Why supply chains are obsolete: transforming retail in the consumer-centric world

The consumer-driven marketplace is creating significant change in retail, causing retailers to redesign their entire business model to better serve consumers, says Scott Welty

By Guest on 17 November 2014
Why supply chains are obsolete: transforming retail in the consumer-centric world

 This article was first published in the Winter 2014 issue of Speak 

The term ‘supply chain’ is a recent idiom, but its roots go back to the industrial revolution and the dawn of mass retail. Large manufacturers would produce mass quantities of goods they thought people would want to buy and pushed them down through distribution channels to retailers, which in turn tried to push the goods into customers’ hands. Supply chain was an apt description of this process because it was all about the suppliers pushing their products down the one-direction chain to retailers as cost effectively as possible. But it doesn’t work that way anymore.

Today, the consumer is in charge, and that’s good news for retailers. Instead of dangling at the end of the chain, retailers are now at the tip of the spear, sensing consumer demand from every channel and engaging with them to complete their shopping journey through intelligent fulfilment. It’s no longer about the supplier or the efficiency of the chain. Retail is now about providing seamless shopping experiences across every touch point.

Companies like Macy’s, Nordstrom and John Lewis understand this momentous shift. They’re shortening delivery times and offering new, more convenient ways for their customers to buy and collect products.

The problem is that most retail operations are still based on the obsolete supply chain ‘push’ model. As much as retail CEOs understand the need to redesign their businesses to engage and satisfy the omni-channel consumer, their operational structures and processes have not transformed to meet this new challenge. They have approached it more like a duck in water. On the surface they appear serene with their slick new websites and mobile apps to attract shoppers. But underneath, with their siloed organisations, disconnected channels and separate fulfilment operations, they’re paddling like mad to fulfil customer expectations.

Why haven’t more retail CEOs transformed their organisations for the new consumer-centric retail world? Many of them are simply overwhelmed because the level of change is so immense and they don’t know where or how to start. Others have invested in new technology only to realise that their organisational structures and processes aren’t set up to leverage it.

Ultimately, CEOs will have to redesign their business models to conform to the new consumer-driven marketplace. They will have to merge merchandising and marketing to present a single face to the customer regardless of channel. They’ll have to integrate fulfilment operations so orders from any channel can be delivered to the customer when and where they want it. And merchandising and fulfilment must be brought together so it appears as one seamless process to the customer.

This brave new consumer-centric world will require more advanced, integrated planning and fulfilment technology, but technology is only an enabler. The real win will come at the intersection of this technology with consumer-centric organisational changes. Those retailers who can transform their business model to this consumer-centric approach, as Macy’s, Nordstrom and John Lewis are doing, will be the retail winners going forward. The question then becomes not if or when, but how quickly can they make the transformation.

Scott Welty is global vice president of retail industry strategy at JDA Software

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