May 17, 2020

Retailers investing heavily in omnichannel selling, but where are the profits?

jda software
Admin
4 min
New JDA study finds only 16 percent of retailers and FMCG firms are fulfilling profitably
A new JDA study reveals an enormous amount of money, energy and time retailers and consumer goods manufacturers are spending to improve their omni-chann...

A new JDA study reveals an enormous amount of money, energy and time retailers and consumer goods manufacturers are spending to improve their omni-channel sales capabilities. While this may not be surprising given the current business environment, the JDA report reveals an unexpected and disturbing fact: despite these significant investments, only 16 percent of companies say they can fulfill omni-channel demand profitably today.

This finding, and others, are highlighted in The Omni-Channel Fulfillment Imperative, a new report prepared for JDA Software Group by PwC. This study is based on a global survey of more than 400 retail and consumer goods CEOs from around the world, conducted in late 2014.

What is eroding retailers’ margins as they sell and deliver products across multiple channels? It’s simple: the high cost of fulfilling orders. A full 67 percent of respondents reported that these costs are growing as they increase their focus on selling across channels. Survey respondents reported their highest costs associated with omni-channel selling as:

  • Handling returns from online and store orders (cited by 71 percent of respondents)
  • Shipping directly to the customer (67 percent)
  • Shipping to the store for customer pick-up (59 percent)

 

The CEOs in the JDA study recognize that they need to continue investing in business improvements to enhance their omni-channel performance. However, reducing the associated logistics costs is not their primary focus. When asked to rank their top initiatives for improving business operations, CEOs’ number-one choice (57 percent) was spending capital on creating new customer experiences. Similarly, when asked to rank strategic growth enablers for the year, reducing/reformatting physical store footprints to focus on expanding the ecommerce business was the top choice at 53 percent.

“Every time retailers receive an online order, they have a number of options to fulfill that demand. They can pull the product from a local store, send it from a centralized warehouse or ship it directly from the supplier. JDA’s new study demonstrates that most retailers lack the insight to make these decisions in a profitable manner — and are not sufficiently focused on this critical capability gap,” said Kevin Iaquinto, chief marketing officer at JDA. “They need intelligent logistics and fulfillment solutions that can reveal the hidden costs, and the customer service trade-offs, associated with every delivery option. In addition, to truly win in the omni-channel marketplace, retailers need the upfront demand forecasting tools to make sure products are already distributed across all locations in a manner that supports profitable delivery.”

While they might not be focused on actions today to create profitable fulfillment and delivery schemes, the JDA study leaves no doubt that CEOs are aware of the importance of profitable omni-channel fulfillment to their future survival. Seventy-one percent of respondents said omni-channel fulfillment is either a high or a top priority. And these CEOs are planning to invest an average of 29 percent of their total capital expenditures for 2015 on improving their omni-channel fulfillment performance.

The fulfillment capability most cited as needing attention was transportation and logistics, named by 88 percent of CEOs as a priority for the future. The second capability CEOs will focus on is improving inventory availability to fill orders, cited by 85 percent.

“Having products available, then finding the most profitable way to deliver them —are critical activities that lie at the heart of supply chain excellence,” noted Iaquinto. “The CEOs in the JDA survey clearly understand the challenges they have ahead of them with regard to fulfillment, and they know they will have to innovate if they are to be profitable while meeting customer expectations across channels. The good news is that advanced technology can help retailers and consumer goods manufacturers master omni-channel fulfillment. However, until companies fully leverage these solutions, they will fail to realize positive financial returns on their omni-channel investments.”

PwC conducted a survey on behalf of JDA Software in late 2014, with 410 responses from CEOs across North and Central America, the United Kingdom, France, Germany, China, Japan and Australia. Twenty-two percent of responses came from top 250 retailers (> $5 billion revenue), with another 51 percent classified as top 1,000 retailers. Respondents identified themselves as coming from hard goods, soft goods, consumer packaged goods, ecommerce and grocery verticals, as well as a few related retail and consumer sectors. 

JDA is the leading provider of end-to-end, integrated retail and supply chain planning and execution solutions for more than 4,000 customers worldwide.

For more information, please visit: www.jda.com/rss.asp?a=press

 

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Jun 16, 2021

EU and US agree end to Airbus-Boeing supply chain tariffs

supplychain
Boeing
Airbus
tariffs
3 min
Supply chains embroiled in Airbus-Boeing dispute will no longer be impacted by $11.5bn tariffs imposed on food and beverage, aircraft and tobacco

The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic. 

Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years. 

It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC. 

The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn. 

In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products. 

Boeing-Airbus dispute by the numbers  

  • The dispute began in 2004
  • Tariffs suspended for 5 years 
  • $11.5bn worth of goods affected by tariffs
  • $3.3bn in duties paid by businesses to date 
  • 15% levy on aircraft and 25% on non-aircraft goods suspended

Both sides welcome end to tariffs 

European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.

“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.

Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”. 

The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."

This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.

Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”

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