When discussing the biggest disruption hitting retail today, a super-session panel of leading retailers at FOCUS 2013 in Orlando, Florida agreed it was….the customer! That’s right, it’s not multi-channel or mobile or social commerce, it’s the changing customer, they said. Why? Because meeting customers’ fast-changing desires for shopping convenience and service, and providing a seamless customer experience across channels, is what is driving revenue growth. Everything else is just a means to that end.
Meet the panel:
- Robin Bornkamp, Vice President, Inventory & Demand Planning, Lowe’s
- Matt Fischer, Vice President, Inventory Management, Michaels Stores
- David Markwell, Vice President, IT Technology Services Management
- Moderator: Brian Gibson, Wilson Family Professor, Aviation & Supply Chain Management, Auburn University
The super-session panel titled: Disruptions in Retail – How to Shift from a Static to a Dynamic Supply Chain, featured executives from Lowe’s, Michaels Stores and Loblaw, and was ably led by Brian Gibson, Professor of Supply Chain Management at Auburn University. The panel discussed the top disrupters and hot issues facing retail in 2013, as well as the actions retailers must take to deal with these issues. The underlying theme of the panelists’ remarks was that retailers must move from static, push-based supply chains to more dynamic, demand-driven supply chains that can immediately respond to changing customer demand.
The top three trends the panel identified were that what customers are looking for is changing, how the competitive landscape is changing with new entrants and broader service offerings to meet this changing customer demand, and that supply chain processes and technology are changing in order to keep up. The terms the retail leaders used most often to describe the necessary response to these trends were that supply chains must be more nimble and flexible.
Matt Fischer of Michaels Stores gave a couple of examples. He said that previously, 80 percent of their supply chain was based on direct-to-store shipments – pushing goods to their stores. Now, 80 percent of their inbound shipments go to their DCs so they can react nimbly to customer demand across channels. Fischer also noted that imports used to be a small portion of their supply chain – approximately 10 percent – but now they get 50 to 60 percent of their goods from overseas. He said Michaels is looking into near-shoring as a means to shorten supply lines so they can be more nimble and flexible in responding to changes in customer demand.
Robin Bornkamp described how Lowe’s is responding to the changing customer landscape by delivering a single customer experience regardless of channel. She said this requires world-class technology, but insightfully noted that retailers must also adopt the world-class best practices that technology vendors have developed in conjunction with retail leaders. She said this will produce more efficient processes and allow retailers to skip the system modifications that increase cost of ownership.
From Static to Dynamic Supply Chains
The panelists agreed that moving from a static to a dynamic supply chain entails a lot more than simply going from a push to a pull model. Fischer notes that the new focus on the customer has helped supply chain operations go from a cost factor to an enabler of business strategy. To do this, he says, supply chains must be able to keep up with the changing customer.
Bornkamp commented that an important aspect of moving to dynamic, customer-centric supply chains is the need to get everyone on the same page, incented to achieve the same goal – serving customers. She says executive support is key in this endeavor both to establish open communications across the enterprise and to ensure goals and metrics are aligned to optimize the entire process, not just individual parts. As an example, she said a little extra work in the DC to create store-ready and shelf-ready pallets can save a tremendous amount of work in stores. Bornkamp remarked that clarity of the decision process is critical to aligning goals. She says management must break down the barriers so people can make these types of decisions.
In a video interview immediately following the panel session, Brian Gibson agreed that the most important factor for retailers in adapting to the new dynamic environment is getting executive involvement and commitment. Gibson said the c-suite is driving corporate strategy and that supply chain leaders must be involved because supply chain capabilities often determine whether those strategies can be executed successfully or not.
Fischer cautioned that the success of the transformation to a dynamic supply chain will depend on people’s willingness to change and accept best practices. He notes that not only have customers changed, employees have changed as well. They don’t respond well to the old command and control structures. They want to be involved in the process and be part of the solution. This requires a new management style, but also brings new creativity and innovation to the process. These more engaged employees typically provide better customer service as well.
A final step the panelists agreed is necessary to move from a static to a dynamic supply chain is to establish an S&OP process. This should include time-phased planning to collaborate both internally and with suppliers. This longer view of inventory requirements helps get rid of the bullwhip effect of demand spikes, reduces inventory levels while increasing on-shelf availability, and better positions the supply chain to respond to customer demand.
As you can see, the panelists shared a lot of useful insights with the FOCUS audience. If you were not fortunate enough to be there, you can still benefit from Brian Gibson’s summary in the video.