The future: Customer focus and the era of multichannel

Supply Chain 2014-2015

With views from supply chain directors at 15 leading retailers spanning the entire industry, this report both reflects the pri­orities of those companies in their individual sec­tors, and provides a wide cross-section of perspec­tives from which crucial observations on supply chain trends and innovations can be drawn.

As published in Retail Week & DWF Supply Chain: Trends and Innovations in Retail 2014-15 report 

First and foremost of these is the importance of multichannel and omnichannel development to the supply chain function. It comes as no surprise to find that the adaptation of their models to the multichannel world is a priority for supply chain directors. While some of the 15 companies are fur­ther along the multichannel journey than others, adapting supply chains to the requirements of mul­tichannel or omnichannel retailing is a constant theme throughout all the interviews and a major priority for supply chain bosses in 2014 and beyond.

The value of collaboration in effective supply chain management is also widely felt. The emphasis placed by the supply chain directors on collabora­tion with other retailers, suppliers or third parties, seen in comments on not just sourcing and logistics, but also environmental responsibility and ethical sourcing, is a clear indication that successful sup­ply chains in today’s complex retail world are reli­ant on close, water-tight relationships.

Retailers also emphasise the benefits of closer collaboration being seen between supply chain teams and other business functions within their companies. As the supply chain director of a lead­ing department store sums up: “In omnichan-nel, there so many areas where full co-operation is needed and where your best minds need to be applied to ensure you have the best solutions. You have to have a supply chain involved, you have to have IT involved and retail. And all the interested parties have to be around the table. You can’t work in silos anymore.”

The greater engagement the supply chain func­tion has throughout the business, and the broader the remit and influence of supply chain profes­sionals within companies, the more rewarding and impacting the work will become. Therefore, there is a prevailing feeling among many of the retailers that jobs in supply chain management have become more interesting and fulfilling than in previous years.

The calibre and professionalism of people work­ing in the supply chain area is increasing as a result. However, given the more demanding roles supply chain staff are assuming, investment in training has never been more crucial, something that is stressed by a number of the supply chain bosses interviewed.

Rapid response

While multichannel transformation is undoubtedly the primary catalyst for so much change and devel­opment within retail companies and their supply chains, coping with the pace of change more gener­ally across the diverse areas supply chain directors have to cover is also an important concern.

By the same token, reacting to or anticipating the fast-changing requirements and preferences of consumers is critical and is a constant thread in the retailers’ interviews. The supply chain must be sufficiently agile to cope with rapidly evolving con­sumer preferences and requirements that are prone to sudden and unpredictable change.

Indeed, the prevalence of references to the consumer – and the fundamental importance at­tached to the consumer – is something which all the interviews share. Whether with regard to the general multichannel and omnichannel challenge, expanding fulfilment options, technological inno­vation, environmental issues or ethical sourcing, the consumer remains top of mind for supply chain directors and their teams. This arguably reflects the increased consumer focus supply chain teams are required to have to do their jobs effectively in the modern retail environment.

This may in turn further reflect how the supply chain function has changed in recent years. Not only has it evolved to assume a role – as one retail director put it: “at the heart of business strategy” – but there’s also a strong sense in this report that supply chain teams are no longer simply providing services for a company, such as storage or transport, but are serving its customers too.

The work they do is of vital importance, and that is finally being recognised. As one supply chain director, who has more than 40 years’ experience in the retail supply chain sector, perceptively com­ments: “I can certainly say that in years gone by no­body took a blind bit of notice of me. Now I operate at board level and sit on the executive committee. There is no question that supply chain does influ­ence the course of events more than we ever have in the past.”

So what will the retail supply chain of 2020 look like? Despite multiple question marks over new technological innovations and rapidly chang­ing rules of engagement in an evolving retail world, what’s certain is that the consumer will be at the heart of the retail supply chain.

As one leading DIY retailer predicts: “There is always going to be a need to shift things around so there will always be a need for road and rail transport and shipping. The difference is prob­ably going to be in the way that we interact with customers and how their expectations are go­ing to change.”

What this focus on offering a first-class customer service will ultimately do is completely shift to-day’s established models of retail profitability, with bottom-line growth coming as much from serving the needs of the customer as it does from selling products.

The response from a big name fashion retailer to the question of how will the retail supply chain in five years’ time be different to that of today, per­fectly epitomised this shift. “Historically, service success was store based. It has become progressively ecommerce based. But in five years’ time it will be omnichannel service based. And profitability of re­tailers will be driven as much by service as it will by product because the economics of service are both powerful and dangerous in equal measure.”

What this will ultimately boil down to is wheth­er existing retail supply chains can cope with this monumental change in what shoppers want – and not just how they receive goods, but also how they browse for them, the speed they can lay their hands on them and the ease of which they can return them.

This will be the ultimate test of supply chains in the not too distant future.

If you have any questions or would like more information, please contact Hilary Ross Partner & Head of Retail, Food & Hospitality sector.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Want to know what some of the UK’s top retailers’ supply chain and legal teams think will be key innovations and issues in 2015?

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Hilary Ross

Executive Partner (London) - Head of Retail, Food & Hospitality

Recognised by The Lawyer as one of the UK’s Top 100 lawyers, I advise clients on compliance and challenges across the EU in relation to products, systems and safety.

Dominic Watkins

Partner - Head of Food Group

I am Head of DWF’s internationally renowned food sector group as well as being Head of Regulatory in London.

Ed Meikle

Partner - Head of Retail Group

I advise on all aspects of intellectual property law, especially advising businesses in retail, food, sport and consumer products on the development, commercialisation and protection of their brands and technology.