As shipping times for retail products continue to shrink, consumers are also starting to expect higher levels of service from omnichannel retailers. Kim Borchert, a partner in Bain's Retail practice, outlines the four rules of supply chain strategy that can help retailers stay competitive and meet customers' expectations.
Read the transcript below.
KIM BORCHERT: With Amazon setting the pace for new consumer expectations around delivery speeds, consumers are also expecting other different levels of service. They're expecting fewer out-of-stocks. They're expecting to see inventory levels real-time before they go to the store to pick up their product or have it delivered.
And omnichannel retailers are having to decide and think about how to make investments—investments in their supply chain. And they want to make sure that they're going to get a payback on that. And so what we've found is there are four key rules in order to think about that and do that in the most effective way.
First is really have your supply chain strategy grounded in your business strategy. Every organization has a unique and advantaged business strategy. Make sure that your supply chain strategy supports that.
Which consumers are you targeting? What are they expecting for delivery speeds? What are they willing to pay for? What is your competition doing? That is all really important as you think about supply chain strategy.
The second point is making sure your supply chain strategy is really fit-for-purpose for your organization. So think about what delivery speed you want, what inventory levels. For example, think about how you use your stores. Stores are an amazing asset. What we found is you can actually ship from stores, and it'll often cost 10% to 20% less for often the same or faster delivery speed.
So think about the full supply chain. Include your stores. Think about decisions that the merchants are making to really think outside of the siloed nature of your supply chain.
Third is adjust your operating model. Lots of the decisions are now more cross-functional. Think about who's going to make the decisions, where to get input, how to really broaden the base of input that the supply chain is getting in order to deliver on the increasing customer expectations.
Fourth, really make sure that your IT strategy and your analytic strategy are there to support your supply chain. IT and analytics are so important for supply chain. And so make sure that is working in lockstep with the rest of your supply chain strategy.
And finally, it's a multi-year journey. Think about the appropriate steps and the appropriate timing for each of your decisions.
Read the Bain Brief:
Modern Retail Supply Chains—Backbone for Omnichannel