Supply chain struggles to keep up with retailers' omnichannel ambitions

It's becoming increasingly clear that if retailers want to succeed today they need to have a strong omnichannel strategy. Armed with smartphones, tablets, and other connected devices, consumers expect to move effortlessly between the physical and digital worlds. They want the option to buy online and pick up at the store, or buy at a store and have the order delivered from a warehouse or distribution center—or even from another store.

In their second annual omnichannel study, Supply Chain Quarterly's sister publication DC Velocity and the research firm ARC Advisory Group found that retailers are well aware of this business imperative. Yet the study also found that in many cases, retailers' supply chain capabilities were not keeping up with their vision of an effective omnichannel strategy. For example, a little more than one-third of respondents (37 percent) are fulfilling e-commerce orders from store shelves (see figure). The clear majority of those respondents—71 percent—are using a paper-based method to select orders. Similarly, less than half (43 percent) of respondents said they have real-time inventory-location software at their stores. The study's main authors, ARC analysts Clint Reiser and Chris Cunnane, warn that retailers' reliance on paper-based selection could hamper their ability to effectively manage store-based fulfillment.

Another area of the store that requires updating in order for omnichannel retailing to succeed is the backroom, according to the consulting firm Tompkins Inc. In its report "Retail Backrooms: A Revolution in Roles and Business Value," Tompkins argues that with brick-and-mortar stores playing a growing role in enabling same-day or next-day fulfillment of online orders, the backroom can no longer be ignored. Instead, it must be transformed from a simple storage place to a "mini distribution center," where orders can be picked, packed, and shipped.

Here are some of the Tompkins paper's suggestions for incorporating the backroom into an omnichannel strategy:

• Make the backroom part of the supply chain operation. If the backroom is required to facilitate the efficient flow of products, it may not make sense to manage it under merchandising or store operations, which mostly focus on sales.
• To make in-store picking and packing more efficient, fulfill online, customer-direct orders from the backroom and not from the store floor. Retailers can create packing stations in the backroom that are dedicated to customer-direct orders. Separate inventory counts for the backroom and for the store floor may also be helpful.
• Install material handling equipment. Depending on the configuration of the space, it may be possible to employ horizontal or vertical carousels, flow racks, conveyors, or small automated storage and retrieval systems.

For more about retail backrooms and omnichannel fulfillment, download the white paper. To read about the DC Velocity/ARC study, click here.