RILA and Auburn University Release Third Annual State of the Retail Supply Chain Report

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Report Reveals the New Multi-Channel Reality for Retailers and a Shift from
Cost Cutting to Growth

Arlington, VA – The Retail Industry Leaders Association (RILA) in
partnership with Auburn University and with sponsorship from Accenture,
released the third annual State of The Retail Supply Chain Report today. The
report findings reveal a heightened urgency by retailers and supply chain
management (SCM) executives to shift from cost cutting to growth. The report
also places emphasis on multichannel retailing and explores how retailers
are working to meet the increased consumer demand for continual access to
products from any channel. @RILAtweets will moderate a live Twitter Chat
today from 12-1pm EST via #RILAchat to discuss the report findings. Just
follow the hashtag #RILAchat to join in the conversation.

The report data was compiled through a series of executive interviews and
industry surveys with retailers across every segment of retail, with the
goal of understanding the capabilities that drive exceptional retail supply
chain performance. One hundred and ninety-nine retail supply chain
executives took part in the research. The criteria for participation
included: company revenue exceeding 1 billion, multichannel operations, and
Director-level or above responsibilities. The respondents have 17 years of
retail experience, on average.

“This study will be essential reading for a wide cross-section of retail
supply chain executives seeking insights into the key supply chain trends
taking place in retail, including multichannel operations,” said Parag
Jategaonkar, senior executive with Accenture’s Retail practice. “Accenture’s
own experience with clients indicates an increasing focus amongst retailers
on developing their supply chains to more effectively deliver a compelling
customer experience, regardless of the channel.”

The most significant takeaway from the report centered on the importance of
multichannel operations including fulfillment of .com, mobile, and tablet
orders. The report states that electronic ecommerce sales have grown by more
than 15 percent to $35.3 billion versus an overall sales growth of 4.1
percent versus the previous year. With predictions that e-commerce sales
will grow 10 percent annually, multichannel has become a game changer for
retailers. It has also added a new layer of fulfillment complexity that
retail SCM executives must manage.

According to the report: Over 85 percent of survey participants indicated
that direct consumer fulfillment is a top priority for them and that it is
imperative to create a seamless customer experience regardless of the
fulfillment channel, order size, origin, or delivery requirement.

“Consumer expectations are changing, and as a result, retail business models
are changing,” said Casey Chroust, executive vice president of retail
operations. “Traditionally retailers have used separate operational models
to move goods and fulfill orders. Now those models need to be merged so that
companies can continue to deliver the products consumers want across any
channel without losing efficiency or adding cost. This requires advanced
integration and innovation and working closely with suppliers and service
providers while utilizing technology,” concluded Chroust.

According to the report: In this “anytime, anywhere, any way I choose”
environment, supply chain leaders must establish the appropriate mix of
fulfillment capabilities. Their networks and processes must be properly
aligned with each channel’s order characteristics, inventory profiles, and
service requirements.

The report also highlighted the various multichannel challenges facing
retailers, including: variation in shipment size, order filling processes
and delivery methods as well as the inconsistent SKU assortment of
multichannel retailers. Less than 18 percent of the retailers surveyed offer
the same SKUs across channels.

When it comes to solutions to the multichannel challenge, the report
explored the various technologies that SCM executives are looking at to meet
their multi-channel needs. With the complex challenges facing supply chain
leaders, utilizing the right technology can mean the difference between
mastering multi-channel and succumbing to it.

“The real challenge for today’s multichannel retailer is to become channel
agnostic and fulfill demand effectively regardless of order type or origin,”
said Brian Gibson, Professor of SCM at Auburn University. “As sales volume
grows in nontraditional channels, achievement of technology integration,
operational flexibility, and process visibility will separate the leaders
from the pack. These capabilities provide the fulfillment agility, accuracy,
and cost efficiency needed for multichannel success,” summarized Gibson.

According to the report: experts are recommending distributed order
management (DOM) software as a common-sense response to retailers’
multi-channel needs. DOM allows retailers the ability to capture, manage and
optimize orders regardless of origin-computer, retailer store, kiosk, or
mobile phone. After the order capture, the DOM system identifies the
fulfillment facility or channel that will best serve the customer and the
retailer.

While not a silver bullet, DOM offers promise for cross-chain visibility,
integration and service improvement. Analysis from the report concludes that
full utilization of DOM across all fulfillment processes earns the greats
cost reductions. DOM also allows customers to shop across all channels with
the ability to make returns at any location regardless of where the order
was fulfilled.

Other takeaways in the report included insight into supply chain strategy,
sourcing practices, the reemergence of Radio Frequency Identification
(RFID), and emerging challenges in the retail supply chain.

Retail Industry Leaders Association
RILA is the home of the world’s largest and most successful retail
companies, whose executives participate in RILA for its unique educational
forums, its effective public policy advocacy, and its advancement of the
retail industry. RILA membership includes more than 200 member companies –
from Abercrombie & Fitch to Walmart – representing more than $1.5 trillion
in sales. Through its board of directors, Leaders Councils, committees and
working groups, RILA members determine the issues and focus areas for public
policy, educational offerings and research. Visit www.rila.org.

Auburn University College of Business
The Supply Chain Management program brings the unchanging values of Auburn
University – practical education and research, honesty, and hard work – to a
changing world. We actively collaborate with supply chain professionals to
ensure that our research, academic degree programs, and industry outreach
events effectively reflect current supply chain theory and application.
Auburn SCM graduates are well-prepared for the classroom-to-workplace
transition and our alumni enjoy successful supply chain careers with retail,
manufacturing, 3PL, transportation, and service firms. For additional
information, visit www.business.auburn.edu.
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