Building the Case for Omnichannel In Retail (My Take)

Earlier this month Brendan Witcher of Forrester published an updated version of their "Building the Business Case for Omnichannel in Retail" white paper (download link below).

As he always does, Brendan highlighted the major considerations for approaching large-scale Omnichannel initiatives with relevant examples and data points. Below is a few excerpts from the white paper and my thoughts on each:

Building the business case to offer capabilities to the consumer

" Forty-two percent of eBusiness and channel strategy professionals have either implemented or plan to implement the ability to view store inventory information online within the next two years. Around one-third also plan to offer at least one other omnichannel fulfillment capability — buy online/pick up in-store, ship-to-store, ship-from-store, endless aisle — within the same time frame."

This metric reported brings light to the fact that different retailers are approaching Omnichannel capabilities projects with different motives and at differing paces. While implementing Manhattan Associates Order Management solutions over the last decade, the main insight I had was that retailers were just beginning to acknowledge that there is a quantifiable business case for pursuing Omni-capabilities such as pickup in store (to drive additional foot-traffic and increase in-store purchases) as well as ship-from-store (to leverage underutilized inventory + serve the customer from a location in closer proximity and at a lower transportation cost). Likewise, pioneers in offering these fulfillment options, such as Macy's, are realizing their overall brand equity has increased 3-fold as they present a single face to the customer for both taking delivery and enabling returns across what was historically split channels.

Likewise, pioneers in offering these fulfillment options, such as Macy's, are realizing their overall brand equity has increased 3-fold as they present a single face to the customer for both taking delivery and enabling returns across what was historically split channels.

Developing and Using the Business Case to build support for the initiative

"As the sole point of reference when considering the merits of an initiative, t he business plan is crucial to answering key questions upfront and minimizing potential confusion among multiple stakeholders. above all, write the plan clearly and succinctly."

The old adage used "Measure twice, cut once" is wholly applicable to today's Omnichannel Order Management implementations. Broadening out from just OMS, what might surprise you is that numerous leading retailers proceed with Omnichannel initiatives without a well planned and quantifiable plan. Rather, the technology vendor provides a framework project plan to implement the technology solutions and that is later expanded by the retailer with additional task around the software implementation. What Brendan and team point out is that a succinct business case is first needed as a framework for the decisions on which OMS to select and the sequence to implement the capabilities. This clarifies to all stakeholders, direct and indirect, on what the plan is, what the goals of the plan are, and what the output of the plan is. It's important that this plan focus on the financial and quantifiable, rather than qualitative metrics such as brand equity and perception by the consumer.

What Brendan and team point out is that a succinct business case is first needed as a framework for the decisions on which OMS to select and the sequence to implement the capabilities. This clarifies to all stakeholders, direct and indirect, on what the plan is, what the goals of the plan are, and what the output of the plan is. It's important that this plan focus on the financial and quantifiable, rather than qualitative metrics such as brand equity and perception by the consumer.

Use Order Orchestration to save cost

"Every omnichannel retailer we spoke with for this report mentioned savings that they have realized through the programs, including a niche retailer claiming “six- figure savings” in annual shipping costs. Find savings in areas like labor, shipping, and capital expenditures by asking: Can we utilize less expensive delivery methods? Can we shift demand to more pro table channels?

However, eBusiness leaders must always add cost savings to the business plan, including detailed descriptions of the changes required for savings to happen. For example, if you are developing a plan for ship-from-store, you must include in the business case other projected benefits like lower distribution center labor costs, including reductions in distinct job hours or salaries over a specic time frame."

There's numerous advantages for leveraging the OMS to optimize order fulfillment locations. The main functionality in leading OMS is a concept called "Geographical Proximity based sourcing" as a strategy in allocation engines. This allows the business to configure a rule that allocates to the store in closest proximity, with the consumer being the epicenter in a series of expanding concentric circles. Each concentric circle is modeled to reflect the size of a national carrier's zones. Within each "band" (circle) systems assess the labor utilization of the stores, so it may be the case that the OMS selects the a store further away from the consumer which has enough labor capacity to fulfill the Order, relative to another store. To Forrester's point, this not only saves on transportation cost, but has numerous additional quantitative benefits:

To Forrester's point, this not only saves on transportation cost, but has numerous additional quantitative benefits:

1. Lower transportation cost by sourcing closer to customer.
2. Shorter Order-to-Delivery time to the consumer (could be sent FedEx Ground and arrive next day if allocated to store in same city).
3. Leverage under-utilized inventory in the store which may not have been selling equal to forecast, saving cost by not having to return the goods at end of season back to the DC.
4. Leverage under-utilized store associates (Note - where picking is done in earlier hours in morning prior to lunch/afternoon/evening rush).

For more information on how SCApath can help you develop an Omnichannel strategy, as well as design and implement your supply chain systems, please visit www.scapath.com or contact me at zach@scapath.com.

For a deeper look at the report, please visit the link provided by Freestyle Solutions. Download Link of Forrester White-Paper