A new study from PwC, commissioned by JDA Software, found that while 83% of retail executives surveyed reported that their supply chains were not optimized to support the new omnichannel world, only one-third considered the omnichannel dynamic to be an external threat.
The study, which surveyed more than 400 retail CEOs from around the globe, also found that the percentage of respondents who believed their supply chain was optimized for omnichannel improved among the top 250 companies, rising from 17% to 33%. Just over half of respondents said they considered their supply chain management to be a competitive differentiator.
Scott Welty, global vice president of retail industry strategy for JDA, said with the massive sea change brought about by omnichannel, comp store sales are no longer the “pinnacle metric” for retailers. He added that as more and more retailers focus on new markets to sustain growth, this naturally leads to challenges and complications in supply chain management.
“It seems that every customer is asking us, ‘how can you help us grow into new markets?’ ” Welty said. “This of course puts more stress on the supply chain. If a retailer is struggling to manage supply chain in their own country, how will they be flexible and nimble enough to supply customers across the globe?”
Welty said the study pointed out a disconnect between retailers’ plans to expand into new markets to drive opportunities and their failure to realize the importance of supply chain optimization in helping to drive profitable growth. Two-thirds of respondents didn’t see a connection between the two, he said.
“They want to grow, but only half of them saw their supply chain as a strategic differentiator,” Welty said. “Investment in the supply chain has generally not been at the top of the list of priorities for retail executives – it’s become kind of like the elephant in the room.”
Based on the survey results, retail leaders who focused on supply chains investment have 15% lower supply chain costs, less than half the inventory levels and more than three times shorter cash-to-cash cycles. It also found a clear linkage between supply chain proficiency and confidence in revenue growth.
Welty said the senior vice president of supply chain for a large footwear company told him recently that the company couldn’t find any more cost reductions from its manufacturing in Asia, or squeeze more savings from transportation, so supply chain efficiency was growing in importance.
“Executives are starting to view the supply chain not just as a cost of doing business, but as a differentiator,” he said. “There’s a big difference between a customer going to a retailer’s website and saying they want to buy today and get it tomorrow, and being told they can’t get it until next week. That might be their last shopping experience with that retailer. So supply chain becomes a catalyst for change.”
Failure to have a retail supply chain that is optimized for omnichannel can also damage a brand’s reputation, Welty said.
“Brand integrity is the new currency – that’s the new growth center, how to get more customers to love you and the brand,” he said. “You can’t afford to not give them what want when they want it and how, or not show them virtual assortments, or the ability to buy items from a tablet carried by an associate. If you’re not being that flexible and responsive, you could lose your brand advocates.”