Omni-channel revolution a tipping point for automation
14 June 2013
Consulting firm predicts automated technology will help bricks and mortar retailers to carry out fulfillment through a number of channels without compromising service.
Automated warehousing is set to play a key role in facilitating a make or break revolution in retailing, according to a major UK supply chain consultancy firm.
LCP has released The Omni-channel Revolution report, which outlines how the non-food retail sector is set to invest some £5 billion over the next five years to re-engineer businesses to compete seamlessly across digital as well as traditional channels.
LCP based its report on research of board level executives at top retailers in the UK and the USA and defines Omni-channel as "an integrated approach delivering seamless customer experience across all channels including mobile devices, computers, in-store and catalogues”.
LCP’s research unveiled many retailers seeing Omni-channel as the ‘need to have’ model for the industry, regardless of cost, having almost reached the tipping-point of change or fail.
Much of the estimated £5 billion will be spent on logistics and warehousing as
retailers re-configure their supply chains to meet rapidly changing fulfillment needs in the wake of greater digital selling.
Automated warehousing is expected to play a key role in this, says LCP Consulting director Julian Mosquera.
"Omni-channel demands a revolutionary change in the operating model – not least a common stock policy and visibility and single-pick capability.
"The productivity benefits automation can drive are remarkable. It also allows retailers to blend both clicks and bricks fulfillment through the same system without compromising service in any channel, primarily because stock serves the channel that is most active at any time.”
"Automated warehousing is not a panacea to serve all retail requirements, but [in the right circumstances] a quick return on investment can be realised.”
LCP asserts the Omni-channel fulfillment model demands a single view of inventory which will allow deployment of stock into specific sales channels to be deferred closer to the point of consumption or sale. This allows the business to service the demands of the most active sales channels as a priority.
"This necessarily references a common pool of stock serving all channels and will lead to an increase in singles-based replenishment as the lowest common denominator for fulfillment,” adds LCP Consulting retail partner Stuart Higgins.
"The added complexity this will drive into retail supply chains will tip the balance towards appropriate investment in automation, to build a responsive and agile supply chain with a defined ROI when compared to the alternative Multi-channel model.”
LCP defines Multi-channel as retail operations comprising independently managed channels to serve, for example, physical stores or web sales, or sales from mobile devices etc.
Former CEO of Halfords and group supply chain director at Tesco David Wild helped LCP with its report. He describes Omni-channel as partly a defensive strategy from traditional retailers, who have too much floor space they need to justify.
"Amazon is the elephant in the room,” he says. "It is the price leader in many areas. Its net margins are 1-2% despite its low overheads. Marks & Spencer in contrast is more like 12% net. This brings pressure to bear, so supply chains have to be slick and responsive.
"We need a single view of inventory to optimise level of stock and cut costs.”