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6 Key Learnings from RILA Retail Supply Chain 2015

April 21, 2015

The ‘O’ word was omnipresent at the recent RILA conference where the retail C-suite discussed the big issues.

Tighter margins, data integrity and infrastructure unfit for purpose – Omni-channel issues dominated debate among suppliers and retailers at the RILA Retail Supply Chain Conference 2015.

Key learnings to take from round tables and panel debates at the event include:

  • Free shipping and same day delivery hurt margins

Retailers must quickly figure out their strategy for click‘n’collect and other omni-channel operations as standing still is no longer an option. For most retailers the costs of servicing an online order to be collected are greater than if the entire transaction was carried out in-store. To keep the sale retailers are willing to take this hit but they will have to figure out other ways of shoring up margin – for instance, if the customer is coming in-store staff must be primed to upsell accessories and additional products. To maintain overall revenue, retailers are going to have to balance the price of goods with the cost of meeting customer expectations of free shipping or same day delivery.

  • Distribution efficiencies are being eroded

New processes need to be developed quickly throughout the supply chain if cost-savings based on efficiency are to remain. Over many years companies have devised the most cost-effective processes for distribution from the place of manufacture to the retail store. However, omni-channel has disrupted these carefully refined practices and companies need to identify where new cost savings can be made.

  • The ‘last mile’ needs sharper focus

Retailers must invest to ensure they do not foul-up during the crucial ‘last mile’ of delivery to their customers, whether this be to the door or the shop floor. Shoppers demand an exceptional experience and an incorrect order or delivery can cause long-lasting damage to a store or brand’s reputation. Fulfilment of the ‘last mile’ in the new eco-system is more complicated and therefore more prone to supply chain error.

  • Safety stock levels need close attention

Retailers need a robust way of determining the right level of ‘safety stock’ to hold. Some retailers are keeping up to 20 per cent of inventory as a buffer to meet omni-channel orders and as a result are tying up capital that could be better used elsewhere. The higher the levels of stock the greater also is the risk of incorrect inventory data occurring, with the attendant problems this causes further down the supply chain to store shelf-level.

  • RFID early adopters are seeing positive results

Companies that have piloted RFID are reporting increases in inventory accuracy between 50% and 95%, reductions in out-of-stock from 60% to 80% and increase in sales between 6 and 14%. Tracking inventory from end to end in the supply chain enable these retailers to use the learnings to reframe their distribution processes. It is expected that the bulk of retailers will implement RFID sooner rather than later to meet the requirements of their omni-channel strategies and shoppers’ demands.

Better research will help beleaguered retailers

Research that can benchmark the whole available range of technology solutions and offer guidance in choosing the right systems should be a priority for the retail community. More detail is needed on how legacy systems can integrate with new analytics and fulfilment software, as there is a real danger of important data ‘falling down the cracks’ and undermining inventory accuracy.

There is agreement that that omni-channel will only grow but a sizeable majority of senior executives are still working on a clearly-defined strategy to meet the challenge. Once the right techniques and technology are in place omni-channel should ultimately prove an excellent opportunity to generate customer loyalty and repeat business.