple systems, and migration of their ERP and e-commerce platforms in parallel with their new DAI systems.

The DAI Message Routeing solution integrates with the ERP and e-commerce systems and allows stock levels to be replicated across all of the systems, so if one product is sold on the legacy e-commerce system the stock-level is automatically replicated in the ERP systems and in the new e-commerce system.