Omni Channel Retailing: Opening Pandora's Box?
Mick Jones, Vice President Global Logistics, Supply Chain Strategy & Network Transformation at Lenovo took part in a panel at eft’s Hi-tech Supply Chain Summit in Amsterdam, have a read at his takeaways.
I sat on a Panel at a recent conference with Retailers and 3PL's to discuss this. Our discussions developed the topic by referencing one Mythical Maelstrom - the aforementioned Pandora's Box - and one definitive Scientific Principle - that well known physics concept of Entropy! Wow! That was some Supply Chain discussion!!
First let's get rid of the word Retailing and call it Omni Channel Supply Chain - this is a subject that belongs to all of us - it is pervasive and it is end to end!
....and let me define Omni Channel - here's one I got off a blog:
Bottom Line: The Customer wants what they want when they want it. They want it where they want it and at a price they want to buy it at. They want to buy it through any medium and delivered to any place. If you don't have it in stock then you had better make sure it gets to their house tomorrow morning ...... or they will buy it from Amazon .... Who WILL have it .... WITH free shipping.
(That is a great description - it shows the complexity of the omni channel revolution and it shows the competitiveness of the market that we are moving into!).
OK, the mythical reference: Well once opened Pandora's Box lets lose chaos and complexity on the world. And once levered open it is impossible to put the lid back on the box! As we speed down the road to omni channel our cosmically connected consumers ask for / demand more and more: Offer one consumer delivery during the advert break in 'Game of Thrones' and via Social Media that becomes the norm for you and then for all of your competitors! We end up being forced to offer infinite choice to consumers - normally at no extra cost (thats the other thing that Social Media slowly erodes!). We build enormous complexity into our supply chains but struggle to pass that cost on to the rest of the chain! Try putting the lid back on that!
The chaos comes from the fact that the omni channel supply chain is very much that - an end to end omni channel supply chain - and the impact on the downstream retail end of the chain leaches its way upstream and effectively ultimately 'infects' every inch of the end to end supply chain. The need to deliver one box at 8:35 pm on a Sunday impacts the 3PL, obviously; then the Manufacturer, who needs to think about the more jagged demand; the component Manufacture, who needs to supply that demand etc.
I'm being overly dramatic here on purpose, but there is no doubt that consumers are driving complexity, that we are all trying to meet, at the same time as trying to avoid the cost implications of it. AND that complexity will move upstream and occupy all layers and corners of the supply chain for that product!
So, to the second element of our discussion: Entropy. Entropy means that there is a constant amount of energy in a closed system that can't be created or destroyed - it can only move from one part of the system to another - bit like the air in a balloon - squeeze one end and the air goes to the other!
Similarly in a supply chain add more complexity or more pressure at one end and the impact of that is typically somewhere else in the supply chain. Try and do more for the consumer and a cost is created - if we don't absorb that cost at the consumer end of the chain then it moves further up-stream - but ultimately the same amount of energy - or cost in this case - sits in the same supply chain! So adding more effort has to add more cost somewhere.
The old Cost - Quality - Lead Time triangle suddenly has to start taking steroids!
So Chaos, Complexity, and Cost impacts you, wherever you sit in the end to end chain. It is forcing us to think through all of our inventory, forecasting and demand strategies. It will force us all to become more agile and more flexible, and force us to look at our order allocation strategies. Maybe there is some future relief in the further development of 3D printing, and the ability of the internet of things to give us greater visibility and more intelligent demand sensing. Maybe new analytics will give us improved forecasting and the ability to make more informed decisions. Certainly we will all have to brush off the old concepts of near sourcing, late postponement and Configure to Order downstream in the chain and closer to the customer (I am sure that some clever consultant will give these new names and start selling them back to us). But it all adds up to a massive challenge to us all wherever we sit in the e2e chain.
I genuinely believe that the only way that we can truly deal with this in the chain is to start to think - realistically and without the 'if's and but's' that we normally add to this concept - about COLLABORATION!
We have to be able to look at the impact driven by the consumer as an entire supply chain organism, with fairness and trust. Share inventory information, share demand data, share networks, look collaboratively at problems and issues and come up with joint solutions - operational and commercial.
A sort of new Justice League of Superhero's fighting the 'evil' consumer: I like that! Bagsy I get telepathy as my super skill and get to wear the Red Cloak!
Collaboration? Hmmmmmm! Maybe we would all be better investing in research for Dr Spock's matter transporter beams!
@collaboration @omnichannelretailing @justiceleague