buy anywhere, fulfill anywhere….illustrative examples for click and collect % of online orders...

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David Hogg, Commerce Solutions Leader Europe

October 15th, 2014

Buy anywhere, Fulfill anywhereConsiderations for Omni-Channel Retail Supply Chain

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3 areas which retailers need to take note of and

respond to

Customer demands are driving supply chain

developments

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Considerations and how IBM can help3

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3 areas which retailers need to take note of and

respond to

Customer demands are driving supply chain

developments

2

Considerations and how IBM can help3

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However, Customers are looking for more …

IBM survey of 30,554 consumers in 16 countries, highlighted 5 top omni-

channel needs, 4 of which focused on integrated supply chain capabilities

1. Price consistency across channels

2. In-store, locate out-of-stock item and get it

shipped home

3. Track order status

4. Consistent assortment across channels

5. Return in store of online purchases

Top 5 omnichannel capabilities

Source: IBM IBV 2013 survey, n= 30,554 Q21 HYP2 New capabilities

We surveyed 30,554 consumers in 16 countries to discover their opinions of omni-channel capabilities and the

impact on choice

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Retail supply chain executives, see the challenges for their operations ; Most Important Perceived Operational Challenges in Supply Chain Execution

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Traditional supply chains have been linear with moderate challenges in

demand volatility, delivery channels, order fulfilment windows and inventory

HubDC

Customers

Customers

Spokes

ManufacturerLocal

In Transit Supplier International

Transit

…

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Complex supply chains servicing stores and customers directly….

HubDC

Customers

Customers

Spokes

Manufacturer

Local In Transit

Supplier

International Transit

…increasing challenges in demand volatility, multiple order

channels, faster fulfilment expectations and inventory utilisation

Web andMobile

CallCenter

Catalogue & Field Sales

SpecialOrder

Kiosk

Customers

E-commerceDC

Manufacturer

MarketPlace

Returns

3PLs

3rd Party suppliers and services

Customers

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3 areas which retailers need to take note of and

respond to

How Customer demands are driving supply chain

developments and our understanding of Blokker

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Considerations and how IBM can help3

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#1 – Optimise and Model for success

Be sure that your supply chain strategy

locks in competitive advantage not cost

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With the rapid growth of omni-channel retailing, it is critical for long term

success that retailer supply chains have good design and inventory

optimisation

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Supply Chain strategy influencing store layouts, formats and organisational

design

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#2 – Delivery Impact on Profit?

Multiple options of fulfillment expected,

much of it being free – profitability is critical

as volumes increase

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What is the right balance on basket size and charging ?

….Illustrative examples for next day delivery

Delivery Charge

£5.95

£4.95

£5

£10

£6.95

£3.99

£3.95

Free

£8.95

Ba

ske

t Siz

e ?

Scenario

- Product value £20, with Gross Margin of 30% or £6

- Argos/Toys R us Delivery charge difference is £5

- What is happening ? Is one operating at a loss,

breakeven or enhancing gross margins ?

- How does this effect price and value perceptions ?

Brand 2

Brand 3

Brand 4

Brand 5

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What is the right mix of collection and delivery ?

….Illustrative examples for click and collect % of online orders

% o

f O

nlin

e O

rde

rs c

olle

cte

d f

rom

sto

re

45%

31%

86%

65% *

Ave

rag

e

2014

35%

13%

Fo

rec

ast

2017

71%

5%

(1) Argos figure includes Check and Reserve *

(2) Country information sourced from Planet Retail Click and Collect report, store information from company reports

Click and collect forecast to double in 3

years, key capability to manage working

capital and operating costs for Omni-

Channel retailers

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#3 – Beware of DisruptorsNew entrants and others see supply chain

differently, focus on agility and innovation

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New subscription models being offered to drive loyalty and predictability,

however adoption will impact on existing operating and financial models

$99

$79

€9.95

£9.95

$39

£60

£70

$119

$99

£60

(1) Prices checked October 2014

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Amazon extends Prime to non-perishable Grocery items, in 48 US states –

supply chain economics very visible in its approach

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3 areas which retailers need to take note of and

respond to

Customer demands are driving supply chain

developments

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Considerations and how IBM can help3

1

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drive omni-channel revenue, improve customer satisfaction and profitability

Cross Channel

Dropship

Guided selling

Order management

Cross channel sales

Endless aisle

Save the sale

Markdown reduction

Additional revenue streams resulting from system and process integration of online and Brick & Mortar

Ability to sell merchandize that cannot be stocked profitably at each store

Stock out reductions realized through expanded inventory access on existing assortment

Expanded enterprise view of available inventory and sourcing flexibility improves conversion, improves turn and avoids markdown

Expanded assortment

Incremental revenue from expanded assortment from drop-ship agreements with 3rd party partners

Order modification

Self service

Order fulfillment

Revenue from order modification / retention versus order cancelation and / or returns

Consumer self-service capabilities reduce agent assisted service contacts

Improved order fulfillment rate

Dynamic Bundling

Ability to create dynamic bundles of products and services, and personalize these products and services through configuration

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#1 – Optimise and Model for successBe sure that your supply chain strategy locks in competitive

advantage not cost

#2 – How does delivery impact profitability ?

Multiple options of fulfillment expected, much of it being free –

profitability is critical as volumes increase

#3 – Beware of DisruptorsNew entrants and others see supply chain differently, focus on agility

and innovation

In summary, Customers are demanding more from retailer supply chains,

considerations for success

All of which requires a connection between supply chain strategy

and operational capabilities for long term profitable success

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Thank You

hoggdavi@uk.ibm.com

www.ibm.com/retail

+44 7814 248797