By Gopi Krishnan and Arun Channakrishnaiah
Retailers such as Best Buy and Nordstrom are focused on using multiple channels to provide their customers the ability to transact with them across these channels. Most retailers, however, have set up the various channels as independent entities, with each channel having its own operating strategy. This translates to a set of disparate, standalone business process flows around order capture, order management and fulfillment workflows. Even infrastructure that supports the channels is sometimes native to a specific channel.
Such fragmentation leads to inaccurate order promising and poor fulfillment rates. Whether the fragmentation is because the channels are independent entities or because the retailer has acquired a new channel partner (and inherited incompatible processes/systems), the net result is an inefficient supply chain and inability to service customers well.
Over the last decade, customer behavior too has changed significantly. Today's customers, empowered by easy access to information, are increasingly "channel agnostic" with their buying behavior and leverage multiple channels for each buying cycle. The consumer today is likely to encounter a product in a store but, rather than buy right away, may research it online, comparing features and prices, proceed to buy through the retailer's call center and finally pick up the product from the local store.
Separation of channels leads to inconsistencies in business practices and policies, leaving customers frustrated and confused. For instance, customers may be forced to pay more at the call center if a coupon that is accepted at the store is not accepted by the call center agent due to lack of cross-channel information visibility. Similarly, if the supply chain is designed to be channel-specific, there will be greater inefficiency and hence dissatisfaction for both the retailer and customer.
On the other hand, the multi-channel behavior of today's customers also is an opportunity for retailers to increase their revenue. For example, store pick-up is a good opportunity to upsell/cross-sell while the customer is already in the store to pick up what was bought online.
Absence of Cross-channel Leverage
Unfortunately, quite a few retailers remain oblivious to these changing realities and formulate their multi-channel strategies with serious policy limitations around the integration of process, data and technology. This not only creates process silos but fragments the supporting structures as well. Typical issues of fragmentation include: inconsistent customer experience; duplication of data, processes and information systems; inability to gain a single view of the customer; inability to gather and share data across channels for analysis/decision-making; weak fulfillment percentages; and duplication of physical infrastructure.
Thus, the primary need is to eliminate channel-specific silos by seamlessly connecting them to ensure that information flows across channels are enabled in near real time. Effective fulfillment of orders transcending channels requires total synchronization, that is, the integration of all core functions involved in the order receiving and completion process, as well as the decision-support functions that make business and process/policy decisions. While achieving this level of synchronization is no easy task, there are significant rewards for organizations that manage to do so, as both customer experience and supply chain efficiencies improve.
MCI: The Integrating Glue for MCO
Merely operating multiple channels does not imply that the full vision of multi-channel commerce (MCC) is realized. This is just the first infrastructural or operational step towards achieving that goal. A state in which multiple channels operate in isolation and converge only in the accounting books (financially) is just multi-channel operations (MCO). True MCC is achieved only after the various channels (both buy and sell side) are completely integrated, which is where multi-channel integration (MCI) comes in.
With MCI, the supply chain functions that help capture and fulfill orders are integrated such that each channel is aware of the fulfillment rules/policies/processes followed by the other channels. When MCI is achieved, customer experience is seamless. The customer can transact with the retailer through any channel, over any part of the ordering process. Whether the customer researches the product online and then places the order through the call center, or whether the product received is returned at a store, the customer will be able to move from channel to channel and yet receive the same service level. On the supply side, the retailer gains a unified view of the supply chain to consistently apply business rules and policies. It can weigh the various fulfillment options available before choosing the most cost-effective and efficient option.
More importantly, with MCI, organizations are able to use data gathered to answer questions about customer behavior: Which channel is used by customers to research products and which one for order placement? What are the relationships among products bought by the same customer across channels? Which promotions attract target customer segments? These insights provide a glimpse into not just "what" customers buy but also "why" and "where." Such information can be used to design focused, personal offerings or services.
Additionally, integration enables intelligence gathering on internal aspects of the supply chain to verify the ability and readiness to service customers. For instance, by obtaining a consolidated view of cross-channel demand, planners can manage supplies better and eliminate wasteful inventory. In the event of a stock-out at a store, sales personnel can quickly check the inventory status and save the sale by offering to ship the product from another location to the customer directly.