Ian Wong, IBM Australia - The “Buy” button is the start of the Online Retail challenge
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Ian Wong, IBM Australia - The “Buy” button is the start of the Online Retail challenge

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Ian Wong, Strategy & Transformation Digital Front Office, IBM Australia Ltd presented this at Online Retail Logistics 2013. The conference focused on ways to create efficient supply chains to support ...

Ian Wong, Strategy & Transformation Digital Front Office, IBM Australia Ltd presented this at Online Retail Logistics 2013. The conference focused on ways to create efficient supply chains to support the increase in online shopping.

For more information, visit http://www.informa.com.au/onlineretaillogistics13

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    Ian Wong, IBM Australia - The “Buy” button is the start of the Online Retail challenge Ian Wong, IBM Australia - The “Buy” button is the start of the Online Retail challenge Presentation Transcript

    • Copyright 2013 IBM Commercial in Confidence The “Buy” button is the start of the Online Retail challenge Ian Wong Partner, Global Business Services Strategy & Transformation – Digital Front Office Lead Retail Industry Lead IBM Australia 13th November 2013 1
    • Customers now have unlimited access to information and can instantly share it with the world Customer expectations of service, price and delivery are soaring Social networking and mobile commerce have dramatically changed the dynamic between buyer and seller This is changing the entire way products are sourced, manufactured and distributed—and making business more complex than ever Copyright 2013 IBM Commercial in Confidence The age of the empowered customer. ustomer activated Enterprise To understand how our clients planned to address these rapid changes, IBM conducted the 2013 Global C-Suite Study covering 4,183 face-to-face conversations with CxOs. How the C-suite is preparing for the future: – Open up to customer influence – Pioneer digital-physical innovation – Craft engaging customer experiences 250 million 75% $93 billion Number of tweets sent via Twitter each day Percentage of people who believe companies don’t tell the truth in advertisements Amount in sales missed due to out of stock inventory 2
    • Copyright 2013 IBM Commercial in Confidence Globally, the major response to the empowered customer has been a focus on marketing and customer engagement. Pre- Purchase Purchase Post Purchase Key Objectives Marketing Strategy and Transformation Marketing Performance and Optimisation Customer Engagement and Experience Cross Channel Integration & Execution Innovating to drive revenue and growth Creating highly personalised and targeted offers Optimising customer engagement at every touch Optimising visibility & integration to balance supply and demand Capitalising on the shift to digital, mobile, and social interactions Maximising the performance of the marketing organisation View of all customer interactions regardless of channel Growing revenue through integrated cross-channel execution 3
    • Digital merchandising with endless inventory Augmented Reality In-store dynamic queue management Personalised, interactive technology Copyright 2013 IBM Commercial in Confidence The focus on marketing and customer engagement has resulted in many ideas for attracting and converting customers… Innovative customer service development Active Display Advertising 4
    • Copyright 2013 IBM Commercial in Confidence … and there is a constant stream of innovation in this area. Best Buy’s “Connected Store” focuses on hands-on service through use of innovative checkout Converse is enabling fans to let their creativity flow and be rewarded for their work Quirky helps consumers get their brilliant ideas to market through a social and collaborative development process …and there is always something on the horizon Macy's is staying ahead by integrating online shopping into the physical world Smart hangers Virtual Shopping 5
    • Copyright 2013 IBM Commercial in Confidence In the last few years there has been a renewed focus on cross channel execution within the supply chain... Question: Which is more important in forming your lasting opinion of a retailer? Post Purchase Pre-purchase Cross Channel Integration & Execution Post Purchase Source: Smarter Commerce Consumer Advocacy Study; IBM; August 2012 IBM studies show supply chain visionaries and planners have achieved strong returns by investing in visibility, process collaboration and analytics Source: IBM Institute for Business Value, "New Rules for a New Decade" 3 year avg revenue growth Key Objectives 3 year avg ROIC Optimising visibility & integration to balance supply and demand Growing revenue through integrated cross-channel execution Customer analytics 6
    • 7 Copyright 2013 IBM Commercial in Confidence ….because in the end, the critical step in any on-line transaction is fulfilling the order.
    • Copyright 2013 IBM Commercial in Confidence The real challenge starts after the “Check Out” button is clicked because of the complexity of fulfilment in an Omni-channel world. Multiple Enterprises Brands Divisions Business Units Acquisitions Multiple Back-End Systems ERP / CRM Merchandising POS Database Store 3 Suppliers Multiple Catalogs Products Services Store 2 DCs Distributors Multiple Product Choices Configuration Guided Selling Store 1 Warehouses Carriers/ 3PL Customs Banks Multiple Fulfillment Methods Warehouse Stores Lockers Suppliers Drop-ship 3PL Networks Catalog Web Multiple Channels Store / Retail Website / Mobile Catalog / Call Center Kiosk Commercial / Contractor Distributors / Resellers Call Center Customers Multiple Customer Segments Consumer Distribution Corporate 8
    • Copyright 2013 IBM Commercial in Confidence Example: The competing requirements of the traditional retail supply chain compared to a Omni-channel supply chain . Dimension Store Retail Omni-Channel Supply Chain Complexity Managing range, promotions, pricing, customer service, buying, merchandising, marketing and logistics across a single channel Managing range, promotions, pricing, customer service, buying, merchandising, marketing and logistics for and across Multiple channels Logistics Complexity Distribution Centres cross-docks and stores Distribution centres, cross-docks, on-line fulfilment centres, dark stores, store picking, collection points, drop ship Operational Objectives Better, faster, and cheaper Efficient store replenishment, lower costs and fast turnover Efficiency plus meeting customer requirements 24/7. Logistics Execution One way - moving full cases of inventory to stores in truckload quantities on a static schedule Picking, packing despatching small orders to individual customers and orchestrating interstore transfers 9
    • Copyright 2013 IBM Commercial in Confidence The competing requirements of the traditional retail supply chain compared to a Omni-channel supply chain (cont’d) . Dimension Store Retail Omni-Channel Order Management Customer present in store Complex business rules for order fulfilment based on channel, cost, availability, processing capacity and channel Range Limited by shelf space Expanded through fulfilment centres and/or inter-store transfers or unlimited through endless aisle and drop ship Availability Stock available at specific store, expectation of customer conditioned by available choice and substitution decisions Customer expectation of stock available at any collection point or ready for immediate delivery with no substitutions IT Systems Information systems stratified by level or function Integrated data across inventory, order management, logistics execution, store operations and marketing 10
    • Copyright 2013 IBM Commercial in Confidence The competing requirements of the traditional retail supply chain compared to a Omni-channel supply chain (cont’d) Dimension Store Retail Omni-Channel Returns Limited and very often linked to store of purchase enabling exchange and put back to shelf Return to Multiple stores (even cross banner if allowed) or by mail requiring returns processing. Track and Trace Generally not required Integrated view of order fulfilment with near real-time alerts Store Personnel Know the location of products and sell them Guide and orientate customers to Multiple channels 11
    • Copyright 2013 IBM Commercial in Confidence Example: Deciding on the “right” Omni-channel strategy. Example Decisions   Delivery: How will you compete and differentiate yourself from your competitors?  Insource or outsource to 3PL?  Separate supply chains for on-line and store?  Fulfilment sources: o o o o o o Store picking? Separate eFulfillment Hub? Combine Store and eFulfillment DC’s? Dark stores? Drop Ship? International and national consolidation centres? o o o o o o Home delivery? Pick up in store? Drive Thru? Collection points? Lockers? Mobile delivery points? Drive Thru Image: Sipa Press from WSJ On-Line Mobile collection point Collection Lockers 12
    • Copyright 2013 IBM Commercial in Confidence There is no clear winning model… each retailer and manufacturer has to determine the best strategy for its particular circumstances… 13
    • Copyright 2013 IBM Commercial in Confidence … and answer the question of how it will profitably meet the new demands of its customers. Supplier Collaboration • Supplier Inventory Visibility and CTP • Supplier Order Management • Logistics Execution Visibility - Into Store - Into DC - Drop Ship • Supplier Life Cycle Analytics Performance OmniChannel Strategy & Metrics Inventory Management • Demand Forecasting • Demand Shaping - Price Optimisation - Promotion Planning - Markdown Optimisation • Multi-Echelon Multi-Banner Inventory Optimisation • Replenishment Planning Supply Chain Network Design Information Technology Cross Channel Integration and Execution Processes & People • Supply & Demand Demographics • Optimised location/capacity of logistics facilities • Optimised location of online fulfilment • Operational Modelling Fulfilment Execution - Optimised Sourcing (ATP,CTP) - Optimised In Store Picking - Omni-source consolidation Transport Strategy Facility Design Transport Management • Routing & Scheduling - Replenishment - Interstore Transfer - Home Delivery - Returns • Transport Execution Visibility 14
    • Copyright 2013 IBM Commercial in Confidence IBM Perspective Australian Retailers have made significant investments to build their foundation capabilities. Roadmap for transformation Phase 0 Minimal digital capability Phase 1 Build front-end Phase 2 Build foundational capabilities Immediate focus Phase 3 Develop marketing capabilities Phase 4 Optimise & integrate Key takeaways  Limited investment in digital transformation  “Grab for market” strategy  Merchandising & supply chain not scalable  Increase sales via broad product range  Strong foundation capabilities to reduce cost to serve  Increase operational agility and flexibility  Targeted marketing to increase cross sell/ up sell  Increased personalisation  Influence customer buying behaviour (i.e. channels)  Further decrease cost to serve Ad-hoc, misguided investment in marketing function Minimal maturity both locally and globally Maturity by phase2: Strong investment with leading frontend capability Limited focus on foundation capabilities relative to global peers 1 Indicative based on IBM client experience; 2 IBM local experience Time  Some Australian Retailers have very mature customer frontend capability.  However, significant investment is still required to build the supporting foundation capabilities (supply chain, merchandising & support function optimisation) 15
    • Copyright 2013 IBM Commercial in Confidence IBM Perspective But as capabilities mature, Enterprises will experience a tapering effect on revenue and margins requiring continual investment. Roadmap for transformation Not to scale Illustrative only High Phase 0 Minimal digital capability Phase 2 Build foundational capabilities Phase 1 Build front-end 3 Growth rate 1Increased sales volumes via online channel however, suboptimal foundational capabilities erodes margin improvement… Phase 3 Develop marketing capabilities Revenue Targeted marketing & promotions will further drive up sales volumes… Margin 4 2 Phase 4 Optimise & integrate …with significant margin improvement via crossfunctional optimisation and integration across people, process, technology …but…an optimised supply chain, merchandising & support functions will significantly improve margins Based on IBM Client case example, IBM experience 16
    • Digital initiatives  New‘Omni-channel’ technology to fuse its digital experiences, offering ~90,000 SKUs, a mobile store, an iPad App with the ability to purchase online, digital gift cards and a store booking tool (for in-store services) which can be used across all channels and devices.  Scalable IT platform consisting of a new content management system, a new order management system & a new warehouse mgt. system has been implemented.  Fully integrated into the company’s proprietary systems giving the business one view of all products, pricing, promotions & inventory across all channels. Outcomes  Web store achieved a 288% increase in sales in the three months ending 26 January 2013, compared with the prior corresponding period.  Sales in that quarter were double the entire online sales achieved in the full year 2012 and visitor numbers more than doubled to 5.4 million visits. Digital initiatives  Significantly invested in their merchandise management system, POS system, and supply chain have set the foundations for effective inventory and order management.  During 2012, good progress made on its website, built on the WebSphere Commerce platform. Significant number of enhancements, both visible to customers and behind the scenes, with a strong pipeline of future improvements.  Key improvements included a new inspirational homepage design, a one-page check out, customer ratings and reviews, and enhanced conversion tactics. Outcomes  Company’s online sales more than doubled as they continued to increase the number of SKUs online to 30,000, all showcased with improved imagery, product information, ratings and reviews, and enhanced search capability.  14 million unique visits to the website yearly, we believe this represents a significant opportunity for the business.  Invested in the bricks-and-mortar element of Omni-channel retailing by upgrading the point-of-sales system & increasing sales staff - customer service complaints dropped by 17 per cent. Information sourced from newspapers and Annual Reports. 17 Copyright 2013 IBM Commercial in Confidence There have been good examples of department store retail transformations in Australia over the past two years.
    • Copyright 2013 IBM Commercial in Confidence Sterling Commerce Order Management and Fulfillment enabled a unified customer experience in the Australian Department Store segment by: Streamlining complex business processes across disparate systems Improving cross-channel efficiencies Incorporating advanced analytics Automating shipment planning and execution Providing: •Greater order visibility •Reduced fulfillment costs •Superior customer experience 18
    • Copyright 2013 IBM Commercial in Confidence Cross-Channel Order Management streamlines order and fulfillment processes across all channels and the extended supplier network. Stores Kiosk DCs Special Order Cross-Channel Order Management Customers Call Center Web Sales Catalog Sales Customers  Order configuration – substitutions, pre-order, split shipments,  Management of supply locations with demand locations drop shipments  Schedule, sequence, and execute service requests  Order aggregation, optimized source of supply, prioritization  Fulfillment cost analysis, recommendation, and  Order visibility, monitoring, status, and exception alerts orchestration  Global inventory visibility and available-to-promise  Product returns management 19
    • Copyright 2013 IBM Commercial in Confidence Omni-channel is just one area of change that is driving enterprises towards a Digital Front Office that is fully enabled by a Globally Integrated Enterprise. Digital Front Office Globally Integrated Enterprise Reimagining everything about the way people connect, transact and engage with companies, institutions and governments—and how they create mutual value. Transforming the organisation for efficiency, effectiveness and to enable new growth. 20
    • 21 Copyright 2013 IBM Commercial in Confidence
    • Copyright 2013 IBM Commercial in Confidence Questions? Ian Wong Partner, Global Business Services Strategy and Transformation – Digital Front Office Lead Retail Industry Lead IBM Australia IBM Centre 60 City Road (Southgate) Melbourne Vic 3006 +61 3 9262 3700 22