Three key strategies for integrating online and physical supply chains

Published on the 11/12/2014 | Written by Danie Vermeulen

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This is an excerpt of an iStart research paper, commissioned by Netsuite and produced in collaboration with the author, Danie Vermeulen, a six-sigma black belt and CEO of the NZ Kaizen Institute, and the Chartered Institute of Logistics and Transport Australia (CILTA).

in_depthTo register to download the full white paper click here.

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Selling through online channels relies on virtual processes that work with physical realities. This white paper by Danie Vermeulen delves into key strategies for success…[Register to download]

Consumers in New Zealand and Australia have spent up big on online shopping in the past five years, with online spending increasing at a compound annual rate of 20-30 percent taking an ever growing share of total sales. The impact is that selling online is becoming a commercial necessity for many businesses.

Success in integrating online channels with physical supply chains can be summarised down to three key strategic drivers.

Serve the customer

Selling anything is about understanding and responding to the customer’s requirements. Customers will continue to raise the bar of expectations with 24×7 accessibility on the device of their choice, and instant, accurate access to product specifications, price and availability along with flexible delivery and payment options. To help them decide, they may expect an aggregator-type service to compare similar products, prices, delivery options and loyalty benefits from different suppliers side by side. Once they’ve placed the order they will expect to be able to change their minds and their orders and get real time updates about the status of their orders. Live point of sale data from all channels will fine-tune replenishment signals.

The implication is that everyone up and down the supply chain must provide accurate, real time data. Stock availability, pricing, delivery dates and cost, order status, etc. must be able to be updated, calculated and recalculated within seconds. Mobile devices capturing every transaction along the supply chain clearly plays an important role, so barcoding and scanning at pick, pack and delivery interfaces is vital. Ease of use, tight integration and investment in the training of staff to not only use the devices properly but also understand the implication of misuse will be the key.

Strive for flexibility

The ability to respond to changing demand is crucial. For instance, fashion trends can change overnight when a celebrity displays a new look. A particular fashion item can literally become yesterday’s or last week’s look. When that happens, it could dramatically reduce the demand for and value of that item resulting in obsolete inventory. Likewise if a new fashion trend kicks off and there is not enough inventory available to satisfy demand the result is loss of sales. The implication is that supply needs to be flexible enough to ramp up or down to meet fluctuating demand, including allowing shipments to be diverted or expedited at short notice.

Build end-to-end visibility

Real time visibility of your own data as well as suppliers’ and supply chain partners’ data can be either hugely beneficial, or, without it, a major disadvantage. There is no doubt that sophisticated modern technology throughout the supply chain is a key requirement to doing business. However, costly system implementations offering many nice to have features and functions won’t be the answer. The answer to success is to truly understand the customer, to accept that customers will be chopping and changing expectations and to focus on what will add value to the customer. System selection and configuration both in-house and across partner systems is then driven by the brand’s vision and aspirations for customer experience and service, underpinned by flexibility, openness and scalability.

To succeed long term, all stakeholders up and down the supply chain will have to be able and willing to succeed or fail, learn and adapt fast. Preferably together.

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This is an excerpt of an iStart research paper, commissioned by Netsuite and produced in collaboration with the author, Danie Vermeulen, a six-sigma black belt and CEO of the NZ Kaizen Institute, and the Chartered Institute of Logistics and Transport Australia (CILTA).

You can download the full paper here.

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