Part two: Untangling the retail supply chain with real-time analytics
by Dr Dale Skeen
Continued from Part One
Integration between multi-channel supply chains for traditional stores and online businesses
Retailers can count on customers to be savvier than ever before – they’re better informed, more interactive and more selective than ever. Deloitte’s 2014 Retail Industry Outlook reveals that the growing popularity of online shopping is pushing retailers to look for new ways to deliver high-touch, personalised service to customers.
Quick and easy access to competitive offers, merchandise availability and pricing means that retailers that don’t stay on top of what their customers want and need in real-time will lose their business to a competitor that can entice them with better convenience, value and service.
Allison Kenney-Paul, Vice Chairman and US Retail and Distribution Leader at Deloitte LLP states that innovative retailers are focused on delivering an integrated “omni-channel” experience, recognising that the same customers are shopping both online and in-store and that channel integration is important for delivering the best possible customer experience.
Customers expect to be able to order online and pick up in-store. They expect inventory to be available – if an item is out of stock in-store or backordered online, they expect the retailer to figure out a workaround to get them the item that they want within the window that they need it. Customers don’t think about how difficult it can be to coordinate operations between online and brick and mortar retail establishments - they want what they want when they want it. And if a particular retailer can’t do it, they will find another that can.
Retailers that are most successful at tackling this problem are equipped with four key capabilities:
They have an end-to-end transparent view of the supply chain across both traditional and online business units; they have the ability to identify bottlenecks and problems in real-time and the agility to take corrective action before the customer experience is impacted; they are able to integrate data from diverse and siloed sources across business units to offer coordinated and quality service levels for the omni-channel shopper; and they can leverage historical data to set baselines and then analyse streaming data against those baselines to make more reliable and timely predictions and better manage their business.
How does multichannel supply chain integration play out for customers?
Let’s say you’re a customer that has surfed the net and found what you think are the perfect pair of black shoes, but you’re reluctant to buy them without trying them on. So you head to the retail store to see how they fit and to make sure that they look and feel as great as you imagined. You show up at the store and ask to try them on in size 11.
The sales clerk returns from the back with a stack of boxes for your consideration – none of which contain the black shoes in size 11.
The clerk tells you that size 11 is in-stock in other colours but not black, that the black is available in 10 ½ and 11 ½ and encourages you to consider other sizes and colours. But you want the colour you want in the size that you wear and aren’t willing to settle.
For a retailer, what happens next determines whether or not you keep or lose not only this sale but also this customer.
The problem with traditional and prevalent approaches to dealing with “out-of-stock” situations is that you’ve got the customer in the funnel but can’t deliver on what they expect in real-time. If they have to drive to another store, they will likely abandon the sale. If they have to pay for shipping because their closest store is out of stock, they will be annoyed and frustrated.
If you send them home to buy them online, they will search for other retailers selling the same item to compare offers and price because they know precisely what they want to buy. In this scenario you have essentially put the sale and the customer you had in the basket up for bid with your competitors.
However, if you can treat your customer as an omni-channel shopper and leverage your online business unit to meet their needs within the critical window of opportunity, you’ve not only kept the sale but also built good will. For instance, if you can check stock availability and place the order from your own online store and offer free overnight shipping on the fly while the customer is still standing at the register, you’ve kept your customer in the fold and your sale intact.
This is just one example of how multi-channel integration benefits both retailers and customers.
Managed fluctuations in demand
Traditional supply chain management approaches rely on historical data for inventory. If you sold 50,000 pairs of snow boots last year, it’s a reasonable assumption that you’ll experience about the same volume this year and you plan your inventory and purchasing cycle accordingly.
What happens when it starts dumping snow in the Midwest in early October and you’re not scheduled to have snow boots in-store for another two weeks?
If you have real-time visibility into your supply chain and are equipped to respond immediately, you can accelerate or reroute deliveries to capitalize on the situation. The key benefit of this capability is that you can effectively respond to unanticipated demand fluctuations in real-time, meet your customers’ needs and protect your sale because you are operationally agile.
While there will always be unplanned anomalies that stir up trouble in the supply chain, planned peak requirements can also present significant challenges. For instance, if you’re a grocery store outlet, you likely stock turkey in your meat case year round and sell a modest yet steady quantity – that is until November hits.
Of the roughly 250 million gobblers consumed each calendar year, approximately 30 percent are purchased between Thanksgiving and Christmas. That means that grocery outlets are funnelling nearly 80 million turkeys through the supply chain over a five week period.
The successful execution of this seasonal demand spike requires careful planning and a watchful eye on core operations. You need to not only get the gobblers on the trucks and in stores in droves within a very narrow time period but also achieve this feat without messing up deliveries and warehousing for other critical items like milk, eggs and bread – because this will understandably make your customers cranky.
Implementing real-time data analytics vastly improves supply chain efficiency and efficacy, and innovative retailers are leveraging these capabilities to improve supply chain management across a variety of operational functional areas.
Real-time analytics capabilities improve forecasting and demand planning and better integrate sourcing and production operations. When it comes down to distribution and inventory management across channels, real-time analytics links business units across channels and siloed systems to ensure that items are perpetually in stock and delivered promptly.
At the end of the day, it’s all about keeping the customer happy and loyal through anticipating their needs and consistently delivering the experience they expect. And with real-time analytics, you’re always one step ahead with retail supply chain management.
Dr Dale Skeen co-founded Vitria with Dr Jo Mei Chang in 1994 and oversees the technology direction of the company. Dr Skeen is credited with inventing distributed publish-subscribe communication, commonly used in stream processing, and holds over a dozen patents in stream processing, streaming analytics, and BPM.
He designed and built his first large-scale, stream processing system more than 25 years ago to support high-speed trading at one of the world’s largest investment banks and has contributed to 10 books and written numerous journal articles on distributed computing.
Prior to co-founding Vitria, Dr Skeen was the co-founder of TIBCO Software, where he served as the Chief Scientist. He has held faculty positions at the University of California, Berkeley as well as Cornell University, and has a Ph.D. in Computer Science from the University of California, Berkeley.