DHL reveals supply chain and logistics as most critical success factor in omni-channel business model
[Source: SCM Portal] There is growing recognition by markets and consumers that traditional channel-based approaches are now out-of-sync with the anytime, anywhere shopping behavior and delivery expectations of modern consumers. This is driving the new omni-channel approach in which all sales channels – brick-and-mortar, online, and mobile – converge into a single seamless channel of orchestrated product flow.
“Within the next three years, most of the world’s population (90 percent) will have fast mobile Internet connection, and today more of us are browsing and buying online. Already some 70 to 80 percent of consumers in the U.S. use multiple channels before making their purchase decision and we expect this to increase in most markets globally”, explains Matthias Heutger, Senior Vice President Strategy, Marketing & Innovation at DHL Customer Solutions and Innovation.
While the omni-channel transformation is well underway, this report reveals that most companies are not yet ready for omni-channel; they are persisting with channel-based approaches that cannot meet new consumer demands. Heutger adds: “Consumers expect access to information at all times, faster delivery speeds, and a personalized shopping experience. Companies can’t meet these expectations using a traditional channel-based approach. An omni-channel strategy is needed for future success.” There is a clear difference between these approaches. Multi-channel retailing aims to optimize the consumer experience in each separate sales channel, whereas the omni-channel approach is holistic, channel-agnostic, and customer-centric.
Omni-channel strategy for competitive advantage
The report reveals companies that master omni-channel will gain significant competitive advantage. Despite the complexity of coordinating and integrating all sales channels, and the investment required to achieve cross-channel fulfillment, early-adopter retailers report significant customer growth, increased customer loyalty, higher profitability, and improved inventory turnover.
The report also highlights that supply chain and logistics are key enablers for omni-channel success, and are essential for fulfilling customer promises. As companies transform their structures, processes, and IT systems to support an omni-channel strategy, logistics providers can facilitate personalized seamless fulfillment options that unlock new levels of operational efficiency and customer satisfaction.
An omni-channel strategy starts with investment in systems to enable full inventory visibility across all channels. Advanced analytics capabilities are required to make proactive, predictive fulfillment decisions. And flexible logistics networks and services ensure seamless product flows between e-commerce supply chains and in-store operations.
Physical assets, including warehouses and stores, will continue to deliver value but with changing roles. To enable flexible cross-channel fulfillment options, warehouses are taking on more direct consumer-facing fulfillment activities, and stores are developing micro-warehousing capabilities. The last mile of the delivery process is also important to an omni-channel strategy. It provides opportunities to enhance the customer experience and to reduce delivery costs.
Omni-channel investment may be unaffordable for small, local retailers. But cities and logistics providers can collaborate to provide access to shared platforms. The report provides a case study example of the Online City Wuppertal project.
Omni-channel trends in Asia Pacific
Asia Pacific is the largest and fastest growing B2C region in the world, and yet there is sparse research on omni-channel trends in Asia. The report includes the key findings of an extensive survey conducted by DHL and IDC with 56 companies across the region. It finds that delivery speed is more important than flexibility to Asian consumers; that the fastest growth in the next two to five years is predicted to be in online marketplaces and online stores; and that companies across Asia are most likely to invest in predictive logistics, the automation of distribution centers, mobility-driven shopping, click & collect models, digitalization of stores, and same-day deliveries.
The report also highlights wide variation in omni-channel readiness and market maturity across Asia. According to Mei Yee Pang, Vice President, DHL Asia Pacific Innovation Center: “Our role at the DHL Innovation Center is to help businesses recognize this diversity, adopt best practices, and innovate for business growth in the region.”