4 Smart Supply Chain Strategies for Boosting Customer Experience

customer experience

This is the best of times and worst times for retail. On one hand, online sales taking retail to new frontiers by offering endless choices from the comfort of home and taking away from the sales of brick and mortar stores, and on the other, e-commerce businesses are scrambling to open brick and mortar stores. Despite the apocalyptic news of bankruptcies and the store closings by well-known brands, the retail sector is growing.

Consumer preferences are changing as well: focus is shifting from acquiring stuff to accumulating experiences. But creating a great experience is complicated. Having a great product is not enough anymore. Offering great customer experiences require developing a personal relationship with the customer and that comes with many questions to answer: what, where, how, how often…, choosing the right communication channel and frequency, which products to show, which offers to extend are all part of the puzzle retailers are having to solve on a daily basis.

This new era of retail needs a fresh look and a different approach. More and more online-only brands are looking into ways to be more like brick-and-mortar. One answer is a great showroom experience for shoppers.

Let me ask why a showroom?

Because it fills a gap in consumer experience that online shopping cannot and it’s an opportunity to create a personalized experience.

How?

Traditionally, store shopping allows you to touch and feel the product, try it. Then, there are additional choices for the unexpected finds. A store is a touchpoint with an opportunity for targeted interaction and can be the front post of the data collection. Retailers are also exploring novel ways to keep the joy of shopping alight. New technology is ensuring that the store shopping is attractive-ranging from digital mirrors to wallet payment options.

Retailers understand how crucial creating a personalized experience is. Many of them also understand the need to better leverage technology in their interactions with the customers. But often they can’t see the importance of the supply chain strategies in this context. But if we go deeper into demystifying ‘wow’ experience  the underlying tenets are:

  • Understand the personalized preferences of consumers (and keep optimum inventory!)
  • Build consistency by repeating wow experience

Ironically, creating great customer experience puts a tremendous strain on the supply chain. Mainly because supply chain has to be nimble and precise to respond: delivering unified customer engagement and creating adaptive and personalized offers/ promotions translates into optimum inventory levels, and short response time (all this with keeping profitability up!). For omnichannel retailers, syncing online and digital retail to create a seamless experience is a key concern and more than anything, it requires a single view of the inventory.

Moreover, retailers and suppliers have to make tough decisions in face of contradicting demands. For example, customer centricity requires avoiding stock-outs, at the same time, lean and fast turning inventory is needed to create a robust discounting and promotion strategy. Also, marketing demands way heavy on logistics costs.

Supply chain management plays a crucial part in creating a great store experience. It constitutes the backbone by taking care of the fundamentals, assortment planning, creating a discount strategy, and rightsizing store inventory and forecast, to name a few. Once the stores have stocks catering to personalized preferences of the customers and lean inventory, the overall experience can be built on top. Here are a few ways to create smart supply chain strategies by using the latest technology and decision support tools:  

4 Smart Supply Chain Strategies

Web-based Merchandise Financial Planning:

As companies grow their sales channels (e-commerce, international, brick and mortar, franchise, wholesale) need for creating, and managing category budgets per channel and country by geographically distributed teams becomes paramount. At the same time, managing the spreadsheet-based process is becoming more and more difficult. This is because spreadsheets are manually revised and are constrained by the inability to do scenario analysis and comparisons. Now web-based tools offer easier and faster collaboration for creating and managing multiple versions of financial plans and budgets across different sales channels. Impact of changing assumptions are reflected in the real-time update of KPI targets that can automatically be shared with downstream planning systems and dashboards for monitoring performance.

Integrated Supply Chain Analytics

Integrated supply chain analytics gives retailers an option to test the efficacy of the decisions, at strategic, operational, and tactical levels, by simulation or what-if scenario planning. Simulations empower the diagnostic, predictive as well as prescriptive analytics for a decision maker. Integrated Supply Chain capabilities give retailers the capability to assess the commercial impacts of operational constraints by quantifying the impact of the current process on key performance indicators (KPIs), identify bottlenecks, and do a sensitivity analysis by running simulations.

Advanced Assortment Planning 

Retailers understand not all stores are created equal;  they have different capacities, different customer segments, different lifestyles and priorities, different price sensitivities, climate patterns leading to different customer needs. “Getting closer” to the customer is a top priority for all retailers now and to make that happen they need more sophisticated ways of evaluating sales performance of different products in different store groups with advanced analytics. Effective assortment localization requires sophisticated assortment planning systems that predict product performance at the store level and support fast decision-making for which stores get which products. 

Markdown Optimization

As margins are shrinking,  apparel and electronics retailers are getting more diligent about the depth and timing of the markdowns for short lifecycle products to ensure they make smart pricing decisions taking into account product lifecycle and customer responses to price changes. Optimizing sell-through or lifetime gross margin of every single product are possible with markdown optimization solutions, which are more sophisticated and precise than rule-based approaches that only consider last weeks’ sales. Best of breed solutions work with business rules such as eligible price lists, target exit dates, minimum gross-margin requirements, and recommend optimal prices per channel, country or store-cluster for different business scenarios such as:

  • Maximize sell-through by the product exit date
  • Maximize lifetime gross margin by the existing date
  • Hybrid scenario to both  two goals with varying weights

For example, here is how Solvoyo helped De-Facto Fashion:

The Issue: Retailer wanted an integrated solution where pre-season planning and in-season pricing and inventory management are all done in the same solution suite based on the same data architecture and planning decisions and parameters are automatically fed into downstream execution systems

The Approach: Solvoyo implemented Retail Planning and Analytics Platform, starting with in-season allocation, replenishment, store to store transfer and markdown optimization solutions, all integrated and aware of decisions being made in others. Then went onto implementing pre-season planning modules including Merchandise Financial Planning, Store Clustering, Assortment Planning and Pre-Pack optimization and related dashboards that give visibility to KPIs and simultaneous analysis of inventory movements, pricing and sales performance.

The Impact: Solvoyo increased the transparency and enabled informed decision making. The user could do the sensitivity analysis by using what-if scenario planning.

Net-net, by efficient supply chain management, retailers today can drive customer experience at the store level by using diagnostic, prescriptive, and predictive analytics at the strategic, tactical, and operational levels.

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