News Feature | July 1, 2016

New Study Identifies Critical Links In The Retail Supply Chain

Christine Kern

By Christine Kern, contributing writer

Supply Chain

Report examines how retailers are responding to the pressure for omnichannel options.

Researchers have dubbed the new pressure for omnichannel shopping options “the Amazon Effect,” in which consumers expect to be able to browse, buy, and return items through traditional and online stores, mobile apps, and call centers. Researchers from Auburn University’s Center for Supply Chain Innovation (CSCI) investigated how retailers are responding to this new reality in the sixth annual “State of the Retail Supply Chain” report, which draws on survey data and interviews with top executives.

“The pressure for omnichannel is constant,” explained CSCI Executive Director Brian Gibson, one of the study authors. “You can’t have a conversation with a retail executive today without it coming back to the omnichannel topic – how you’re trying to monetize it and make it profitable.”

And 2015 was a mixed bag for retailers; while fewer transportation bottlenecks improved inventory availability and the economy seemed to be improving, retail sales rose just 2.1 percent, the weakest since 2009. Meanwhile, online retailing spiked, and Amazon captured 51 cents of every additional dollar spent online during 2015. E-commerce saw huge influxes of investment by retailers to try to combat this “Amazon Effect.”

The study was conducted in partnership with the Retail Industry Leaders Association and sponsored by Checkpoint Systems. It found:

  • 81 percent of retail supply chain executives surveyed are either using, developing or investigating integrated demand planning to better expose store and distribution center inventory to customers and acquire richer analytics about demand for goods and services
  • 67 percent offer store pickup by customers as an omnichannel fulfillment method
  • 61 percent agree that e-commerce “greatly complicates” company demand planning activities
  • 56 percent work for companies that will increase spending on supply chain process improvement this year
  • 49 percent work for companies that are increasing their investments in omnichannel fulfillment to support faster, more efficient “click-to-delivery” capabilities
  • 45 percent of executives highlight the need to develop more effective omnichannel returns strategies
  • 26 percent of executives say their companies are prioritizing “enhanced customer service” as their primary supply chain strategy, up from 11 percent in 2015

Ultimately, customers are becoming more demanding, and retailers are fighting to respond to those demands. Gibson explained that the customer attitude is, “I want to buy it wherever I want, whenever I want it, and have it delivered however I want. And, in some cases, I want to be able to return it to wherever I think is most convenient.”

These new pressures are leading retailers to rethink their overall strategies. As one retail executive stated, “We don’t really think about e-commerce and commerce. We just think about commerce.”