Omnichannel Operations Benefit from Cognitive Computing

Stephen DeAngelis

April 18, 2019

Gone are the days when a consumer decides they need something and their only choice is to head to the store to buy it. Even when a consumer concludes making an in-store purchase is their best option, they are likely to have used their smartphone to search for other options or to compare prices. The digital path to purchase is becoming the norm for many consumers and both retailers and manufacturers are taking notice. The editorial staff at Supply Chain Digest (SCD) note, “The omnichannel world brings many opportunities — and challenges. Combine omnichannel commerce with the power of digitization, and a whole new world of insight into customer behavior can emerge.”[1] It’s clear when SCD staffers write about “the power of digitization” they are referring to a combination of big data and advanced analytics found in cognitive computing systems. Cognitive computing systems are what provide the “insight into customer behavior.” The digital path to purchase and the rise of omnichannel operations has implications up and down the supply chain. The good news is cognitive systems can do more than simply provide insights into customer behavior. They can help optimize both upstream (supplier facing) and downstream (customer facing) omnichannel operations. Jason Rosing (@JasonRosing), founding partner of Veridian, notes, “Retailers are evolving, and supply chains must evolve with them.”[2]

Downstream omnichannel challenges

Many of the challenges associated with downstream omnichannel operations relate to order fulfillment. Joe Skorupa (@joeskorupa) writes, “Omnichannel fulfillment is an essential retail function and yet few retailers claim they do it well. Major weaknesses include efficiency, accuracy, cost effectiveness and speed.”[3] From Skorupa’s comment one could conclude order fulfillment is only a challenge for retailers. Nothing could be further from the truth. Manufacturers and distributors also face omnichannel challenges. Rosing explains, “The application of omnichannel in manufacturing primarily focuses on the collaboration between suppliers, or vendors, and distributors. … Keeping up with customers’ demands has natural implications for business-to-business sellers, including manufacturers. Key applications of omnichannel in manufacturing include increasing end-to-end visibility in material availability; however, many companies overlook ways to improve manufacturer-warehouse relationships, thus they are unable to push operations beyond availability and reliability of supplies.”

It’s no surprise Rosing raises the importance of warehousing. Warehousing has become such an important part of omnichannel operations that warehouse space is being built at historical rates. Even former retail space is, in some cases, being converted to warehouse space. Bridget McCrea observes, “Transportation, warehouse space, labor, and technology are a few of the most common pain points.”[4] She adds, “As e-commerce sales continue to explode, growing and sustaining multiple sales channels can be overwhelming for shippers. Their customers expect a seamless experience — whether they’re shopping via the web, mobile, marketplaces, social or traditional bricks-and-mortar. … Effective distribution requires a critical understanding of your network, high levels of supply chain visibility, and a focus on planning well in advance for the peaks.” In other words, optimizing omnichannel operations requires advanced technologies.

Rosing believes industrial age processes and lack of modern technologies are hampering omnichannel operations. He explains, “The current technology within omnichannel has led to inconsistencies and growing complexity, and instead of the iconic overarching and adoptive platform, many retailers have continued to use legacy systems through custom interfaces that lead to inefficiencies and integration problems.”[5] He insists omnichannel operations need to leverage new technologies purposefully designed to enhance customer relations. He explains, “Retailers and supply chain leaders must increase proficiency across all channels, engaging with consumers and personalizing the shopping experience. This allows retailers and the supply chain to eliminate the barriers to new technology implementation, offer better customer service, and prepare for the next innovation.”

Upstream omnichannel challenges

Adam Robinson, a marketing strategist at Cerasis, bluntly states, “An omnichannel retail strategy is the new norm in today’s supply chains.”[6] Retail omnichannel strategies must be customer-centric. In fact, customers must be the focus all along the supply chain not just with retailers. Three of the most important touchpoints when dealing with customers are: last mile delivery; customer service; and returns.

Last mile delivery. Last mile delivery is where the rubber meets the road — and often the last chance to impress customers with good service. Today, the last mile can include any number of different starting points and end points. Paul A. Myerson (@Paul_A_Myerson), a supply chain instructor at Monmouth University, explains, “Omnichannel retail creates a range of customer touch points — stores, outlets, e-commerce sites, catalogs, and seasonal pop-up locations. … There is the increased demand — and added complexity — for ship-to-store and ship-from-store delivery, turning retail locations into mini-fulfillment centers requiring picking, packing, and possibly delivery capabilities.”[7] Logistics providers are experimenting with offering customers a variety of delivery options from traditional doorsteps to dedicated drop boxes to car trunks. The objective is to provide both security and convenience.

Customer service. On the digital path to purchase, the consumer is king. That means customer service is more important than ever. Meyerson explains, “Omnichannel retail expands the customer experience beyond the store. Many stores contact customers through social media, live chat, or text messaging, so employees need to be trained correctly when they are contacted through any channel.”

Reverse logistics. One unfortunate reality of e-commerce is that northwards of 30 percent of merchandise purchased online is returned. A reverse logistics strategy is essential for successful omnichannel operations. Meyerson asserts, “Make returns convenient through in-store, prepaid mail, and drop point channels.”

Mastering those three challenging areas requires seamless collaboration between retailers and their logistics partners.

Concluding thoughts

When Rosing asserts retailers and other supply chain stakeholders must adopt new technologies in order to master omnichannel operations, the new technologies to which he refers include cognitive technologies that help optimize operations and personalize customer relations. For example, the Enterra Supply Chain Intelligence System™ can help stakeholders optimize operations and the Enterra Shopper Marketing and Consumer Insights Intelligence System™ can leverage all types of consumer data to provide high-dimensional consumer, retailer, and marketing insights. Analysts from Saddle Creek Logistics Services assert, “Robust technology is at the heart of effective omnichannel operations.”[8] They explain, “For optimal effectiveness, today’s omnichannel supply chains require sophisticated technology in order to provide real-time information, optimize inventory, ensure seamless service and offer a variety of delivery options.” Cognitive computing systems should be high on the priority list of sophisticated technologies in which supply chain stakeholders invest.

Footnotes
[1] Staff, “Supply Chain Graphic of the Week: Mapping Customers Flows – and Where Customers are Lost,” Supply Chain Digest, 19 January 2017.
[2] Jason Rosing, “Omnichannel In Manufacturing: Why Manufacturers Are Following Retailers to an Omnichannel World,” Cerasis, 27 April 2018.
[3] Joe Skorupa, “Retail’s Surprising Weakness: Omnichannel Fulfillment,” Retail Info Systems News, 28 August 2017.
[4] Bridget McCrea, “Utilizing Omni-channel Fulfillment Distribution Networks to Build Customer Relationships,” Supply Chain 24/7, 11 December 2018.
[5] Jason Rosing, “Differences between Omnichannel & Omnichannel 2.0,” Supply Chain 24/7, 14 January 2019.
[6] Adam Robinson, “Omnichannel Retail Strategy: Not just a Buzzword, But a Business Model,” Cerasis, 5 October 2018.
[7] Paul A. Myerson, “Are You Ready for Omnichannel Retail?” Inbound Logistics, 16 July 2018.
[8] Saddle Creek Logistics Services, “Omnichannel Operations Require Sophisticated Systems,” Supply Chain 24/7, 27 June 2018.