The Importance of Connecting CX with ‘SC Ex’ (Supply Chain Execution)
John Rossi, SCApath
Many companies are making a huge mistake these days. It’s become trendy to spend a lot of time on the customer experience (CX) for online shopping, but many companies don’t properly connect those efforts to their actual supply chain to ensure successful execution.
If the CX and supply chain execution are not properly connected, the actual customer experience suffers mightily. (For this article, “execution” is defined as warehouse and inventory management.) Which is worse: ordering an item online and it not being available, or ordering an item that’s in stock for express delivery within a few days and it not showing up (especially critical when the item is a gift)?
The industry is presently absorbed with building better experiences for shoppers, and it shouldn’t underestimate the impact of delivering the correct product, at the agreed-upon price, on time. No one benefits from backorders — not the customer, not the retailer and not the manufacturer.
Connecting CX with the supply chain is even more critical for companies wanting to create successful omnichannel opportunities.
This past holiday season, many consumers shopped online for their gifts. We saw first-hand the negative impact of items being ordered, the retailer sending confirmation of the order being accepted along with a delivery date — and then, a day or two later, sending a “Sorry, your order is delayed” message. This might not be considered a CX-related issue internally, but the customer doesn’t realize (or care) that it’s actually a supply chain execution issue, and customer feedback shows that it’s almost always a supply chain execution issue. And once a message like that is sent, any strides the company has made on improving the CX has been diminished — if not negated entirely.
A recent industry study shows that over 50% of shoppers will buy online, pick-up in store (BOPIS), and that over 90% want a seamless shopping experience across all channels. And retailers with effective omnichannel customer engagement see a 9% increase in year-over-year revenues.
So how can companies keep this from negatively impacting their performance? There are six main areas to address when successfully connecting CX to supply chain, especially for omnichannel environments:
1. Payments and Financials. The goal is to build payment services that allow cross-channel, frictionless and seamless processing throughout the order lifecycle. This is much more than most ERP’s (enterprise resource planning) provide today. It requires a compliant and secure payment system, fast and frictionless authorization and settlement, and financial posting to ensure that the right channel gets credit, including an accurate ledger balance of inventory.
2. Customer Support. The goal is to improve customer interactions across multiple touchpoints during the time of sale and throughout the customer lifecycle. Not all order management system (OMS) solutions are built to give customer service reps and store associates a full historical view of the customer across channels. Retailers struggle with aggregating and making sense of all the data points in the OMS, which many times don’t accurately reflect customer preferences.
3. Store Fulfillment. The goal is for fulfillment solutions to allow store associates to prepare orders for pickup, shipping or return across multiple channels. The trick is to be watchful of timing. Too soon and you potentially allocate to the wrong location; too late and you risk missing on the service-level agreement (SLA) if goods aren’t actually in a shippable state.
Over-engineering the picking sequence, especially in the OMS, often yields marginal time increases but enforces too much rigidity to the retailer, particularly where planograms and floor-sets often change. Not all retail stores should have the same labor capacity, and the operations team responsible for setting the levels can waste substantial time and energy keeping up with configurations if too many different classifications of store capacity are coupled with poor OMS design for configuring in-mass.
4. Order Routing. The goal here is for smart, cost-based systems that analyze historical and real-time data, enhancing the ability to accurately and consistently fill orders. In the order routing engine, too many rules and complex logic slows down OMS performance, impacting all warehouse operations. Complex routing engines and cost-based solutions, while beneficial, both rely on substantial amounts of data, but more importantly assume that the data is accurate and is kept current. Either situation creates poor results; when combined, the result is dreadful.
5. Inventory Availability. The goal is to find order fulfillment solutions with deep capabilities around inventory protection, future inventory tracking and virtual segmentation across multiple channels, to create higher value. The challenge with designing an all-encompassing inventory protection setup, regardless of SKU category or inventory location, is how to balance the overhead of feeds and configurations within an OMS managing millions of “SKU + location” relationships with the desire to optimize sales and avoid order issues.
Real-time inventory management, which is the ability to track and promise available inventory, is core to OMS today. But it’s only reliable when the inventory is accurate and kept current. Many companies struggle to keep the inventory positions across DCs, stores and extended suppliers (drop-shippers) aggregated and fed to requesting systems in real time.
6. Returns & Exchanges. The objective is a centralized view of all returns & exchanges, allowing customer support associates in call centers and stores to provide frictionless post-purchase support to the customer. From a technical standpoint, this process is often poorly designed, leading to disconnected systems with differing and sometimes inaccurate views of the returned status — if it’s tracked at all. Outsourcing the process may just exacerbate the problem.
Oftentimes, returned inventory is either added back immediately when it shouldn’t be or not added back until long after it should have been. The challenge most companies have is positioning the returned inventory in real time and deciding whether or not to make it available, damage out, ship back to vendor, or sell at a discount.
About the Author A recognized consumer goods industry expert and member of CGT’s Executive Council, John Rossi is senior vice president of professional services at SCApath, a leading consulting firm on omnichannel commerce. He can be reached at [email protected].