THE EMERGENCE OF OMNICHANNEL IN B2B HOW TO SURVIVE AND WIN

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1 THE EMERGENCE OF OMNICHANNEL IN B2B HOW TO SURVIVE AND WIN APRIL 2015 Richard Balaban Michael Ryba

2 The online channel is becoming increasingly important in B2B transactions 1

3 Website traffic and the number of B2B buyers purchasing online are increasing 20 % 68 % 18 % Year-over-year growth in traffic 1 of B2B buyers now purchase goods online, up from 57% in B2B buyers who spend >90% of their budget online, up from 9% in Source: The New and Emerging World of B2B Commerce 2014, Forrester 2. Source: 2014 State of B2B Procurement, Acquity Group. The study surveyed 500 buyers with annual procurement budgets of $100,000 or more across a wide range of industries 2

4 resulting in the growth of the B2B online market Size of the US B2B online market 1 $TN ~X Source: Forester research 3

5 Customer expectations keep on rising 4

6 B2C customer experience is altering B2B buyers expectations 65 % of B2B customers feel service gaps vs. Amazon and Amazonlike offerings 1 Our customers have already been trained by Amazon [in B2C] on what good looks like. That s what we have to compete with. Cody Phipps United Stationers CEO 1, Source: The Amazon Effect 2014, LMA Consulting Group 5

7 Traditional service expectations New delivery expectations Product technical services Same-day or next day delivery, or within delivery slots Value added services Negotiated price, list minus discount / other Pick-up in lockers, parcel shops or stores Customer assistance Real-time order tracking Quality guarantee Easy returns process 6

8 How is this impacting wholesale distribution 7

9 The online channel has disrupted the traditional distribution model RETAILER / RESELLER VENDORS DISTRIBUTOR END CONSUMER BUSINESS Traditional flows Flows enabled by online channel ONLINE DISTRIBUTOR META-SEARCH ENGINES ONLINE MARKETPLACES 8

10 Leading distributors are transitioning to omni-channel Grainger ~36 % Share of ecommerce sales MSC ~51 % Share of ecommerce sales The opportunities are almost endless in e-commerce Jim Ryan Grainger s CEO As customers want to take advantage of [Internet] technology, it s really playing right into our sweet spot Eric Gershwind MSC s CEO E-commerce is the glue that holds the multichannel model together Court Carruthers Grainger s Americas President Distributors should pay attention to the overall shopping experience, not just the online element Steve Baruch MSC s Vice President of e-commerce 9

11 So, what will you do 10

12 Wait and see or shoot for the moon? 4/19/

13 What will it take to survive and win in this new world 12

14 The two steps to omnichannel operations Run the key plays Think and build agile Becoming omnichannel will require to focus on the plays that will drive customer centric operations Select the plays where you aim to shoot for the moon and the ones where you wait and see As customer needs will continue to evolve, design an organization and infrastructure that will be flexible and innovative 13

15 Run the key plays that will drive customer-centric operations #1 Dynamic network design #2 Last mile delivery services #3 Integration with vendors #4 Systems and technology innovation 14

16 Step 1: traditional DC DC DC 2 DC 1 DC = Distribution Center; OMS = Order Management System; WMS = Warehouse Management System Warehousing Pick / pack / ship 15

17 Step 2: fulfilment centers Traditional channels Online DC DC 2 DC + FC FC DC 1 Warehousing Case & pallet picking Each picking 16

18 Step 3: dynamic network design Traditional channels Online DC DC 2 DC + FC FC Branches Vendors FC DC 1 Warehousing Pick / pack / ship 17

19 Last mile delivery services are becoming increasingly complex Delivery Services Traditional model B2C-inspired services Day + 2 Fixed delivery points Cadenced Wholesale flows Same day or day +1 Lockers, stores, vending machines On-demand, subscription based Retail flows Real-time tracking Shelf-ready packaging. 18

20 Advanced last mile models #1 Rethink legacy delivery models and adopt dynamic network distribution #2 Leverage startups and radically new solutions #3 Work with third party carriers 19

21 Integration with vendors: P&G example Traditional model Integrated model DC DC FC FC END CONSUMER END CONSUMER 20

22 Advanced collaboration with vendors End-to-end distribution approach, drop-shipping Integrated planning and forecasting, leveraging big data Real-time visibility on inventory and orders Real-time replenishment Differentiated packaging for online versus offline 21

23 85 % of B2B companies recognize that technology investment decisions will be centered on their omni-channel strategy 1 1. Source: Building the B2B Omni-channel commerce platform of the future 2014, Forrester. The study surveyed 526 B2B companies in the US, Canada, UK, France, and Germany 22

24 Traditional systems OMS DC DC 2 DC 1 WMS DC = Distribution Center; OMS = Order Management System; WMS = Warehouse Management System Warehousing Pick / pack / ship 23

25 are not scalable in an omnichannel world Traditional channels Online OMS OMS OMS WMS DC DC + FC FC Branches Vendors FC DC 2 WMS WMS WMS Store WMS DC 1 Warehousing Pick / pack / ship 24

26 Omnichannel systems and technologies Agile and user-friendly customer interfaces Visibility and single view of product, inventory, customer, and order data Real-time decision making and tracking Orchestration of multiple stakeholders Technology-enabled breakthrough in productivity and services 25

27 Think and build agile Think of the end state as an evolving target Focus more on incremental steps and sprints Measure progress primarily in terms of customer satisfaction Plan for experimentation and failure, fail quickly and cheaply Place a high value on simplicity and speed Constantly reflect on progress and be faster and more efficient 26

28 RICHARD BALABAN MICHAEL RYBA

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