Multi-channel retailing is increasing dramatically but far too many organisations are constrained by a lack of channel integration throughout the supply chain. Ring-fencing goods for each channel within the warehouse not only adds cost and reduces efficiency but is also creating massive delays in reallocating stock between channels to maximise sales. The result is actually more wasted goods and mark-downs than in the past.
In the current market, retailers need to drive efficiency through every part of the business. Without excellent cross-channel visibility and the elimination of ring-fenced stock, organisations will never maximise the benefits of multi-channel retailing, argues Daniel Weber, Senior Business Consultant, Prologic.
Constrained model
Fashion retailers have actively embraced a multi-channel model in recent years. As high street sales begin to decline, many organisations are looking to expand their investments in eCommerce, wholesale and international markets. As this model gains maturity, there is growing recognition that a successful multi-channel business demands an integrated approach. Retailers are making great strides in delivering a consistent, coherent service across every channel, allowing customers to buy online and collect or return in store, for example, and collecting customer information across every interaction.
However, fashion retailers are still struggling to maximise cross-business sales due to inadequate warehouse processes and a lack of stock visibility across the business. The majority of organisations are, today, forced to physically ring-fence stock in the warehouse for each channel due to the constraints of their warehouse management and stock replenishment systems. This is adding complexity, demanding additional warehouse space and significantly increasing the time and resources required to undertake a stock check.
Far more critically, by creating separate stock holdings for each channel, retailers are effectively running several separate businesses: they are failing to gain the economies of scale and efficiency that should be delivered by multi-channel retailing and they are unable to reallocate stock on the fly to another channel to maximise sales.
Effective warehouse
With the increasing economic pressure, retailers need to grasp every sales opportunity. And that means responding to the clear differences in sales activity across each channel – from international demand to wholesale.
If sales of certain lines are higher via the eCommerce channel than in the high street, it is essential to reallocate stock to that channel as fast as possible to capitalise on demand. Yet while it may be a simple process to move stock between channels on the replenishment system, organisations are often waiting weeks to actually make the stock available in the new channel due to the need to physically move stock around the warehouse before updating the information on the stock management system.
This is resulting in significant lost revenue and extreme frustration from merchandisers under pressure to achieve sales in a challenging marketplace.
Warehouse efficiency
This inability to maximise stock is at odds with retailer strategies to improve warehouse processes to drive far more efficient replenishment processes and reduce operational costs. Investments in Automated Data Capture (ADC) technology integrated with the core replenishment system have enabled a significant reduction in picking time, reduced costs and provided a quantifiable improvement in stock availability.
Furthermore, some retailers are also offering suppliers access to a ‘supplier portal’ where they can update the retailer on the state of an order and its delivery status. This real time information enables the warehouse to be prepared for any new deliveries, thus minimising the shrinkage problems and additional overtime costs that often result from multiple, unexpected deliveries.
But if organisations cannot manage a central stock repository to support every retail channel, such investments will fail to deliver the expected value.
Single source
A successful multi-channel strategy requires integrated business processes at every part of the supply chain. Using a system that is based on one central source of information, stock can be held centrally in the warehouse and still be nominated for a specific channel.
Taking this approach, there is no need for separate stock holdings in the warehouse – stock is held centrally and can be efficiently picked for each channel. The result is better warehouse management, removing the multi-channel problem of multiple, half full bins of the same product line. Instead, storage efficiency will be increased and organisations will be able to reduce the amount of warehouse space required. For those still looking to expand their multi-channel strategies, this consolidated approach will enable cost effective business expansion without requiring significant additional space or overhead.
Critically, stock can be reallocated in real time between channels to meet demand. This can be handled either manually by a merchandise manager or an organisation can set up predefined rules to enable the system to automatically reallocate the stock.
In addition to maximising sales, retailers can gain clear financial benefits from improved visibility of stock information and slicker warehouse processes. With fewer bins, the daily stock check activity is significantly reduced, providing a knock on effect on costs and staffing requirements.
With a single integrated approach and with all the information coming from one central source, merchandisers can get visibility of stock by channel from a very early stage in the delivery process and can ensure these stock levels can be managed prior to any stock arriving at the warehouse. This will allow stock to be available for sale to the correct channel immediately the stock is booked in.
Operational performance
Putting the customer experience at the heart of the multi-channel strategy is obviously an essential strategy for any fashion retailer. But failing to back up that policy with effective, real time supply chain processes will not only add untenable cost in the current market but will also undermine the quality of that customer experience.
Allowing stock and warehouse management systems to constrain the flexibility of replenishment strategies across every channel will have a seriously detrimental effect on business success.
By leveraging a single source of stock information to improve warehouse processes, retailers can achieve a far more efficient use of stock, respond immediately to trends in demand across each channel and, critically, reduce the volume of goods that are marked down at the end of the season.
It is only by addressing business processes throughout the supply chain, from supplier through to customer purchase that retailers will gain the financial benefits of fully integrated multi-channel retailing.