The Changing World of Omni- Channel and Distributed Order Management

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1 The Changing World of Omni- Channel and Distributed Order Management Fran Riseley Deputy Managing Director Martec International Ltd 19 th May 2015

2 Agenda How online is growing and where is it likely to top out based on our research How fulfilment is changing the varied options available The desire to fulfil from store and the practical issues holding it back Some potential strategies for overcoming the practical issues and the impact on processes The IT support needed to make it work.

3 Omni-channel is the biggest thing on the CEO s agenda It dominates everything else

4 Growth of Non-Store Sales Source: Martec UK IT in Retail Report

5 Growth of Non-Store Sales By Retail Sector Source: Martec UK IT in Retail Report

6 What is the Maximum % of Sales You Think You Will Do Online? % of Retailers 30% 25% 24% 20% 15% 10% 5% 3% 7% 11% 13% 9% 5% 3% 3% 3% 8% 11% 0% Source: Martec UK IT in Retail Report

7 Eventually, we believe that 24% of all that stock that leaves a store will be sold in non-store channels

8 Growth of Sales Channels With Omni-Channel Average number of sales channels per retailer 2.9 Average number of sales channels UK Average number of sales channels Source: Martec UK IT in Retail Report

9 Fulfilment Is The New Competitive Arena Bulky products or special orders may be shipped from the supplier direct to the consumer s home Supplier Order entered while at home, on the move or in the store Consumer Order Entry Order entered on picking list Consumer s Home Requires real time visibility of inventory across the enterprise and single stock pool Order shipped to consumer s home Company Warehouse(s) Order picked in store, shipped or mailed to consumer s home Picked in store, no shipping Consumer Collects From Store Order shipped to store as consumer parcel or with bulk replenishment Store Or order fulfilled from store stock Order shipped to third party location, e.g. train station Consumer Collects From Third Party Location

10 Example - Waitrose Click and Collect Point

11 Fulfilment Is The New Competitive Arena Bulky products or special orders may be shipped from the supplier direct to the consumer s home Supplier Order entered while at home, on the move or in the store Consumer Order Entry Order entered on picking list Consumer s Home Requires a model to allocate each order to the least cost fulfilment path Order shipped to consumer s home Company Warehouse(s) Order picked in store, shipped or mailed to consumer s home Picked in store, no shipping Consumer Collects From Store Order shipped to store as consumer parcel or with bulk replenishment Store Or order fulfilled from store stock Order shipped to third party location, e.g. train station Consumer Collects From Third Party Location

12 Fulfilment Is The New Competitive Arena Bulky products or special orders may be shipped from the supplier direct to the consumer s home Supplier Order entered while at home, on the move or in the store Consumer Order Entry Order entered on picking list Consumer s Home A quality order management system is mission critical Order shipped to consumer s home Company Warehouse(s) Order picked in store, shipped or mailed to consumer s home Picked in store, no shipping Consumer Collects From Store Order shipped to store as consumer parcel or with bulk replenishment Store Or order fulfilled from store stock Order shipped to third party location, e.g. train station Consumer Collects From Third Party Location

13 The Retailer s Holy Grail Fulfil From The Best Place The best place is the one that maximizes your profit on the order The delivery/pick up location could be your home, a store or a third party convenience location Picking up in store gives the consumer speed and free delivery Home delivery is convenient for some, inconvenient for others A tube station or convenience store is convenient for many, though we don t have enough experience on consumer satisfaction with this option. Today most companies fulfil from their warehouse, even for click and collect, because they don t trust the store inventory records Know the customer s preference and the cost of fulfilment, so you can build a set of rules that makes sense.

14 Fulfilment From Store An Evolution Home/Third Party Home delivery fulfil from warehouse if stocks permit Collect From Store Fulfil from store inventory if it s a basic or core line and on hand is >5 of a SKU Fulfil from nearest store with stock if warehouse stock is zero and no receipts imminent Fulfil from store if on hand of any SKU is >5, then if it is 5 when you trust your store records more Fulfil from store if the item is a return to store that the store is not ranged for and you would have to pay to return it to the warehouse and the shipping cost inc store labour is less than the 40% (say) clearance markdown If on hand = 1 or 0, fulfil from warehouse first. If the warehouse has zero on hand (in free stock), offer fulfilment from the closest other store the customer can get to. Fulfil from warehouse if the store has inventory but you don t trust it Fulfil from store if it is a big ticket item and you can call the customer back to confirm it is ready to collect

15 Omni-Channel IT Architecture RETAIL & CRM DW WEB MAP PIM CALL GIFT FA&R POG PLM WSSI ERP ESB (Data Transfer Central) TV CLI EVT Supplier Portal Store/HR Portal FFS WMS DOM EPOS Term PIM PLM ERP MAP FA& R POG FFS WMS DOM GIFT CLI EVT ESB Meaning Product Information Management (part of ERP) Product Lifecycle Management Merchandise Management System Merchandiser and Assortment Planning Forecasting, Allocation and Replenishment Planogram System Freight Forwarding System Warehouse Management (may be part of ERP) Distributed Order Management System Gift Card System Clientelling Events Enterprise Service Bus (Data Transfer Central)

16 Single Stock Pool Across All Sales Channels 70% 60% 54% 67% 57% 50% 50% % of Retailers 50% 40% 30% 20% 25% 10% 0% All Retailers Small Format Speciality Mass Merchants Department Stores Large Format Speciality Food and Drug Stores Goal: Visibility of all stock everywhere in the enterprise including on the boat Source: Relex Solutions State of the Retail Supply Chain 2015

17 Single Stock Pool We don't plan to move to a single stock pool as we only have two channels - retail and online. -Supply Chain Director, Small Format Speciality Retailer We don't trade online and we don't have DCs, so each branch has its own stock pool. -Supply Chain Manager, Large Format Speciality Retailer Goods are cross docked and go straight out to stores, which act as mini warehouses. Online orders are fulfilled from the customer's local store. -Head of Logistics, Small Format Speciality Retailer We don't operate online but we do have in effect a separate stock pool for each warehouse which stores order from. -Supply Chain Director, Small Format Speciality Retailer Source: Relex Solutions State of the Retail Supply Chain 2015

18 Top 3 Business Issues Regarding Supply Chain Planning and Execution 70% 63% 60% % of Retailers 50% 40% 30% 20% 10% 31% 25% 25% 19% 13% 13% 13% 9% 9% 6% 0% Source: Relex Solutions State of the Retail Supply Chain 2015

19 Summary Omni-channel is the most important thing any retail business can address It changes almost monthly as we learn more about what it really means Fulfilment is the area of most development now, though other things are obviously important The implications for inventory management are significant The implications for systems are significant Retailers have no choice but to invest to keep up, let alone get ahead Distributed order management is coming into its own as a new breed of IT systems.

20 We deliver the ROI Martec International

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