From Silos to Synergy: Navigating the Complexities of Omnichannel Supply Chain in Retail

A study by Harvard Business Review found that almost 73% of shoppers utilize multiple channels during their shopping journey, with only 7% being online-only shoppers and 20% being store-only shoppers.

As the holiday season approaches and major sales events like Black Friday loom, retailers face the daunting task of managing a massive influx of merchandise. The complexity amplifies during the crucial last mile of the supply chain when customers switch from home delivery to in-store pickup. This demands intricate adjustments in order routing, inventory allocation, cancellation of previous shipments, and coordination of store labor. This entire process impacts a seamless customer experience.

While multi-channel retailing successfully attracted online consumers to retailers, it also introduced various supply chain challenges related to distribution, inventory management, and data handling.

The Emergence of Omnichannel Retail

The root of the problem lay in perceiving different channels as separate entities, resulting in conflicts between them. However, from the customer’s perspective, online and offline channels were interconnected. They seamlessly transitioned from social media ads to browsing on the website, using mobile apps for purchases, and expecting delivery from various sources.

To meet customer expectations and deliver a cohesive experience, the concept of Omni-channel retail emerged, emphasizing integration across platforms and channels.

According to IDC research, retailers implementing omnichannel marketing strategies experienced significant benefits. This results in an average transaction size increase ranging from 15% to 35%, a 5% to 10% profitability boost from loyal customers, and a 30% higher lifetime value compared to customers who utilize a single channel.

Additionally, an Aberdeen report indicates that robust omnichannel strategies contribute to a higher customer retention rate of 89% over others.

Adopting omnichannel strategies allows companies to attract new customers, strengthen customer relationships, drive sales and margins, and reduce overhead costs. Its success relies on the following four key elements.

The four key elements of omnichannel retailing

1. Unified supply chain: This strategy incorporates in-store order fulfillment, home delivery, store pick-up, and return handling, utilizing various modes for customer convenience. Inventory transparency is critical in enabling customers to access product information and availability across channels.
2. Inventory Transparency: With this, the seamless integration of information, goods, and funds across channels presents a significant challenge. Overcoming this challenge necessitates implementing a robust data management system and adopting innovative business practices. These measures ensure accurate and efficient inventory management across all channels.
3. Technological Upgradation: The integration of online and physical operations encompasses inventories, logistics channels, and the supply chain network, managed as unified entities. It enables retailers to respond promptly to customer needs across channels. Real-time inventory visibility and agile supply chain management are essential to meet customer demands effectively. Technology is an enabler, integrating product platforms, customer engagement channels, and back-end supply chains.
4. Collaboration Efforts: The synergy between marketing and supply chain strategies is crucial for delivering a remarkable customer experience. Retailers must strategically design their supply chain to augment marketing efforts and engage customers in real time. By aligning these strategies, retailers can provide a seamless and differentiated customer experience that distinguishes them from competitors.

Challenges of Omnichannel Supply Chain

While an omnichannel supply chain offers numerous advantages, several critical factors require careful reevaluation. A few key operational challenges businesses face when implementing omnichannel logistics are outlined here.

Inventory visibility becomes a challenge in an omnichannel network as multiple marketing channels create complexities in tracking inventory availability. To address this issue, implementing an inventory management system can greatly benefit all stakeholders, including retailers, warehouses, and end users. Such a system enables real-time visibility of stock, empowering informed purchasing decisions and enhancing overall supply chain efficiency.

Managing delivery timelines in an omnichannel distribution network can be challenging due to the influx of orders from multiple avenues. To efficiently handle this, a comprehensive overview is necessary, including key information such as shipping location, delivery types (same-day or standard), transit availability, and the estimated time of arrival (ETA). By having a centralized system with this information, businesses can optimize their delivery processes and ensure timely shipments to customers.

Choosing a vetted 3PL partner: In the context of omnichannel distribution, partnering with a reputable third-party logistics (3PL) provider can help alleviate operational burdens. However, careful consideration is necessary to ensure the chosen 3PL partner adheres to essential guidelines, meets key performance indicators (KPIs), and maintains an organized supply chain mechanism. By selecting a vetted 3PL partner, businesses can enhance their overall efficiency and ensure a seamless fulfillment process.

Conclusion

Cigniti, with its expertise in Retail Testing, helps multi-channel retailers undergo business transformations by employing quality-optimized and results-driven strategies. Their approach includes unbiased quality engineering, tailored retail testing frameworks, and industry-specific domain expertise. Cigniti’s end-to-end testing processes support individual and large chain retailers in ensuring quality across their enterprise applications, facilitating initiatives such as re-platforming, upgrading, migrating, and setting up complex integrations between CRM, OMS, WMS, Cloud, Mobile, and Web applications.

Leverage Cigniti’s software testing capabilities for Retail and achieve high levels of customer satisfaction and retention.