Organizing for Omnichannel: Inside and Out
Omnichannel has become an increasingly hot buzzword in retail over the last five years. It’s a differentiator for some and a means of survival for others. Some brands look at it as a way to drive cost savings out of their supply chain by consolidating the number of distribution centers they have, lowering overall network inventory, and gaining better insights into where and how to fulfill their goods across their entire network of inventory, not just their main fulfillment centers. Regardless of what the driver is, this much is for sure: everyone has to start somewhere.
It’s often the case that today’s leading retailers have competent and battle-tested leaders within their operations and IT departments. However, given the speed of technology advancements and trends in the market, it’s not always the case that everyone’s leadership knows exactly where and how to start in their omnichannel transformation. That’s why it’s important to consider where you currently are, where you want to be and what you need to get there — across people, process and technology — to create a successful omnichannel strategy.
Figuring Out Where to Start
The first things in this new world of omnichannel retailing to consider are two very simple questions:
- What do your customers need of you now?
- What will your customers require of you later?
There are many considerations from a client-facing perspective to consider when answering these two questions. With the rise of mobile devices as part of the customer experience, the trend in the last year has been to show store availability on retailers’ websites. This tactic drives foot traffic to stores, and can later be leveraged as an enabler for buy online, pick up in-store. Channel convergence is the goal here for most companies, and a complete view of inventory is a typical first step. This view, often hosted by a distributed order management (DOM) system, is made available to the customer regardless of their location, be it in-store through an associate’s device, on the customer’s mobile device or from a cell-center associate aiding the customer over the phone on fulfillment options.
From an internal standpoint, most retailers have pain points around undersold inventory in their stores and underutilized staff in stores. These pain points often lead to projects for buy online, ship from store, and are seen as ways to reach the customer sooner than fulfilling from a distribution center by allocating the customer’s order to a store in closer geographical proximity. Issues arise here with ensuring a consistent brand experience, as the packaging and documentation sometimes differs from orders fulfilled at a facility where its sole purpose is to fulfill e-commerce orders.
Regardless of which project to lead in with, the underlying message is to assess what your customers’ needs are, and to build capabilities based on those needs — both future and current. The output of this planning phase is a list of capabilities your organization needs to plan for, which is the foundation for the next step in planning for omnichannel. Sequencing this list is critical to assessing planning for people and technology, which all feeds into the next step.
Taking a Look in the Mirror
Once a capabilities list is produced by working across your organization’s stakeholders, the mentality should switch to an honest assessment of current capabilities and organizational alignment to those strategies. This is often when retailers pull in outside help to navigate and choose systems which can meet the requirements defined in the previous phase, as well as begin to think through how their organizations are aligned to meet the requirements of such a large undertaking.
Assessing System Capability
From a systems perspective, the trend in the major players for DOM has been to offer a single platform for hosting available inventory and a history of the customer’s orders. A DOM system is critical to providing a network view of inventory and serving that up to the requesting channels. From an execution standpoint, best-of-breed warehouse management systems are evolving to the omnichannel world by allowing the same product to be housed in one location within a distribution center, but to be fulfilled depending on which channel is requesting.
This drives down the need for overall safety stock within the distribution center, as one pool of inventory is shared across channels. Likewise, from a labor standpoint, those leading in omnichannel fulfillment are finding ways to leverage the same labor in the distribution center to fulfill more than just a dedicated channel. A great deal of organizational change and planning is involved in operational excellence, and it’s best to have both internal expertise in operations as well as outside advisement from both technology vendors and third-party consultants.
Aligning Your Organization to Succeed
With the convergence of all channels into one, the company as a whole has to work towards breaking down historic silos and start communicating as “one voice” both internally and, more specifically, to consumers. What’s been successful with those leading in omnichannel is to align both online and offline departments under one person at an executive level, across all functions of the business (e.g., merchants, customer service, marketing, store operations and e-commerce).
An intermediate step, given that a change of that magnitude is so substantial, is to promote or hire from the outside someone that can serve as the “glue” between all channels. The key here is to not simply place someone in this role. In addition to title, give them authority and backing from the company’s senior leadership (CIO/COO). This person, typically a vice president, is responsible for navigating the company’s direction throughout projects that combine to a form a long-term omnichannel plan.
Tying it All Together
Regardless of which capabilities retailers start with, or how they align their organization, one thing is true about the new world of omnichannel retail: The customer is king again, and he/she expects a single view and brand experience, regardless of how they engage the retailer. One face to the customer means one aggregated team, and communication — both internally and especially to the customer — is necessary to make the omnichannel dream a reality.
Zach Zalowitz is the omnichannel practice lead, supply chain services, at SCApath, a consulting firm that specializes in designing and implementing supply chain solutions that enable omnichannel commerce.