SUPPLY CHAIN MANAGEMENT

Read the case study below and answer ALL the questions that follow. (100 Marks)

The Power of Omni-channel Stores

There are different ways to deal with the growth of e-commerce. Here we describe the evolution of two fictional general merchandise retailers that were calling Siloed Sales and Omnichannel Emporium. Ten years ago, each company had sales of about $50 billion with 1,000 stores and a small e-commerce business. Total sales in their industry were relatively flat, but e-commerce sales were growing at about 15%. Siloed Sales decided to jump on the e-commerce bandwagon. It created a fiercely independent e-commerce business, which it called its digital business, and set itself the audacious goal of outperforming Amazon. Because the information technology department at Siloed Sales was weak, the digital business invested heavily to create new cloud-based systems. The company upgraded its website, developed award-winning mobile apps and spent $1 billion to build four additional highly automated fulfillment centres. To increase traffic and accelerate sales growth, the digital business tripled its breadth of assortment. As digital sales continued to grow, Siloed Sales shifted as many resources as possible to its digital business. By 2016, e-commerce orders had grown to more than 40% of total salesmaking the digital business the star of Siloed Saless portfolio. Meanwhile, the stores business at Siloed Sales deteriorated. It seemed as though every dollar of digital sales came straight out of the physical stores. In total, store sales dropped by nearly 6% annuallyvery little in some stores, much more in others. Siloed Sales closed 400 stores and aggressively reduced costs in the others. It slashed the number of employees in stores and shifted away from full-time workers to part-timers to reduce hourly costs and move toward a more variable expense structure. The transition was painful and demoralizing, but everyone at the company knew it was necessary. Customers, however, were less understanding. They complained about the lack of help, timeconsuming buy-online-pick-up-in-store experiences and the inability to return items they bought online to the stores. They also complained about the three to five days it often took to receive online orders, pointing out that Amazon could always get things to them in two days and often on the same day.

Omnichannel Emporium took a different approach. It believed that the company had only one business: selling merchandise to customers however they wanted to buy it. Instead of trying to compete head-to-head with Amazon by radically broadening its total assortment, the company decided to focus on both increasing its unique products (e.g., exclusive items and private-label goods) and providing a superior shopping experience. It stepped up innovation to combine the best of the digital and physical worlds at each step of that experience. Omnichannel Emporium did have e-commerce experts, but its digital and physical operations were seamlessly integrated, and the entire organization adopted Agile frameworks and mindsets. The company decided that instead of spending $1 billion on building more fulfilment centres, it would use the money to add digital technologies and omnichannel shipping capabilities in its stores. It didnt matter if foot traffic dropped off: The total merchandise volume flowing through stores would remain roughly the same.

Omnichannel Emporium built a website and mobile app that worked seamlessly with the store shopping experience. It used digital technologies to improve in-store visual merchandising, help customers connect with in-store associates (or chatbots or remote experts, if they preferred), speed checkout times and customize offers. It regularly invested in store picking-and-packing technologies to improve their effectiveness and efficiency. Nearly 40% of online orders were picked up in stores, saving shipping costs and driving incremental sales as customers bought additional items when they came to pick up their online orders. The company also found that it could ship from stores to customers for nextday delivery at little to no additional cost, which quickly became a clear competitive advantage. Omnichannel Emporium also kept its full-time employees and trained them to deliver new omnichannel customer experiences.

CONCLUSION

Even as retailers with physical stores grow their e-commerce operations, e-commerce pure plays are adding stores or negotiating space in other retailers stores. Examples are plentiful, among them Everlane, Harrys, Rent the Runway, Bonobos, Warby Parker, Glossier, Gilt, Purple Carrot and Amazon. Amazon is rumoured to be rolling out 2,000 stores over the next few years, although the company recently denied this. Whats important is that Amazon is not simply copying todays store formats instead, its reinventing the store. Consider Amazon Go, a pilot store offering no lines, no checkoutjust grab and go! The secret is advanced technology, including microphones, cameras, scales and sensors that detect the items shoppers are choosing and carrying with them out of the store. The company has spent four years developing the concept, and it plans to go public with its first store early next year. Although that first iteration is likely to face challenging unit economics, Amazon has a long track record of testing and learning to get to a model that works.

Case Extracted from a research conducted by Bain and Company Consultants.

1.1 With reference to the case study, provide reasons why there has been a growth in the use of ecommerce within the retail sector (20 marks)

1.2 In relation to Amazon, evaluate the alternative strategies implemented and adopted by Siloed Sales and Omnichannel Emporium general merchandise retailers. (20 marks)

1.3 With reference to the retail industry, critically discuss the omnichannel concept. Your response should outline relevant examples. (20 marks)

1.4 In your view, what are some of the supply chain practices and measures that can be adopted by Amazon and other online stores in order to gain a competitive advantage. (20 marks)

1.5 Critically discuss customer service and the role that technology plays in improving customer service among retailers. (20 marks)