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The data says that about 55% of retailers already offer order on-line, pick up at store - a higher percentage than many might have guessed. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

The third annual State of the Retail Supply Chain report was issued recently by the Retail Industry Leaders Association (RILA), and finds better times are leading to changing supply chain strategies, while multi-channel commerce and fulfillment continue to be challenges for retail executives.

The research effort was by Brian Gibson and C. Clifford Defee, both of Auburn University, and for this report focused on larger retailers with over $1 billion in sales. Another report focusing on smaller retailers is promised for later in the year.

Impressively, beyond the survey data the research included one on one interviews with 35 retail supply chain executives for addition insight. That takes a lot of time, but adds significantly to the end result. The survey respondents include a broad array of retail sectors, as indicated by a list of participants early in the report, which range from Beat Buy to CVS to Dillard's, Auto Zone and many more.

An early question asked retailers what their top issues of concern were for the year, and as shown in the graphic below, a couple of transportation related issues led the way. The report says many respondents were concerned that with an already tight transportation market and rising fuel costs, continued economic recovery in 2012 will exacerbate the current challenges with capacity. That scenario could be made worse by changes in government rules such as coming new Hours of Service (HOS) provisions and the loss of drivers do to their driving history under the new CSA 2010 program.

With regard to making sustainability practices profitable, the report quotes on executive interviewed in the report as saying "Sustainability is an area of ongoing focus. It’s slow in coming, but there will be a point where it financially starts making a lot more sense.”

Top Retail Supply Chain Concerns for 2012

Source: RILA 2012 Supply Chain Report

Retailer expectations are for pretty good economic times in 2012, and hence are upping their level of investment in a number of areas. More companies said they were going to increase their spend on software and technology this year (43%), more than any other category of investment.

The brighter times since the deep recessions years of 2008 and 2009 also show up in terms of the kinds overall supply chain strategies retailers are planning for 2012. As can be seen in the graphic below, a "balanced" approach that embraces cost cutting with growth and customer service priorities topped the list for the year, while pure cost cutting fell sharply to the least popular strategy of the four choices.

Source: RILA 2012 Supply Chain Report

“It’s all about speed to market so there’s a great focus on how we eliminate dwell time,” one retail executive said relative to supply chain strategy.

(Supply Chain Trends and Issues Article - Continued Below)

Multi-Channel Dexterity

Being able to flexibly manage and deliver across multiple channels is not surprisingly today one of the critical capabilities required for retail success, the report says.

Among survey respondents, on-line sales were currently about 9% of revenue, but were expected to grow to 15% over the next couple of years.

The chart below is interesting, showing how retailers manage e-fulfillment. The dark blue bars indicate the percent of retailers that use any of these methods (hence will total up to more than 100%), while the light blues bar indicate which fulfillment model is the primary approach (which totals to 100%).

Source: RILA 2012 Supply Chain Report

The data says that about 55% of retailers already offer order on-line, pick up at store - a higher percentage than many might have guessed.

But of course, there are challenges, especially with regard to inventory management/sharing, and whether it really makes sense or not to combined regular store distribution and e-fulfillment in a single facility - even to the point of having no special e-fulfillment area within the DC. Whether to outsource e-fulfillment or not remains a key question.

The survey data said that only 10% of survey respondents strongly agreed with the statement: “We have achieved a desired level of integration between our retail stores and direct to consumer fulfillment operations.”

There is a lot more in the full report. It can be downloaded from the RILA web site: State of the Retail Supply Chain 2012

Any reaction to the 2012 RILA Supply Chain Report? What do you see as the key challenges to multi-channel management? Let us know your thoughts at the Feedback button below.

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